We’re in the middle of annual general meeting (AGM) season here in Germany – the one time when every shareholder can address the company and get first-hand feedback from the board.
In theory, this should be an exciting day for shareholders and board members alike: opportunities for direct dialog about areas of mutual interest should be embraced and utilized.
In practice, however, German AGMs tend to be very rigid affairs that can take up more than a full day. There is an established ‘formula’ for conducting an AGM that is very formal: as an example, the rules mean that only the meeting leader and the executive board members have an active role in the meeting. All the supervisory board members can do is sit on the sidelines and listen. Just one area where I see room for improvement.
Additionally, large international investors try and bend the board’s ear before the AGMs even begin. With proxy voting companies and associations, this creates a three or four-class system, with normal shareholders left last in line. And with individual shareholders only representing one vote, it’s a fair question to ask if it is the most effective way to run the meeting by allowing each shareholder equal opportunity to speak.
Companies are fearful of deviating from this established process, but I would like to encourage them to be bold in this regard and shake things up.
I do not see the need to completely tear down the traditional AGM system, but there is a difference between setting new practices in motion with the aim of building something new and lasting, and simply tacking on cosmetic amendments to the existing system (the recent shareholder rights directive comes to mind).
The right move is to look at the status quo, consider the digital transformation that is impacting every area of our lives, and make changes based on where we’re headed in the future. There is far too much expertise inherent in board members, and far too much useful feedback from shareholders, to not embrace more engaging and efficient ways to conduct an AGM.
Some companies are already taking to this concept by implementing digital votes and streaming their AGMs on the web. There’s a lot that can still be done with artificial intelligence and algorithms to benchmark a company’s performance in many different areas. An app can probably answer many of the questions shareholders tend to ask at annual meetings.
These are measures that can really help the dialogue, and there are few conversations which impact a shareholder’s buy or sell decision as much as the one that takes place at the AGM. I encourage anyone involved in AGMs – board members and shareholders – to consider how these conversations can become more meaningful in the future.