Are virtual AGMs really effective?

Shareholders, being the owners of a company, have responsibility to attend the general meetings of the company and cast votes on resolutions proposed by the management in the process of corporate decision-making.

Shareholder meeting is a statutory platform for active shareholder participation in governance process.

Consequent to the Covid pandemic, the government restricted movement of people and congregations of any type. However, the Ministry of Corporate Affairs and SEBI have allowed companies to conduct their shareholder meetings through video conferencing during the calendar year 2020, to transact all ordinary and other special businesses that cannot wait till normalcy returns.

Traditionally, a majority of small shareholders stayed out of general body meetings owing to the cost and effort involved in travelling to the AGM venue or due to the feeling that their participation will not matter anyway.

Having realised that retail shareholders stay out of AGM, the Companies Act 2013 has made it compulsory for all listed companies to offer e-voting facility, and now even general meetings are permitted to held through two-way audio-video means.

All these facilities have empowered small shareholders to follow the proceedings of AGMs and vote from the comfort of their homes.

In order to make it easy and understandable, the virtual general body guidelines issued by the government, make it mandatory for the companies to explain in detail about how to access the web meeting site and related steps.

Further, the companies have also been permitted to send notice, annual report and other relevant documents in electronic form. Responsive and empathetic dispensation extended by the MCA and SEBI have ensured that companies could conduct general meetings in a virtual mode, which helps in strengthening corporate governance process.

These regulatory changes are expected to improve participation of shareholders in the corporate governance process.

Attendance pattern

During April 1 to July 15, 2020, 30 listed companies conducted their AGMs using video conferencing facility (Virtual AGM). Virtual AGMs, logically, should result in improved attendance since shareholders otherwise confined within their homes could participate in the meetings from the comfort of their homes.

A shareholder holding shares in multiple companies can attend AGMs of all the companies even if the AGMs are held on the same day since it is only a matter of accessing the virtual AGM portal rather than moving across physical locations.

The attendance of shareholders in the virtual AGMs of the 30 companies was compared with the attendance in the past three years to check if virtual AGMs have improved keenness amongst shareholders to participate in the general meetings. The Table reveals the reality about shareholder keenness in attending general meetings.

From the Table it can be seen that:

Investor keenness to attend AGMs has been subdued over the period of three years. The trend continued this year as well though AGMs were done virtually and shareholders could attend the meeting without incurring any cost or physical exertion of travelling to the venue.

In the case of nine companies, attendance was a better than last year, but in 20 companies, attendance declined.

In 19 out of the 30 companies, the attendance has been on the decline during the period of study.

Attendance in 17 out of the 30 companies is less than 100; in 12 companies it is more than 100 but less than 350. Only in the case of one company, attendance is more than 1,000. The trend has been similar over a period of four years.

The number of shareholders attending the general meetings has been less than 0.50 per cent (half per cent) of the total number of shareholders in the company throughout the period of study — that is, four years . (Total number of shareholders for each company is taken from the websites of stock exchanges.)

This study shows that virtual general meetings have not evoked any curiosity or improved keenness amongst shareholders to attend general meetings.

This gives rise to important questions:

Whether corporate communications being sent to public domain email addresses are getting drowned amongst the plethora of sales/marketing emails due to which shareholders are not able to pay attention?

Whether there is a need to introduce measures to improve effectiveness and forcefulness of corporate communication with their shareholders?

Whether there is a need to set up an alternative institutional arrangement for examining the contents of Annual Reports and ask questions where required instead of just leaving it to the disinterested of shareholders?

The writers are faculty at NISM. Views are personal

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