Better engagement, but virtual AGMs also come with some risks

Singapore

VIRTUAL Annual General Meetings (AGMs) should mean greater convenience and accessibility for shareholders, but may also make it easier for firms to avoid thorny questions, said stakeholders and experts.

The immediate benefit is wider reach, said David Gerald, president of the Securities Investors Association (Singapore) or Sias. Shareholders will be able to attend from office or home, without having to take leave or travel.

The digital approach could also spark wider participation, he added. As firms already hold virtual meetings with institutional investors, extending this option to retail investors "would be encouraging".

Compared to traditional AGMs, virtual ones might be more appealing to the new generation of "digital native" investors, said Irving Low, head of advisory at KPMG in Singapore.

This year, the Companies Act will be amended to provide for the use of digital means for firms to hold meetings and interact with stakeholders, paving the way for virtual AGMs. Announcing the news last month, Second Minister for Finance Indranee Rajah noted that Fortune 500 companies like HP Inc and PayPal have adopted virtual AGMs, citing reduced cost.

Firms often find it hard to estimate turnout, resulting in over- or under-catering of seats and refreshments, said Rachel Eng, managing director of Eng and Co LLC, part of the PwC network. Virtual AGMs could tackle this issue.

And while they may not solve the problem of AGMs bunching in April, they could let shareholders attend more meetings in quick succession or even simultaneously.

Welcoming virtual AGMs for the potential of improved shareholder engagement, Singapore Institute of Directors chairman Tham Sai Choy said they "can easily and quickly scale up for a much larger attendance".

Yet even as they empower distant investors, they may exclude those uncomfortable with technology, he added. Drawing a parallel with annual reports moving from print to CDs and websites, he said: "Different companies will find different solutions best for themselves."

Cost savings are not assured for all corporates, as the costs of wider engagement through technology may outweigh those of more limited physical AGMs, said Kim Teo, group CEO of Boardroom, which offers meeting services, including virtual meetings.

Associate Professor Lawrence Loh, director of the NUS Business School's Centre for Governance, Institutions and Organisations, highlights the option of hybrid AGMs that allow both physical and online attendance.

"If a company wants to implement virtual-only AGMs, one critical safeguard is to require that shareholder consent must be obtained," he added.

Seah Hai Yang, director of RHT Corporate Advisory - which provides AGM services, among others - sees potential for virtual meetings to complement physical ones, but not to replace them in the near future.

Virtual AGMs may be more impersonal and allow firms to filter out inconvenient questions, said experts.

"In a virtual AGM, there is no sense of shareholder collectivism as participants may not be able to see one another. This can become a problem if the meeting chairman favours certain shareholders by cherry-picking their questions," said Prof Loh. "Tough questions can be ignored if there are no safeguards to enable all participants to see all questions."

RHT's Mr Seah noted that "heated dialogues or less favourable opinions can potentially be silenced with the click of a button". Virtual access could also compromise the closed-door nature of AGMs, as onscreen proceedings are easily viewed by others.

Nonetheless, the prospect of virtual AGMs was broadly welcomed for the flexibility and potential benefits.

"Sias would like to see companies that are registered overseas but listed in Singapore, like Thai Bev, that hold AGM overseas to use virtual AGMs," said Mr Gerald. "Secondly, listed companies with large shareholder base should also adopt virtual AGMs."

With virtual AGMs "becoming a norm" in many countries, particularly the US tech sector, Deloitte Southeast Asia Centre for Corporate Governance leader David Chew thinks they will catch on here, with financial services firms as early adopters. Firms which go virtual should ensure that their governing documents - articles of incorporation, certificate and bylaws - facilitate this, he added. (see amendment note)

KPMG's Mr Low doubts many Singapore firms will go for fully-virtual AGMs, expecting them to start with hybrid options. In a 2016 study, most companies that did not allow absentia voting cited security and integrity concerns, he noted, "indicating some reluctance to introduce remote technologies at this stage".

Amendment note: An earlier version of the story referred to "Deloitte's Mr Chew" on first mention. It should have been "Deloitte Southeast Asia Centre for Corporate Governance leader David Chew". The article above has been revised to reflect this.