How boards can reframe the AGM

Virtual annual general meetings (AGMs) were held in Singapore for the very first time last year for most listed companies. Initial concerns of poor attendance were unwarranted as some AGMs registered higher attendance rates than past in-person events. Yet, shareholders had varying experiences at the virtual AGMs - and many had found the experience wanting.

There are criticisms that virtual AGMs have been extremely efficient to the point of being clinical, allowing the board and management to communicate their messages without receiving immediate retort from the audience. The pre-submitting of questions by shareholders also empowers companies with the ability to pick the ones they choose to answer. Further, responses to questions have been formal, measured, rehearsed and often delivered one-way with no avenue for follow-up questions.

Arguably, the lack of live interaction between the board and shareholders is a major drawback of virtual AGMs. On one hand, it deprives shareholders the once-yearly opportunity to pose tough questions to those tasked with looking after their investments and seek assurance that the company is on the right path. On the other, for proactive boards that are keen to engage, they have to work harder to connect with the virtual audience. For those who choose to see the AGM as a compliance exercise and leverage the virtual format for an "easier" dialogue, it is a wasted opportunity to engage with shareholders robustly and openly, and through that, build trust and confidence.

The experience of virtual AGMs does not have to be this way. Regardless of the mode of meeting, the purpose of an AGM has not changed. What if companies reframe the way they view virtual AGMs - as an innovative platform that offers upsides to shareholder outreach, instead of the temporary substitute for physical meetings?

DO IT DIFFERENTLY

For the upcoming AGM season, it is worthwhile assessing if a fully virtual or hybrid AGM is the best way forward. With a hybrid format, shareholders can choose to either attend the AGM virtually or in person, subject to headcount. Providing such an option already signals the board's willingness to be flexible in accommodating shareholders' preferences especially those who value face-to-face dialogues, while expanding the outreach to potential investors who are digitally savvy and content with the convenience of a virtual session.

The challenge then is for companies to explore ways to connect with both the group onsite while employing technological solutions that replicate the live experience as much as possible for those attending virtually. Ensuring information equality and fairness at hybrid AGMs is important. Companies need to ensure that the same level and extent of information as well as the ability to pose questions are availed to both the virtual and physical audiences, lest they are inadvertently perceived to favour one group over the other.

Online real-time surveys and feedback-seeking apps can be used to bring both groups of audience closer to the proceedings and allow them to participate actively. The results can be shared live, together with the use of graphics visualisation and analytics to interpret the feedback. Allowing live online questions at the AGM injects spontaneity that is often lacking in a virtual AGM. Boards can take it up a notch by allowing "live-cam" questions to which they can respond directly, adding a sense of intimacy and candour that is usually lacking in a virtual session.

KEEP TO THE STRATEGIC INTENT

Reframing the AGM does not mean that the board should be caught up with too many new initiatives - or the form it takes. Rather, boards need to remain laser-focused on the messages that they want to communicate to stakeholders - as well as what the stakeholders would want to know. Whether it is a virtual or hybrid AGM, controlling the agenda and timing of the proceeding must be a discipline. The typically compressed duration of virtual or hybrid AGMs will demand greater rigour of boards, as the audience is likely able to stay more focused within the shorter time span. This makes it all the more crucial for the board and management to deliver an impactful message about the company's performance and its outlook, and inspire confidence in the corporate strategy.

As companies shape their narrative for the AGM this year, they should consider the growing emphasis on environment, social and governance (ESG) concerns by stakeholders, partly driven by the Covid-19 pandemic. The need to communicate a broader performance narrative beyond the financials and demonstrate how the company is delivering and protecting value is not new - but companies vary in doing so effectively. Effective ESG communications offer a forward-looking perspective into how the company is building resilience and strengthening its competitive positioning. They are also clear on the parameters and metrics that are aligned with the materiality of the ESG concerns for the company, how these are integrated into the corporate strategy, and the outcomes.

This is not to suggest that communicating financial performance takes a back seat; it is about telling a more complete story of the company's strategy and performance. In fact, communications with shareholders should be done throughout the year via regular business updates. For example, the CEO or CFO presentation does not have to wait till the AGM. Companies that have active investor engagements and conference calls recognise this. Unfortunately, in some cases, the removal of quarterly reporting has also partly receded investor relations to the background. For those that are less active and rely on the annual AGM to connect with shareholders, consider resetting the engagement momentum. After all, technology enables the shareholder outreach to take place any time and in real time, if that is desired.

SUBSTANCE OVER FORM

It did take a pandemic for AGMs to be widely conducted virtually. However, the end of the pandemic need not spell an end to the use of virtual or hybrid modes of communication with shareholders on a regular basis. While regulatory amendments will be required for virtual AGMs to be a permanent feature in future, perhaps what matters more is less the form that the AGM takes than the substance and spirit of the meeting - an open and transparent two-way dialogue on the how the company is doing, financially and non-financially, in the recent past, now and going into the future.

• The writer is Singapore head of assurance at Ernst & Young LLP. The views reflected in this article are the writer's and do not necessarily reflect the views of the global EY organisation or its member firms.