The Covid-19 crisis coincided with the peak of the 2020 proxy voting season, forcing the majority of companies to hold their AGMs online

However, asset managers have said companies must return to in-person meetings once the pandemic is over, with the possibility to hold hybrid meetings to increase shareholder participation.

The lockdown period fell between March and June, when the majority of listed companies hold their annual general meetings (AGMs). The solution for most was to take these meetings fully online for the first time. As a result, a number of asset managers reported that the majority of the meetings they attended during this season were virtual, in most cases without shareholder participation.

Overall, managers have welcomed the ability of companies to shift AGMs online, and said the development has not negatively affected their dialogue with companies.

Kalina Lazarova, vice president, governance & responsible investment at BMO Global Asset Management (BMO GAM), said: “We have noted that engagement with companies ran relatively smoothly, with companies sometimes more prepared than usual to accommodate one-to-one and group investor calls with board members.”

See also: – Lessons in successful shareholder engagement

Short-term solution

However, asset managers want to see companies return to holding AGMs in-person when the pandemic is over, saying that virtual meetings have their limitations.

Irfan Patel, corporate governance analyst at AXA Investment Management, said: “AXA IM is supportive of companies moving to virtual online meetings in emergency cases. We however encouraged companies to return to physical, in-person meetings once the Covid-19 situation normalises.

“Virtual, online meetings help augment shareholder participation especially for international investors who can rarely attend in person. This is a positive for shareholder rights – but we also believe it is no permanent replacement for companies holding AGMs in person.”

Lazarova said one of the key issues is that regulation and technology in some areas have not been up to standard, making it harder for shareholders to exercise their voting rights.

“Notably, we have understood that asking questions and making follow-up remarks during the AGM – a fundamental tenet of shareholder democracy – has not always been possible,” she said.

“The exercise of voting rights has also been constrained by outdated requirements in some markets (e.g. Sweden) for investors to have a Power of Attorney (requiring wet signatures) in advance of the AGM in order to have their electronic votes counted.”

The various paper-based requirements by regulators, custodian banks or individual companies may have been impossible for some investors to complete during lockdown, thereby “disenfranchising many investors’ voices and likely contributing to lower voting turnouts”, she said.

Hybrid meetings

As a result of these concerns, asset managers including AXA IM, BMO GAM and BNP Paribas AM are calling for ‘hybrid’ AGMs in the future, where a physical meeting is enhanced by online presence at the same time, instead of carrying on with virtual meetings once the pandemic is over.

Patel said: “These hybrid AGMs could boost shareholder participation and allow international investors an effective means of participating. We expect this will become increasingly commonplace in future years.”

He noted a number of cases in the UK where companies have already tried putting forward article amendment resolutions to allow them to hold virtual-only meetings, but said these were either defeated or passed with a slim majority, “suggesting that investors still harbour reservations about the prospect of virtual-only meetings post-pandemic”.

Lazarova is also in favour of ‘hybrid’ AGMs, but said companies must adhere to five key criteria to make this a viable option.

This includes having a live video and audio transmission of the entire meetings and giving shareholders the option to ask questions in writing and live, as well as the possibility to ask follow-up questions during the AGM.

She also said questions asked in advance should be published on a company’s website and answered at the AGM, while companies must make registration for virtual attendance as straightforward as possible, while meeting data protection and information security needs.