Virtual annual general meetings (AGMs) which started merely as a stop-gap measure to prevent the spread of the coronavirus in Kenya during the devastating Covid-19 pandemic in 2020 have, four years later, grown in popularity among directors of listed firms in East Africa’s largest economy.
The Nairobi Securities Exchange (NSE) listed companies, with the approval of the regulators and revision of rules governing their internal operations (Articles of Association and Memorandum of Association) have moved to embrace online AGMs, allowing them to avoid face-to-face interrogation by shareholders on business operations.
However, the debate on whether virtual AGMs indeed create value to both the directors, management and shareholders is far from abating.
A virtual meeting of shareholders is one that takes place using online technology. It can be either a “virtual-only meeting”, which is held exclusively online, without a corresponding in-person meeting, or a ‘hybrid meeting’, which is held in-person at a physical location and is also open to online participation.
AGM is an important governance activity for any company whereby the firm provides crucial information to its shareholders to ensure transparency over business operations. The information allows shareholders to make informed investment decisions.
Through AGMs, companies obtain shareholder approvals on voting resolutions and the meeting provides one of the few opportunities for company shareholders to question the board, engage directly with management, and hear the views of other shareholders.
The outbreak of the coronavirus in 2020, however, caused several companies to rethink their arrangements for these meetings in light of potential bans on large gatherings, travel restrictions and the risk that venues selected for the meetings may cease to be available due to unexpected closure.
The Capital Markets Authority (CMA) says despite granting approval for virtual AGMs this format of shareholder gatherings has proved to have its own merits as well as shortcomings.
“Even before Covid-19, holding virtual meetings was more efficient only that the platform to support it was lacking. Although it was a temporary measure, many companies amended their procedures to provide for this option,” says Wycliffe Shamiah, chief executive at the CMA.
“We find it acceptable practice although it may have a few challenges. But on the overall, the attendance and efficiency has increased.
“As you will understand any listed company that was to conduct their AGM virtually had to seek approval from us. What we see is a blend of both physical and online.”
Habil Olaka, former chief executive of the Kenya Bankers Association (KBA), says companies embraced virtual AGMs after realising that, apart from just preventing the spread of the coronavirus, it was also a form of cost-cutting measure but in the process, shareholders have lost the opportunity for social interaction with the directors and the face-to-face interrogation of the directors on how their companies are being run.
“Virtual meetings picked up currency during the Covid pandemic as a way of managing risk of spread.
“What began off as a public health management measure soon became a cost containment avenue for these meetings because a physical AGM requires reservation of the avenue, provision of food and drinks and some goodies for the shareholders as they leave. The convenience of attendance from wherever one is, is another attraction,” he says.
“The only drawback is that they (shareholders) lose the opportunity for social intercourse, which is an essential ingredient for the shareholders to feel that their company is steering in the right direction.
“It also provides an avenue for directors who want to short change their employers (shareholders) the opportunity to ask the tough questions.”
According to the British business newspaper Financial Times virtual AGMs have made it easier for company executives to avoid difficult questions from shareholders, noting that a big challenge for any virtual AGM is how to set up a fair and efficient process for shareholders to ask questions and note objections.
While virtual meetings have been commonplace in the US for years, with blue chips from Microsoft to Ford hosting them, companies all across Europe as well as in Australia had, until the Covid period, almost universally stuck with the traditional format (in-person meetings), according to the publication.
Ken Gichinga, chief economist at Mentoria Economics, says the absence of face- to-face engagement between management and shareholders can reduce the quality of interrogation, which means the future has to be a hybrid of the physical and the virtual AGMs.
Mr Gichinga, however, reckons that many companies have embraced virtual AGMs to manage costs and to help reach a wider audience but from a shareholder perspective there are also challenges related to power fluctuations or weak internet connectivity.
“From the shareholder perspective, there is an opportunity to participate in the proceedings from a remote location. However, with the challenges that can come with power fluctuations or weak Internet connectivity, a shareholder can also miss out on a critical part of the AGM, which might have far-reaching consequences,” he says.
This year (2024) banks such as Co-operative Bank, Absa Bank (Kenya), Stanbic bank and NCBA have already announced to hold virtual AGMs.
I&M group’s regional chief executive Kihara Maina says companies always look for efficiencies and virtual AGMs allow wider reach with less logistical complexity.
“Recording an AGM makes it easy for proceedings to be minuted and for voting to be automated. It is possible to open early for voting on key agenda items and close at a set time. Everyone sees the records so it improves transparency,” says Mr. Maina.
“Hybrid AGMs can also benefit from the efficiency that technology brings.”
Eric Musau, Head of research at Standard Investment Bank (SIB) is of the view that virtual AGMs are cheaper and the overall attendance is higher compared to physical meetings.
The Director General of the Business Registration Service on his part issued guidelines on the conduct of Hybrid and virtual meetings by companies.
