"Firms must provide a new form of scrutiny for shareholders as AGMs go digital"

Big AGM meetings are no longer necessary due to technology, but Terry Tanaka asserts that the board must still be held accountable

It is astonishing that the corporate annual general meeting (AGM) still takes place in this era of Zoom, smartphones, and remote work. A century ago, the only efficient method of speaking with shareholders directly was to call a meeting in a dilapidated ballroom at a large, historic hotel in London. Even the high drama of the 1970s and 1980s takeover battles took place there, with competing factions publicly debating the fate of a conglomerate.

However, things have changed. Electronic vote counting, online meetings, and instantaneous communication with all shareholders are all possible for businesses. Gathering everyone in one location, serving them tea and cookies, making them endure numerous boring presentations, and having the board re-elected hardly seems necessary.

AGMs are already being held online by an increasing number of large corporations. It was recently revealed that HSBC might follow in the footsteps of toothpaste manufacturer Haleon, building society Nationwide, and pharmaceutical behemoth AstraZeneca, who have already made the transition to electronic meetings.

Watch out for the repercussions.

It is difficult to blame them in some respects. For Just Stop Oil or another extremist group, the meetings offer the ideal setting for a high-profile demonstration. A retired accountant from Eastbourne will probably take advantage of the protests to make a lengthy speech challenging a mysterious footnote in the accounts, even if improved police or surveillance can handle the demonstrators. The AGM is difficult to justify as a worthwhile use of anyone's time.

Online meetings are not a good alternative, though. They are much too easily manipulated by the corporate public relations apparatus. Only a certain amount of time is allotted for each question, and there is no chance for follow-ups. The questions can be selected beforehand. There will be no way for anyone who wants to ask the board some pointed questions to get the backing of the other people in the room. Additionally, anyone who is even slightly disruptive can be dealt with by simply turning off their microphone. Although a Zoom meeting has its uses, it is not nearly as important as meeting someone face-to-face. The chance to have a real two-way conversation is gone, along with the chemistry.

Perhaps moving AGMs online and eventually doing away with them is just a short step away. As it turns into a soulless online event, attendance, which is already extremely irregular, is probably going to drop even more. The big, institutional shareholders can still be consulted in private briefings, while everyone else can be ignored. Why not replace it with a "shareholders satisfaction questionnaire" or "feedback survey"? Or, better yet, do away with it completely and implement a system where the board is automatically re-elected each year unless enough shareholders write in to protest?

Still, scrutiny is required.

Corporate boards must be held to a far higher standard of accountability than they currently are. Few produce the expected results. Senior managers frequently receive far too much money and become distracted by trendy causes that have no bearing on business. Additionally, they frequently make empire-building acquisitions that can result in the CEO appearing on the covers of a few magazines but devastate a significant amount of shareholder value. Businesses must devise a new, stringent method of shareholder scrutiny if the AGM is to be eliminated. Otherwise, the management of large, publicly traded corporations will become even more aloof and self-centered than they already are.