Blog Post

Virtual AGMs – Are they here to stay? 

Sue Lawrence • 5 June 2020

Current AGMs are largely hybrid meetings combining small scale physical meetings with virtual attendees. But could they become the new normal for future AGMs?

Many companies have found solutions for holding formal company meetings during the period of lockdown, whether this is virtual meetings, hybrid meetings incorporating some virtual communications, written resolutions or, for those hoping not to have to implement change, postponing meetings for as long as possible. Alongside this, legislation throughout the world has been adjusted or relaxed to accommodate Covid-19 related changes. What has been evident is that the use of virtual meetings based around electronic communications has been adopted extensively.

Virtual meetings have long been held for internal or purely operational meetings of directors and executives as they enable efficient and effective meetings to be held without participants, who are often geographically dispersed, having to travel to attend a physical meeting. Technology has developed considerably over the past decade to accommodate effective communication and this type of formal connectivity.

However, the drive to utilise technology for larger gatherings, specifically AGMs where a broad range of shareholders and stakeholders are brought together *, has long been discussed, but only infrequently applied. Barriers to the implementation of virtual meetings have been thrown up, including legal restrictions, a perceived lack of shareholder acceptance, practical issues in terms of voting and the potential resultant inability to challenge boards and executives on their actions.

The current global situation, with many countries implementing social distancing and/or restrictions on meetings of more than a small number of people, have meant that companies have had to adapt their standard annual meeting approach. This is particularly evident in those companies who have a formal deadline to hold a meeting within a certain time period of the end of their financial year end. In the UK, a public company with a financial year end of 31st December has a requirement to have their annual accounts approved by their shareholders at an AGM within 6 months of the year end, with the same requirement for private companies being 9 months. These deadlines have meant that companies have had to adapt their plans during this, the UK public listed company AGM season, to reflect a myriad of imposed requirements.

Attending a recent webinar from The Chartered Governance Institute (a global network with 9 local institutes in countries throughout the world) on this topic, where practitioners shared their experience of rearranging large-scale AGMs, it was evident that companies are finding effective solutions to ensuring that they can continue to fulfill their obligations with governance experts adapting to the current requirements, whether this is to incorporate social distancing measures or to implement virtual meetings. Some core lessons were shared on achieving quorum, generating questions before the meeting, sharing the status and outlook for the business through statements and videos, as well as demonstrating continued commitment to having physical meetings in the future. (A recording of this insightful webinar is due to be shared on their website at: https://www.cgiglobal.org/ )

What should be remembered is that the AGM is a meeting with two primary purposes. One is to get the operational business of the company approved through the adoption of resolutions presented to shareholders. The other is to enable shareholders to hold the board and executive to account for their actions. The former is relatively straight-forward to accommodate in a virtual meeting, unless there are any contentious resolutions. The latter, which is arguably the most important purpose, is more difficult to incorporate. Submission of questions by shareholders before the meeting can initiate some discussion and feedback but is unlikely to create a robust discussion or enable effective challenge.

Best practice seems to have been the commitment to hold a shareholder meeting later in the year when it can be held physically with the primary purpose of enabling shareholders to question and challenge boards and executives on their actions, strategy and future plans. Given the current disruption that has impacted on companies, either positively or negatively financially, but in all cases significantly with regard to operations and activity, being able to share the view from the board of the future of the business with shareholders is surely an imperative that any effective board should seek to have.

It has been noted that the majority of AGMs are attended by retail investors seeking a connectivity with the companies they have invested in. Whilst there is representation by institutional investors, these large-scale investors also have the ability to speak directly with the company outside of the meeting, at the request of either party. This direct contact means that their views are already known to companies and can be accommodated in actions, communications and expectations around voting. Virtual meetings for these shareholders can be seen as formalities, rather than a key touchpoint during the financial year.

The real benefit of the AGM then is to hear the view of the breadth of retail shareholders who may hold relatively few shares by percentage but, by their actions as consumers, may have a broader impact on the success of the company. The views of the wider stakeholder community can also be added, especially for companies that have a direct impact on communities, whether locally or globally. It is particularly in these companies that the ESG (Environmental, Social, Governance) agenda is so important and where recent global activism surrounding climate change has been so vocal. Whilst it may be tempting for boards to avoid or downplay the opportunity for these views to be publicly heard, the alternative may drive these stakeholders to seek other avenues to challenge companies and their executives. In fact, having an AGM enables this section to have the opportunity to vocalise their opinions and any board should welcome and be able to respond to these.

One view that has favoured virtual meetings is that, where discussions may be contentious or there may be a visible group with a focused agenda, the views of the silent minority, or even the silent majority, may be lost in the noise. Having a virtual meeting with questions asked ahead of the meeting enables all questions to be received, considered and responded to, no matter their source, topic or the volume of the questioner.

What is the Likely Future for Virtual AGMs?

The consensus view is that the current forced requirement to review how meetings can be held has enabled discussions that have been held over many years to be crystalised. Hybrid meetings have become the norm in the current AGM season with those still to come seeking to implement them rather than await the potential reversion back to normality.

Actions have been taken to amend Articles where needed to allow for virtual meetings. The ability to have a quorum through minimum attendance and proxies has been ascertained and adopted. Pro-active requests for questions prior to the meeting have been implemented, and shareholders have responded positively. Resolutions have been shared prior to the meeting as usual, but with greater emphasis on lodging votes prior to the meeting.

All of these actions can easily be continued in the future to the benefit of the business, either in their entirety or in part.

Where there is clearly a residual requirement for a physical meeting is for the shareholder connectivity and the ability for the board and stakeholders to meet and exchange views. In the future, the opportunity for this for the wider shareholder community to meet needs to be maintained. If the only discussion with shareholders is via the privileged access that major institutional shareholders receive, then the board and executives are not getting the benefit of a broader perspective. This is particularly important in those companies with a breadth of retail investors and/or who’s customer base is the individual consumer.

If the follow up physical meetings are a success post lock-down, they may become the norm for shareholder interaction and could relegate the AGM to being a formality of approvals of resolutions. In this scenario it could easily be seen that AGMs are held virtually whilst shareholder meetings, in an alternative format, are held separately. The consideration then should be when the shareholder meetings are held and whether one per year is sufficient. For example, should contentious resolutions be shared for discussion with shareholders at a meeting so their views can be accommodated? Given the board is acting on behalf of shareholders, you would expect the views of shareholders, especially those that are in contrast to the board, should be at least discussed, even if not accommodated in their entirety. Should the forward-looking strategy of the business become a stand-alone meeting with shareholders to encourage discussion and wider opinions and views?

With the increase focus on ESG by many companies, non-AGM meetings may be a preferred solution as the stakeholder voice gains more traction and companies recognise more directly their impact on society and the environment around them. Hopefully this will also be a way for those companies who, many as a result of Covid-19, have consciously recognised their wider impact on society as being a core element to their business model and ultimate success, to maintain this connection. By continuing to seek the views of stakeholders as well as the broad shareholder group, they can continue their ESG focus beyond the crisis to the benefit of the company, as well as the society in which they act.

So are virtual AGMs here to stay? I hope so for the practicalities but only with alternative methods being introduced and maintained to facilitate shareholder and stakeholder interaction outside of the AGM and beyond lead institutional investors.

* A video on holding hybrid AGMs from the Hong Kong Institute of Chartered Secretaries in August 2018 is an interesting 3 minute watch especially with the benefit of hindsight.

https://www.youtube.com/watch?v=bqzty6DBX-8&feature=youtube.be

The Chartered Governance Institute has published new guidance on what constitutes good practice in the conduct of virtual board and committee meetings which can be found on their website at:

https://www.icsa.org.uk/knowledge/resources/good-practice-for-virtual-board-and-committee-meetings




Founders Perspective - Nigel Thornton, Agulhas Applied Knowledge

22 January 2025
Agulhas Applied Knowledge was founded in January 2003 and became employee owned in December 2020. Here Nigel Thornton , one of the 3 founder vendors, kindly shares his journey to making the decision to sell to an EOT, and beyond to its current position as an EOT, B-Corp certified company with the founders stepping back and a new leadership team in place. Why did you originally decide to sell to an EOT, and do you now believe that it was the right decision? I haven't regretted the choice to sell Agulhas to an EOT for one minute. Many years before we made the decision, we had talked to other founders of companies similar to ours, and heard how they were all struggling with the challenge of transition. I knew for a long time that we would have to come to a point where we did sell. We had three choices; the first was to wind the company down. The second was to look for a buyer, probably to a much larger company. And the third, thanks to the 2014 act, was the option to sell to the employees through the mechanism of an EOT. After living and breathing Agulhas for many years, the idea of winding down just didn't seem right, so we looked at the second two options more carefully. Once the three founders talked to others about selling out to a larger company (and we’d had some interest), or getting a venture capital injection, we realized it wasn’t an attractive option for us. We would end up doing the bidding of the buyer through the workout period, being vulnerable, really, to the new owners’ whims. A buyer would likely fire most of the staff, retaining only the seniors, and the company would be gone. From companies that had got venture capital funds we’d seen we’d be forced to grow rapidly to meet an investor’s requirements and become driven by the bottom line. In both these cases, what we'd created that was unique about Agulhas would be lost. We didn't want that to happen. So it became clear fairly quickly that the choice to sell to an EOT seemed best. It meant that the company could work effectively on the kind of things that we've always thought important. The culture of the company would be maintained. We could evolve from where we were rather than be forced to change. And actually it was better than that. It wasn’t the best worst option, quite the reverse. Soon after we made the choice to go for an EOT, and began working through what it meant, we realised that doing so was indeed consistent with our values. It was an expression of who we already were and the founders’ beliefs. And, as its worked out, I think we’ve found that for Agulhas, becoming an EOT was not as great a step as it might have been culturally, or practically. What stage is the Company at now, and what is your ongoing involvement, if any? We’re four years into our EOT life, and about halfway through the payoff of the deferred consideration. It’s gone slower that we’d hoped as our main client is the UK Government and there’s been a lot of disruption to our expected cashflow since December 2020 when we became an EOT. I've handed over being the CEO to Lauren Pett who had been our Chief Operating Officer. We did it in a very Agulhas way, evolving and having a phased process of her taking over. Since we became an EOT, the role of the staff has been strengthened through what we call the Co-Owners Forum (COF). This is still evolving, with informal and more formal working groups aligned to both areas of strategic priority for the company, and themes important to the staff. And the EOT has driven us to put in place more structured governance. We’re in the process of further developing the leadership roles in the company - what the oversight of the company board and the Trust Board means in practice - to ensure that there is a robust architecture to go forward towards and beyond Freedom Day. That’s meant a structured change to the roles that the three founders have, with us more clearly taking an oversight role through the board of Directors and the Trust Board, rather than day to day running of the company. Together with one of the other co-founders, Catherine Cameron, I’ve gone down to a four-day week. That’s for the good of us and the company, and is a deliberate internal and external signal. Beyond the CEO functions, one of the things that has enabled me to step back is the fact that we've employed people who can take on key tasks I used to do, for instance, finance and IT. I think its not unusual that if a company has grown around you, a founder ends up being a Jack or Jill of all trades. And a key thing for me is I’ve stepped out of managing our biggest client, which I’d done for over a decade. Such stepping back is the right thing to do, although doing so can be hard, it is important. When somebody asks me to do something, I’m finding myself saying, well, actually, that's not my problem anymore, go and ask so and so, it’s their job. It takes a while to get people used to that (and people still find it difficult sometimes) but, as a founder, you’ve been the last person that everybody looks to for so long it’s a hard habit for everyone to break. What have been the challenges since the transition, from your perspective as a Founder? I think when you have spent many, many years being where the buck stops, it's hard then not to think of you yourself in that role anymore. Just because it's habit, you think you are responsible for solving things because, actually, you have been responsible for solving things! You've woken up at three o'clock in the morning because it has been your responsibility to worry about whatever the company is facing, be it a cash flow issue or a delivery issue or a sticky relationship with a key client. So the first thing you've got to do is actually change where your head is at. And that's been a challenge for me. So I’ve needed to change my headspace, and also my actions. It also takes time for people to believe you when you say you aren’t going to be around forever and that you do want to step back. I think it's also a difficulty, or certainly one that I've had, which is to know when to say something and when not to say something, when to intervene and when not to intervene. You've got to let the new leadership take the decisions. And sometimes those decisions are not going to be the same as that you would have made, and sometimes there are going to be mistakes that you might see coming and you might warn people about, but actually they've got to go through and learn from the experience in the same way that I've learned over many years. And the best teacher is, in the end, experience. So it's important to calibrate when to keep your mouth shut, and crucially to be available to the new leadership if they want to ask you a question, ask what you think, to be helpful and supportive, so that they know that you have got their back if necessary. It’s delicate and I haven’t always got it right. The key issue for me is knowing that the company is safe; and that’s essentially about knowing that the beliefs, people and systems are sound, and that as far as possible there’s a secure commercial outlook. What have been the positive highlights that you can share with others? At each of the last three company away days, I've said a version of the same thing which is that 20 plus years ago, when we founded the company, if you had told me that Agulhas Applied Knowledge would have the number of staff we have, our diversity, the level of energy and interest they show in the work, and that we would have a portfolio that is as wide and interesting (and if I may say as influential) as we have, I probably wouldn't have believed you. We founded Agulhas because (apart from probably being unemployable by anyone else!) we wanted to do interesting and impactful work. We never set out as the founders to create a company that Agulhas has become. A lot of the recent change is down to the energy of our CEO, Lauren, along with the rest of our team, and the energy and creativity that being an EOT engenders. They and us have built on the foundations we created. And Agulhas has become something bigger than me or the founders; it's beyond us, and that is fantastic. The employee ownership trust creates a whole new dynamism and crystallizes the company as no longer about who we are, but about the collective energy and commitment of the entire workforce of Agulhas, our beliefs, values and its culture. And that is amazing. Truly amazing! As a Founder, and Seller, what advice would you give to leadership teams of an EO business? Firstly, don't rush. Set a clear direction, but realise the wheel can take time to turn. All the change, all the all the evolution of your company to be a fully fledged EOT is not going to happen overnight, and different parts of it will grow at different paces. There will be hiccups along the way. Which leads to the second point, its important therefore to start the process early and allow things to work through! My guess is that many founders start too late, often perhaps too close to the time when they should be moving on. Thirdly, don't be greedy. If you're greedy, if you want your payout early, if you want a lot of money, that's probably not a good thing. We had to slow down our deferred consideration repayment because our expected cashflow was heavily impacted, first by COVID and then by political machinations in the UK. We had to manage our payoff at a slower phase than we expected. I think those who look for too much money or want it too quickly run into trouble. Fourthly I think it's very important to be clear about the beliefs and values of the company; for us that was easy because our job has always been very clearly value driven. It's very important to get a sense of who you are as a company, your values, your culture, so that that can be shared amongst everybody. And if somebody comes into your company, its clear they're buying into that – and being an EOT is now who we are. Very soon after becoming an EOT we also applied for and became B-Corp certified (with a very high score I might say!). That was very good for us as the combination of both EOT and B Corp was a clear public declaration of what we stand for and communicated the identity of Agulhas internally and externally. Fifthly, get the governance right. That took us a bit, but we are well on the way. A long time ago as a young management consultant in one of the Big Four, I realised that most organisational problems boil down to two issues; role clarity and effective communication. Get those both right through the transition from a company that relies on the founders to one that is mature and no longer dependent on you, and you’ll not go far wrong. Agulhas Applied Knowledge was founded in January 2003 and became employee owned in December 2020. A research, evaluation, and consultancy specializing in international development and social policy, Agulhas is based in the UK working across the world with a variety of clients including governments, UN Agencies, NGOs, and international organizations. www.agulhas.co.uk Agulhas Applied Knowledge Trustee Limited has had an IDT independent trustee appointed to their trust board since July 2022.

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