Could virtual AGMs become the norm?

with Georges Bock

Could virtual AGMs become the norm?


ILA was the first major association in Luxembourg to hold its annual general meeting (AGM) online during the Covid crisis. The experiment was successful, with participation 20% higher than normal. Could this become the model in the future for organisations in Luxembourg and beyond?


 

"This year’s virtual AGM was a test for our members, and I am happy to confirm that it has been a great success, with more than 300 members voting remotely, which represents a record so far in terms of participation at an ILA Annual General Meeting,” said Carine Feipel, ILA’s chair. “We are proud of being the first major association in Luxembourg to hold its annual general meeting entirely digitally!”

For many years, there has been resistance to holding AGMs online, but maybe the taboo has been broken with the Covid crisis. An emergency Grand Ducal regulation of 20th March allowed annual meetings to take place in Luxembourg either by digital or written means. ILA was keen to break new ground and opted to use the Meetings online solution provided by the local technology firm Governance.com. 

The meeting began with agenda items approved using digital voting. Then followed two virtual sessions: A Q&A and a presentation of 2019 activities and objectives for 2020. The high rate of voter turnout reflected members’ support for this format.

Easier, cheaper, less pollution

“It’s a widely held misconception that the most important part of an AGM is being present live, either in person or virtually. However, legally speaking, the key factor is logging in, reading the documents and voting,” said Georges Bock Chief Strategist Officer with Governance.com. He thinks ILA’s ground-breaking step to hold its AGM online is a model to be followed more widely. 

Introductory video presentations do not need to be viewed live but can be watched at a later date. Shareholders could have several days to log-on, to view this video, review all relevant documentation, ask questions online, and then vote. Subsequently there would be an online wrap-up session where conclusions are presented. “There are three main advantages of this arrangement: ease of access, lower costs and lower CO2 emissions,” Georges said.

Boosting shareholder engagement to raise corporate governance standards has been a long-term goal of national and international rule-makers. For example, EU Directive 2017/828 was aimed specifically at encouraging shareholder engagement by enhancing participation and transparency. By easing access to shareholder meetings, the goal of transparent and engaging governance is well served. There is a particular advantage if shareholders are in different continents, as there would be no need to find a mutually convenient time. 

Clear audit trail

An audit trail would be ensured as state-of-the-art digital systems can record who logged on and when, as well as registering voting intentions. Moreover, there are no concerns relating to substance with AGMs, as these have traditionally been held away from head office in an attempt to increase investor engagement. 

Financial and environmental cost reduction are also clear advantages. Transport, hotel, catering, and other expenses would be eliminated, as would the pollution from aeroplane and car travel. 

Law reform required

Georges notes there is a chance for Luxembourg to be a first mover of a trend that is gaining traction globally, but a law change is needed to turn the current temporary provision into a permanent change. “Digital transformation is a journey not a big bang, but sometimes a crisis is needed to shift the dial. It is important to take these first steps, People have had a taste for virtual meetings being part of the governance mix, and now they want more,” he said.