Shareholders’ ability to hold the board to account is a fundamental principle of corporate governance. Effective engagement can enhance the long-term performance and corporate value of a company for all shareholders. ASIC encourages companies to use every opportunity to engage with shareholders, including using technology to enhance shareholder engagement and participation.
A company’s annual general meeting is an opportunity for a board to communicate directly with its shareholders. It is the primary forum at which all of the company’s shareholders have the opportunity to meet with those entrusted with the company’s management to review the company’s operations for the past year and ask questions, make comments or have their say by voting on various matters.
The information provided to shareholders as part of the annual general meeting is critical to their assessment of the company’s business strategies and future prospects.
ASIC strongly encourages directors to consider initiatives to increase shareholder engagement in annual general meetings. In particular, directors should consider how technology might be used to provide shareholders with greater accessibility to not only view presentations at these meetings, but also to ask questions and vote.
Holding a hybrid annual general meeting is one option directors may wish to consider. This is an annual general meeting in which shareholders can participate, in terms of attending, voting and asking questions, from either a physical location at which the board is present, or by connecting electronically to that meeting from a remote location.
Companies in both Australia and a number of foreign jurisdictions are holding hybrid annual general meetings to increase shareholder engagement. These meetings give shareholders the ability to actively participate without incurring the cost and inconvenience of travelling to the physical location of the meeting. Importantly, they also allow shareholders to physically attend the meeting and ‘eyeball the board’ if they wish.
ASIC strongly supports the use of technology to enhance shareholder engagement and participation in annual general meetings, for example by holding a hybrid annual general meeting, provided that the introduction of any technological enhancements to the meeting do not detract from the company’s ability to comply with its obligations under the Corporations Act 2001.
These include obligations to allow a reasonable opportunity for members as a whole to ask questions about, or make comments on, the management of the company, the remuneration report and the financial statement, and the obligation to hold the annual general meeting at a reasonable time and place. For example, the technology should not be used to disenfranchise particular shareholders or particular groups of shareholders by cherry-picking questions submitted by online participants or to otherwise selectively avoid opportunities for dialogue.
Companies should also take steps to ensure the technology does not adversely impact shareholders’ ability to exercise their right to vote. Among other things, it is important for companies to consider options available if the technology supporting a hybrid annual general meeting fails due to reasons beyond the company’s control, such as a cyber attack.
Companies may gain insights into useful strategies, for example in relation to issues such as validation of participants, voting procedures and the manner in which questions received from shareholders participating electronically from a remote location are handled, from best practice guidelines available in jurisdictions where the use of technology in annual general meetings has been more prevalent, such as the US. The procedures ultimately adopted by the company should be clear, transparent and easily accessible.