Clicks over chairs: Shareholders favour virtual AGMs

THE Securities Commission (SC) had, on the eve of Merdeka Day last year, issued a directive that all AGMs must be held in hybrid or physical format with effect from March 1 this year.

Hence, companies with December year-ends were the first to go back to physical form, and it is widely believed that most opted for physical AGMs due to the cost associated with the hybrid option.

The SC’s directive issued last year was not unexpected, especially after the pandemic, but returning to physical meetings also posed challenges to listed companies, especially preparing for the right number of shareholders to attend the physical set-up, more so if there was no hybrid option.

Take the example of Public Bank Bhd (PBB) for its AGM held in May this year.

With more than 180,000 shareholders, the venue chosen by the banking group was one of the largest banquet halls in a five-star venue, located in the heart of the city.

PBB echoed the call by regulators and held its meeting in a hybrid manner.

However, as the bank decided not to provide any door gifts or meals other than coffee and tea, most shareholders left after registering for the meeting.

In PBB’s previous AGMs, it was believed that the bank attracted as many as 1,800 shareholders, but this year, only 500 showed up, while fewer than 100 stayed on throughout the physical meeting.

On resolutions that were carried out, the response was much better with some 3,000 shareholders voting, representing some 72% of total issued shares.

From the attendance figures, one could conclude that the online option is the preferred option among shareholders attending AGMs, rather than physical presence.

Expecting the expected

It is not easy to guesstimate the number of attendees who will turn up at an AGM, and the best advice is to always prepare more than expected to avoid disappointing shareholders or causing embarrassment to the company.

However, having said that, there must be a better way to manage expected turnout, including making proper hall reservations and planning meals (if any) to ensure wastage is minimised.

While every registered shareholder has a say when it comes to an AGM, as the rule of one-share-one-vote applies, the actual number of shareholders that will turn up is influenced by many variables.

A corporation making it clear that it is not providing any door gifts or meals will likely see 99% of retail shareholders shying away from attending the AGM.

The availability of a hybrid option is another factor that can reduce attendance, while the venue and location of the AGM may also make a difference.

All in all, it is likely that most AGMs will only see less than 1% of shareholders in attendance.

In the case of PBB, it was a mere 0.27% of shareholders who attended physically.

As a rule of thumb, one can assume AGM attendance will likely be incredibly low and not even reach 1% of total shareholders.

Even assuming 1%, the figure derived can be vastly different from actual attendance.

Hence, predicting the turnout is neither an exact science nor an art.

Virtual AGMs

Judging by the poor response to physical AGMs and the greater popularity of virtual AGMs, perhaps the regulators could revisit the option given to companies for how AGMs should be conducted.

While the current default is physical, it should instead move towards having the online AGM as the default, leaving the hybrid option available for companies that wish to offer it.

With online AGMs, we would likely see greater participation among shareholders, both near and far, while removing the need to reserve large venues or prepare door gifts and meals.

Even large companies in the United States hold AGMs online, allowing shareholders from all over the world to attend the annual event virtually.

A look at practices adopted by many international financial markets today shows that conducting AGMs online is the norm, rather than physical meetings.

Shareholders are not denied any rights by attending online, and the virtual format allows participation remotely, near and far, and across time zones.

Online AGMs are also more economical and environmentally friendly.

Shareholders save time, travel costs, and parking fees, while companies reduce expenses related to booking venues and other costs associated with holding a physical AGM.

Voting for re-election

Another critical point when it comes to an AGM is the voting process.

While the Companies Act 2016 and the Malaysian Code of Corporate Governance do not prohibit an individual director from voting for him/herself for re-election at an AGM, it is best practice that they refrain from doing so.

In some cases, a director seeking re-election may also be the single largest shareholder or a major shareholder, and despite the conflict of interest, the director in question will likely be voting for him/herself.

Hence, while legally the law is silent on the issue of conflict of interest, there must be greater scrutiny to ensure a majority shareholder does not abuse the voting process when it comes to re-election.

After all, at board meetings, directors who have a conflict of interest are required to abstain from voting on relevant resolutions.

The same should also apply to the re-election of directors who are also shareholders of the company.

In conclusion, an AGM is an important calendar event for any listed company.

The fact that less than 1% of shareholders are even interested in attending physically is rather telling, as the focus for these shareholders remains grounded towards getting door gifts and meals rather than asking hard and tough questions.

Moving back to the online option as the default method to hold AGMs makes more sense than physical AGMs.