Virtual AGMs Reduce Shareholders’ Rights –Experts
For many people, the effectiveness of physical conversation differs from virtual communication, especially where two parties need to argue, debate, and agree to disagree about economic issues.
As such, experts believe that meeting shareholders virtually could reduce communication effectiveness between business owners and their directors.
Following the outbreak of the coronavirus pandemic that triggered the global economic lockdown, companies reacted positively to virtual annual general meetings to reduce the risk of virus spread.
Companies across the world adopted various online platforms and internet-powered communication resources including apps to conduct meetings.
Having proven effective, listed companies across the world are finding it difficult to shift back to the order of having physical meetings with shareholders of companies.
Experts accept that virtual meetings have become a norm among listed companies in Nigeria and elsewhere. They anchored their criticism on the fact that it has reduced shareholders’ rights to participate in the annual meetings.
Listed companies are not only finding it easier, the move has reduced the costs of organizing shareholders’ meetings, drastically. At the same time, the gap between shareholders and directors has widened further.
Some shareholders said their participation levels at meetings have reduced due to the fact that their voices, statements, and the need to ask questions get lost in the cloud.
In its latest release shared with MarketForces Africa, International Corporate Governance Network (ICGN) has also cautioned against a rise in the number of companies organizing virtual-only AGMs following changes in regulation in many markets, ICGN asserts this comes at the expense of shareholder rights, diminishing board accountability.
ICGN advocates that the preferred approach to Company AGMs is a hybrid format, which should replicate as closely as possible the in-person experience, to enable constructive interactivity between shareholders, the board of directors and senior management.
The network said the Covid pandemic caused many Governments to enact emergency legislation to allow for companies to conduct virtual-only AGMs, for example via electronic or audio means.
Shareholders pragmatically understood the necessity of virtual-only AGMs during the pandemic when there were limitations on gatherings for health and safety reasons.
Shareholders are tolerant of the need for fully virtual AGMs only in extremis or in the event of ‘emergency’ situations. It must be recognized by companies and regulators alike that this format comes at the expense of watered-down shareholder rights.
“We are no longer in an ‘emergency’ situation, and it is not necessary for companies to restrict AGMs to a virtual-only format. A hybrid approach is optimal, allowing for both in-person and virtual participation by shareholders”.
Experts said, shareholders in Africa are less savvy in using internet resources to communicate and issues over a poor network have reduced participation, a situation that has been the subject of discussion in Nigeria.
The shareholder meeting is one of a company’s primary corporate governance vehicles. During the meeting, the company’s owners (the shareholders) ratify decisions on topics determined by the law and by the corporate bylaws.
Shareholders have voting rights, the right to inspect books and records of the company, the right to transfer ownership, the right to claim liquidation, liability limited by shares, the right to participate in profit, the right to issue, and the right to sue for wrongful acts. #Virtual AGMs Reduce Shareholders’ Rights –Experts
