The first virtual shareholder meeting was held in 2016 by Jimmy Choo. There were no known subsequent attempts until now, when it has become the necessary norm over the past few months since the health crisis struck the work environment and disrupted its processes. With the restrictions on both travel as well as numbers that can gather, alternative ways have had to be found to ensure the direct dialogue between the board and shareholders can continue: governance obligations have to be maintained at a social distance.
To make this possible, many countries, including Luxembourg, Belgium and the Netherlands, rapidly introduced new laws that list measures to facilitate board and shareholder meetings to take place virtually. Creating a legal framework for virtual shareholder meetings is therefore a fundamental step to practicing Modern Governance in a digital age. The three most important duties during a meeting are transparency, accountability and engagement, but the question is how to hold meetings in an efficient and secure way, while ensuring and encouraging active shareholder participation?
The advantages to virtual shareholder meetings are obvious: they are not only cost effective and convenient, but currently necessary when you consider that most participants are geographically dispersed. Without the costs of hiring a venue, catering, transport and accommodation among others, considerable savings can be made. “Now that familiarity with remote technology is becoming more routine, without having to be displaced, companies are finding that at times there are even more attendees when the event is virtual,” explains Jesse Thiel, Regional Sales Director, Diligent Benelux. In addition, people can engage in the livestream, watch again at their convenience, and make use of the electronic voting system.
Yet going virtual for such important meetings is not without its challenges. The decision-making process and quality of decision-making can be impacted. Engagement levels throughout the whole meeting are also a concern and difficult to gauge as there is no body language or facial expressions. “This loss of non-verbal cues affects the whole experience. As such, it can be difficult for the General Counsel or Company Secretary to ask the right questions at the opportune moments,” describes Jesse Thiel.
Now that familiarity with remote technology is becoming more routine, without having to be displaced, companies are finding that at times there are even more attendees when the event is virtual.
The other disadvantage is that participants are less used to virtual meetings and how to behave in them, and people are being less challenged. If the shareholders cannot be heard, the meeting loses an essential function of board-shareholder interaction and governance diminishes. “Those who might have spoken up will keep their mouth shut or hide behind their laptop, making the virtual bringing together of people fall short from what a shareholder meeting is supposed to allow for: interaction, engagement and even confrontation on sensitive subjects,” says Jesse Thiel. If participants tend to keep quiet, this can influence the quality of the decisions made, as they do not take into account all factors that would have been addressed.
With a few best practices under your belt, the virtual attempt at shareholder meetings is bound to be a success. Firstly, communication with the shareholders needs to be crystal clear, defining the changes to virtual format across multiple communication channels. Everything has to be outlined, from the reasons why and process of running the meetings as well as how to attend and vote.
In order to prepare, a dry run can instil confidence in the platform and technology, and help the real event to run more smoothly by revealing any glitches in advance. It offers a practice run at the new virtual processes of taking questions and switching between presenters, that can be less natural than the traditional in-person experience. “A post-event consultation and evaluation including a distribution of materials such as meeting recordings and online responses to submitted questions can really help to make sure that everyone’s voices are heard and included in the final decision-making,” Mr Thiel concludes.
Modern Governance requires complete digital solutions. Whether or not in the future they are to increasingly become the rule rather than the exception, find out how to make a success of your virtual shareholder meetings now and watch the replay of Diligent’s webinar on Best Practices for Virtual AGMs and the Future of (Remote) Work.