ICGN chief Kerrie Waring: ‘Corporates should stop holding virtual-only AGMs’

As the proxy season is in full swing, with hundreds of asset owners and corporates holding their AGMs this and next month, a leading voice in the industry has come out to criticise the format of some corporate meetings.

In a nutshell: Now the pandemic is gradually behind us, companies should stop holding virtual-only AGMs.

At least that is the message from industry heavyweight Kerrie Waring, the current CEO of the International Corporate Governance Network (ICGN), which comprises of investors responsible for assets under management of around $70 trillion and seen as a driving force in corporate governance and investor stewardship worldwide.

Waring today cautioned against a rise in the number of companies organising only-only AGMs following changes in regulation in many markets.

She told Net Zero Investor this comes at the expense of shareholder rights, diminishing board accountability.

However, "companies must commit to provide for hybrid AGMs to allow global investors to have the option of virtual or live participation," Waring said.

"I encourage regulators to adequately consult with shareholders and stakeholders in the event any changes to regulation or legislation regarding the format of AGMs, particularly matters impacting shareholder rights, are being considered.”

Impact of the Covid pandemic

While it is traditional for there to be physical in-person participation at AGMs, the Covid pandemic caused many Governments to enact emergency legislation to allow for companies to conduct virtual-only AGMs, for example via electronic or audio means.

Shareholders pragmatically understood the necessity of virtual-only AGMs during the pandemic when there were limitations on gatherings for health and safety reasons.

Waring continued: "Shareholders continue to be tolerant of the need for this in the event of ‘emergency’ situations. It must however be recognised by regulators and companies alike that this pragmatism comes at the expense of watered-down shareholder rights." 

For example, she pointed out that virtual-only meetings have significant limitations on the ability of shareholders to directly interact with boards and management (particularly on contentious proposals), view materials presented at the meeting, ask unmoderated questions, and make statements from the floor.

"We are no longer in an ‘emergency’ situation. It is not necessary for companies to restrict AGMs to a virtual-only format." 

Waring called a hybrid approach "optimal" as it allows for both in-person and virtual participation by shareholders. 

Virtual-only AGMs should only be conducted in exceptional circumstances, she argued, particularly audio-only meetings which limit facial expression. 

"In the event it is necessary for a company to conduct a virtual-only AGM, the reason for this should be explained by the board to shareholders ahead of the meeting."

Moreover, "if companies do not ensure an effective and inclusive AGM experience, investors are likely to vote against proposals to change constitutional documents, or vote against board directors, particularly those serving on committees responsible for the company’s governance," Waring concluded.