The main problem is that shareholders are only able to ask written questions at virtual AGMs, making it easy for boards to evade genuine dialogue.
Just Share attended seven virtual AGMs between 21 May and 9 June: Old Mutual, Standard Bank, Exxaro Resources, Nedbank, the Johannesburg Stock Exchange (JSE), Absa and Sanlam. All of these were the second virtual AGM for the company concerned since the start of Covid-19.
The effects of only allowing written questions were made worse by the fact that many platforms have undisclosed word limits, which resulted in some questions being cut off. Someone, other than the person posing the question, usually the company secretary, then read the question out to the board.
- That person had never seen the question before, and was often unfamiliar with its subject matter. The result was that questions were “read out hesitantly, with incorrect emphasis, and sometimes incorrectly,” Just Share says.
- “This is hugely frustrating for the questioner, who sits helplessly listening to the mangling of his/her question,” Just Share says.
- “The written-only format also makes it extremely difficult to respond to a director’s answer to a question,” especially as most responses are deliberately non-committal, Just Share says.
- “This may be convenient for the board, but creates reputational issues, and reinforces the perception that AGM engagement is not worthwhile.”
- There is no technological barrier to verbal questions at virtual AGMs, and all companies should allow them, Just Share says.
Accepting written-only questions “unequivocally” makes it too easy for companies to avoid or neutralise any difficult line of questioning, says Thobela Bixa, an investment analyst at Mergence Investment Managers in Johannesburg. “Live questions provide a sense of accountability and ensure the board does not cherry pick questions to respond to.”
Craig Smith, head of research and property at Anchor Stockbrokers in Johannesburg, says he generally agrees with Just Share’s views. “There should be verbal communication and interaction but with the caveat that there needs to be structure to the engagement to ensure it doesn’t go off track,” he says. The best way to ensure that, he adds, is a strong chair.
Just Share notes that there have been some improvements since 2020. Last year, many companies seemed to be surprised that any questions were asked at all. At most AGMs this year, board members were visible on camera when speaking and answering questions. The JSE even provided an agenda to help participants, a first for the 22 virtual AGMs that Just Share has attended since March 2020.
- Companies already engage stakeholders in a meaningful way during results presentations, Bixa notes, and a similar approach needs to be applied to AGMs.
- All forms of communication need to be open all-year-round to all stakeholders, and not just to institutional investors, he argues.
- But stakeholders “also need to use these avenues of communication and not just wait for AGMs to express their grievances,” Bixa says.
- If small minority shareholders find themselves unheard then they also have the possibility of collaborative engagement with other investors, he adds.
Companies that accept written-only questions give the impression that they’re scared of a conversation with their shareholders.
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