An anachronism from a pre-Internet era, or still the most potent platform to engage investors; opinion is divided over the future of the Annual General Meeting (AGM), and it's not difficult to see why.
Yes, AGMs are expensive and time-consuming for senior management. And yes, for many, attendee numbers are dwindling. Understandably some members of the business community are stirring for a fresh, more cost-effective approach.
The alternatives are already available to us. Webcasts, online voting platforms: the technology is there to phase out face-to-face AGMs all together. Basing everything online would not only be cost-effective, but it'd also increase the scope for stakeholder engagement. So there's a salient case for AGMs - at least in the format way we've known them for over a century - to be shelved. But it's important to flip the coin and ask: why keep them?
Let's look at accountability and transparency. To relieve business leaders of the spotlighted stage could inadvertently cannibalise the thrust towards these two ethical codes. The ability of a business leader to look into the eyes of investors and credibly answer a hairy question is a major part of leadership. Everything is amplified in a live, face-to-face forum, which I feel helps inspire the business community's desire to be accountable and transparent. There's nowhere to hide when you're up on that stage.
Generally we still don't see enough opinion of the CEO or the Chairman. We don't see that free flowing conversation where they say look, these things haven't worked, these things have, and these things will. The AGM is an opportunity for these sorts of conversations to occur. The "all under one roof" element is essential for the relationship between investor and management. I fear abandoning it will drive a wedge between business and investors at a time where the relationship is still shaky post the GFC. Okay, so not as many shareholders are attending these events, but I feel the absence of the traditional meeting will induce opaqueness between all parties no matter what technology is introduced as an alternative. It's important for investors to see in person essentially the people that they appointed to run the business. Eliminating the AGM will reinforce the idea that the CEO and Board are inaccessible which isn't good business.
What I feel forms the crux of this discussion is answering: who are AGMs for?
There are two broad populations in the investor world: those that are online, and those that aren't and never will be. So right now, that's a big challenge for business: finding an informative and cost-effective way to reach them all. Axing AGMs would alienate a percentage of investors, whereas another group would be okay with it and happy to adopt something purely web-based.
Another categorisation is the rise of the short-term investor. Traditionally AGMs have been attended by long-term and Mum and Dad investors. While this persuasion of course still exists, the big X-factor in all this is the "three-minute shareholders" who are now so prevalent. I see them almost daily sitting with their tablets outside the ASX building in Sydney, punching notes into their tablets, planning their next trade. Are these people really interested in AGMs in their current form? I think not. They're in and out within seconds and can get the information they require from the click of a button.
To accommodate this divide, AGMs must be a far more strategic event, focusing more on the future and what the business is planning on doing to thrive in it. Investors want to see a greater confidence from the Board and CEO that they have a vision and know where the business will be in three or five years time. They also need to better manage their communications around why stock may have dropped: a lot of the time it just comes down no other substantive reason other than the emotions of short term investors. Many businesses aren't managing the explanation of this very well at the moment.
Currently investor relations are in a state of transition. In a few years time we will be ready to make some bolder moves in terms of how we engage shareholders, but quite simply, now is not the time to send AGMs to the chopping block. Now is the time for planning what investor relations might look like in five or ten years to ensure the relationship between business and investor remains the priority. An innovative approach doesn't have to be a sweeping change to the current format.
It's time to reimagine the Annual General Meeting, not replace it.