D.he Annual General Meeting in 2020 usually looked like this this year: The shareholders sit at home in front of their computer screens and listen to the speeches of the Supervisory Board and Executive Board via video conference. If someone wanted to ask questions, they had to be submitted by email beforehand. Combined into more or less meaningful topic packages, the prepared answers of the board members were then returned. To ask? Nothing. Spontaneous questions that arose from what was said were usually not possible. After almost all major German companies held their general meetings online this year, shareholder advocates are now calling for improvements to be made for next year.
Because thousands of people usually come together at the annual shareholder meetings, the German legislature had allowed for the first time this year, due to the corona pandemic, to hold general meetings online without changing the articles of association beforehand. Because the situation remains uncertain, the federal government extended the special regulation until the end of 2021.
This year, 90 percent of German companies listed in the major stock indices have their annual meetings with shareholders online via video conferences, as a study by the German Association for Securities Ownership (DSW) presented on Tuesday revealed. There were a number of weaknesses: “The consequences of these emergency laws were often the weakening of the shareholders’ right to speak and ask questions as well as the responsible exercise of their voting rights,” said DSW’s deputy chief executive, Jella Benner-Heinacher, at the presentation of the study . “Only at the shareholders’ meeting can there be a real exchange between management and shareholders.”
Shareholders want face-to-face meetings back
Together with the European investor protection association Better Finance, DSW analyzed the experiences made this year in various countries with general meetings without the presence of shareholders. For this purpose, investors and their representatives were surveyed in several European countries via the respective shareholders’ associations. “The opinion of the shareholders and their representatives is very clear in this regard,” said Benner-Heinacher. “An overwhelming majority of both groups prefer to keep the general meeting in person or combine it with virtual components as a hybrid general meeting.”
Both models have their strengths and weaknesses. One of the advantages of online meetings is that shareholders from all over the world can easily reach them. Participation is cheaper and takes less time. The events – if they are recorded – could also be called up afterwards. A major disadvantage, however, is that people without internet access or with poor IT skills cannot attend virtual general meetings, or only with difficulties. “In addition, a significant part of the general meeting, namely the discussion, is lost in the online version,” said Benner-Heinacher.
Inquiries are a must
On the other hand, the classic face-to-face events are not easily accessible for many shareholders. In addition, they are time-consuming and costly. A great advantage of the face-to-face meetings is their transparency: both the questions of the shareholders and the answers of the management board can be heard by all participants. In order to make a mixture of both formats the future model for EU-listed companies, the weaknesses of both variants would have to be remedied, demanded Benner-Heinacher.
Even the question of whether a general meeting is held in a purely virtual manner should be decided by the shareholders and not the management of the company through an amendment to the articles of association. In the case of a mixed event, it would have to be ensured for the shareholders that they are treated equally, regardless of whether they participate virtually or on site. It is important that every shareholder retains the right to ask questions, to receive meaningful answers, to inquire, and to be able to make the voting decision based on the course of the general meeting. At many virtual general meetings, the companies only answered questions sent in in advance and then answered them in thematic packages. Inquiries from shareholders were often not possible.
Rocket Internet as a dramatic case
Benner-Heinacher described the elimination of the possibility of direct exchange as “particularly dramatic” if the decisions at a purely online event were to initiate massive cuts for the shareholders. As an example from the past season, she cited the general meetings of Axel Springer and Comdirect, at which a so-called squeeze-out, i.e. the forced expulsion of the remaining free shareholders, was to be decided. Rocket Internet, in turn, had measures resolved at the online general meeting that will lead to a farewell to the stock market. “Putting the vote on such drastic decisions on the agenda of a purely virtual general meeting, where there is no discussion and the shareholders’ right to questions and information is extremely limited, shows an understanding of shareholder democracy that we cannot understand,” said Benner-Heinacher.
Across Europe, according to the study, two thirds of companies held their 2020 Annual General Meetings purely as an online event. In France it was even 100 percent and in Great Britain 95 percent.