By James Thomson
Credit goes to Treasurer Josh Frydenberg for his eminently sensible intervention on the vexed issue of virtual AGMs.
The government’s preference for a hybrid model – where physical AGMs remain a crucial part of Australia’s corporate governance landscape, but are complemented by virtual participation to maximise shareholder engagement – is spot on.
Frydenberg’s view that any “reforms to the regulation of AGMs should enhance the ability of shareholders to interact with the board, not diminish it” will be music to the ears of the institutional investors and retail shareholders who rose up against a Treasury proposal that resulted from lobbying by the Australian Investor Relations Association, the Governance Institute and the Australian Institute of Companies Directors.
To push for virtual AGMs to be made permanent just months after they were introduced as a COVID-safe measure was just too much, too soon.
The format provided a great stop-gap to get us through this year, but the meetings have been highly scripted, decidedly stilted and of varying quality. Some (mainly bigger) companies have brought high production values to their meetings; others smaller firms (Myer was a good example on Thursday) didn’t even provide a video feed.
But the biggest problem was one of transparency.
While investors might be able to view more meetings online than in person, it’s what they can’t see that created the biggest concerns.
The virtual format means investors can’t see how questions are being selected, with even big investors such as Wilson Asset Management reporting questions it has posed to boards had been ignored.
The virtual format means they can’t see how questions are being edited or consolidated or rephrased, with some retail shareholders reporting that their questions were changed, with key details left out.
And the virtual format makes it impossible to see whether a company is cutting a debate short when investors still have questions to ask.
All of the power to control the tone, the length and the intensity of debate is in the hands of the company. Proponents of virtual AGMs say our biggest companies are doing the right thing and taking as many questions as possible, and they probably are – but it is simply impossible for an investor to be sure.
The ease with which an under-pressure board can kill off debate is obvious, particularly for shoddy companies where transparency is most important.
Geoff Wilson, who famously helped the Coalition retain government last year by marshalling the 90,000 small investors in Wilson Asset Management against Labor’s proposal to end franking credit refunds, deserves particular credit for his strong stance on virtual AGMs, which was revealed by this columnist on Monday.
Wilson was accused of being a Liberal stooge during the election campaign, but maintained he was taking a principled stance on behalf of his investor base. When he turned his guns on the government’s proposal this week, that same principle of sticking up for his investors was at play.
Treasury’s consultation will now run for another week, until next Friday. That too is a sensible move, given many of key stakeholders in this debate are – ironically – in the middle of AGM season.
It should be noted that while there has been debate on virtual meetings, there is uniform support for Treasury’s proposal to allow companies to provide investors with AGM materials electronically, a measure predicted to save between $435 million and $445 million.
Delivering big costs savings through enshrining electronic document delivery, and then ushering in hybrid meetings that maximise participation while safeguarding accountability, would be a great outcome from this process.