After an unusual AGM season

- an obvious occasion to consider holding virtual or partly virtual AGMs.

26.06.2020
Virtual annual general meetings (AGMs), or hybrids of the virtual and physical formats, have been around for some time – but so far, only relatively few Danish companies and pension/mutual funds have chosen the virtual or the partly virtual format. This year has been anything but normal, since the Covid-19 outbreak made it impossible to hold in-person gatherings, many companies and pension/mutual funds have tested various different virtual formats. MP Pension was one of the pension funds to choose the “real” virtual AGM. We asked Jens Munch Holst, CEO at MP Pension, and Niels Kornerup, partner at Bech Bruun and chairman of MP Pension’s AGM, to share their experience and views, give some advice on what to consider with regard to the virtual AGM format, and present their expectations of the future for virtual AGMs.

What to be aware of when considering the format of your AGM

When organising and considering the format of their future AGMs, companies and pension/mutual funds should consider carefully which format best suits each unit and its specific conditions, including the shareholder/membership structure. If an electronic format is chosen, it should also be considered whether this should be a partly or fully virtual AGM. MP Pension’s AGM at the beginning of June 2020 was a fully virtual AGM, which means that no physical meeting took place, and it was possible to vote during the meeting and also to debate online.

“To be sure that the partly or fully virtual AGM runs successfully, it is absolutely essential that the electronic set-up functions efficiently. There must be a line to all participating shareholders/members, including a secure approval process, so that only shareholders/members can participate (typically via NemID); the shareholders/members must be able to vote during the meeting; and there should also be an opportunity for online debate, so that proposers can present their proposals online via e.g. Teams, and questions can be asked live or in writing via email,” Niels Kornerup says.

Jens Munch Holst elaborates: “I would always recommend a trial run prior to the AGM, to make sure that the electronic system functions well and that the parties involved know exactly how to go through and handle the individual processes during the meeting. The team behind the scenes is very busy during the AGM, making it very important that potential challenges are identified and processes adapted prior to the AGM – this is a condition for a successful virtual AGM.”

In addition to the purely technical issues, the individual company, and also the chairman, must be aware that the partly or fully virtual format naturally presents a new framework for how the AGM is conducted, compared to the normal physical meeting.

“It is important, for example, that the management’s report is adapted to the new format, and it is even more important than at the physical AGM that there is a good match between the report and the accompanying slides, since the slides’ content is what the attendees primarily view on their screens during the AGM. In my view, it is also important that the technical format and the management’s and chairman’s handling and approach support shareholder/membership democracy and engagement. The questions asked and the debate therefore need to be handled effectively, so that shareholders/members feel that it is easy to be heard and perceive that their questions are handled appropriately. Concerning debate – and on a technical note – it is important to be aware that there is a minor time lag during live-streamed meetings and the debate therefore needs to be adapted to this situation,” Niels Kornerup comments.

“On planning the virtual AGM, we were highly aware that we needed to think virtual from the outset and adapt to the new media – and not just copy the normal physical AGM. Among other things, the management’s report was reduced significantly, and the slides were more basic than in prior years, with their primary focus on key messages. We also included some relevant ‘entertainment elements’ during the AGM, with the aim of holding attendees’ attention and creating a good flow. It is very demanding to maintain your attention from the beginning to the end of a long virtual meeting,” Jens Munch Holst says.

The fully virtual AGM at MP Pension was a great success

Turning to the key take-aways from the virtual AGM at MP Pension, Jens Munch Holst is very satisfied with the outcome: ”In my view, our first virtual AGM was a huge success in terms of attendance and questions asked. Almost 2,400 members participated or had voted by proxy, which is 30 per cent more than last year, and some 330 participated online. Around 90 questions/comments were posted during the meeting, which is almost three times more than usual. The high number of participants and questions indicates that members who had usually been prevented from attending the physical AGM took the opportunity to participate and take part in the debate. The debate was actually more varied than usual, because so many members took part. In addition, the technical execution went very smoothly. It was thus almost a perfect AGM and a very positive experience,” says CEO Jens Munch Holst.

General learnings from virtual reality

Not all learnings about the various types of virtual set-up were as positive as MP Pension’s.

“Personally, my impressions and experience are diverse. In the case of MP Pension, with the full virtual AGM set-up, we experienced a very successful AGM with many attendees and a lively and lengthy debate. Furthermore, we saw that questions were typically sharper and more to the point because they were submitted in writing, and we also succeeded in grouping questions within the same category. Despite a very large number of questions, we kept up a good momentum during the AGM – giving participants an impression of efficiency and ongoing progress in the debate. At the other end of the scale, we have seen companies choosing a webcast type of set-up, with streaming (with no attendees due to the ban on gatherings and no opportunity for online voting or debate) – in other words neither a partly nor a fully virtual AGM. These cases were a very different experience, and the AGMs were, to put it frankly, less inspiring formal events, with only few or no questions asked and no debate. I’m aware that this format was an emergency choice, but it does serve to illustrate that format matters a lot,” Niels Kornerup says.

The future of the virtual AGM

Now, the question is how companies and pension/mutual funds will use their newly gained experience and whether they will take the opportunity to change the format of their future AGMs.

“When this Covid-19 outbreak is behind us, I expect that the trend for virtual AGMs is likely to continue and even accelerate. Companies and many shareholders/members have become more accustomed to digital communication during, and also before, the pandemic, and I anticipate that shareholders/members will expect or even demand virtual formats going forward – making it easier to participate for everyone, irrespective of geography, and also making it easier to exercise shareholder rights. It is probably too early for the fully virtual AGM, but more and more shareholders/members are prepared for the partly virtual AGM, as a combination of the physical and the virtual AGM. Seen from the companies’ perspective, the potential cost savings and the convenience of virtual meetings might be attractive and furthermore, holding virtual AGMs will serve to illustrate their support for shareholder engagement and the exercising of shareholder democracy. Having said that, companies should naturally be aware that some shareholders, especially large institutional investors, and also groups of active retail investors, argue that, while solely virtual AGMs function reasonably well for most plain vanilla issues, they are not designed for corporate battles involving activist investors or critical shareholders/members who want to see and hear an accountable management and board. In their view, a proposal presented remotely and online probably has less impact than one presented ‘from the floor’ at a physical AGM,” Niels Kornerup concludes.

At MP Pension, they have now begun to evaluate the virtual set-up and to consider how to use the experience gained going forward, as Jens Munch Holst sums up: “We have not taken any final decision about our future AGM set-up, but I expect that we will prefer a partly virtual set-up going forward. Our aim is to develop a new model that, in the best possible way, meets the demands and expectations of our members. One thing seems clear: we will not return to the physical-only set-up, because our members obviously expect something more, now that they know – and have tried out – a more flexible and member-friendly solution.”
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