AGM and shareholder engagement stepping out of the 19th century
Although shareholders are happy to log-on to their online broking portal to trade contracts for difference, renounceable rights issues, options and shares, when it comes to information from the company, things take a large step back into the 19th century.
The law currently provides that all companies must give notice of upcoming meetings – including annual general meetings and other general meetings – to shareholders personally or by sending notice by post, unless an individual shareholder elects to receive the notices via electronic means, or the company has amended its constitution to stipulate an alternative method of notice.
Given the volume of shares traded every day, it is impractical for companies to write to every single new shareholder seeking their email address to send out future notices.
The Federal Government has taken on board the fact 92 per cent of Australians went online in the six months to May 2015 and 86 per cent of households have an internet connection at home.
A proposal paper was launched in May 2016 looking at technology neutrality in the distribution of company notices and materials.
The paper builds on an earlier 2012 discussion paper, “The AGM and shareholder engagement”, which highlighted the huge costs and limited benefits of sticking with the current arrangements.
Computershare submitted that 80% of its clients surveyed said they wanted their AGM communications electronically; and AMP submitted that in 2012, they mailed out 700,000 AGM notices and emailed a further 200,000 – yet only 322 attended the meeting and only 40,000 actually voted by proxy.
In the United States, Canada and the United Kingdom, the shift to electronic communication occurred long ago, with the US leading the charge through amendments back in 2007. While there are slight differences, the main thrust is that companies can lodge their AGM materials (Annual Report, Notice of Meeting and Proxy Forms) to a website and then simply send shareholders a one-page letter notifying them that the documents have been lodged and how to access them.
The proposal for Australia looks to go one step further than this by removing references to the specific delivery platforms (post, email or SMS), allowing for the use of new widely accepted methods that may evolve in the future.
The Australian Institute of Company Directors, in its submission noted very low (8%) support for retaining the status quo, with 45% preferring notices and materials to be sent via email unless there is a specific request otherwise, and a further 37% supporting the posting of materials to a public website and then notifying members electronically.
The AICD submission also pushes for technology neutrality to be extended beyond meeting notices to the delivery of any company document to shareholders. The submission argues that if members’ electronic details are available for meeting notices, why not utilise them for everything.
Shareholders, by large, are interested in what their companies are doing and how they are performing. However, low turnout to AGMs and proxy returns indicates that this form of engagement is limited and that there are likely to be better ways of communication.
Whether this leads to online AGM webcasts or live and direct voting, we’ll just have to wait and see.