Investor groups pushing back on virtual AGM proposal

Opposition to the Morrison government’s proposal for virtual-only shareholder meetings is building.

Investor groups say a move to allow virtual-only AGMs permanently will lessen the scrutiny of company directors.

Opposition is swelling to the Morrison government’s proposal for virtual-only shareholder meetings, with proxy advisers and the nation’s powerful industry funds indicating their strong opposition.

The Australian Council of Superannuation Investors, on behalf of 37 asset managers holding an average 10 per cent stake in each ASX200 company, said on Monday that annual meetings were a core part of shareholders’ ability to hold companies to account.

“Significant changes to how they are run should not occur without proper scrutiny and consultation,” ACSI chief executive Louise Davidson said.

Dean Paatsch, co-founder of influential proxy adviser Ownership Matters, added his voice to the clamour of opposition, saying the government was proceeding with “undue haste”.

Treasury is consulting on changes to the Corporations Act which would remove any requirement for physical annual meetings.

The consultation period closes at the end of this month, and follows Josh Frydenberg’s introduction of legislative relief to enable companies to respect social distancing requirements by holding their meetings online.

The relief was later extended to March 2021, but the government says in its consultation document that it wants to make the changes permanent.

Australian Investor Relations Association chief executive Ian Matheson stressed that virtual shareholder meetings would only be made optional under the proposed changes.

“All share registers are different,” Mr Matheson said.

“Virtual meetings would be appropriate for some but not for others, but we believe virtual AGMs increase participation rather than reduce it.”

One of the arguments advanced is that the current requirements to hold physical meetings and post out documents are expensive, costing between $250,000 to $1m.

The proposed switch to virtual-only shareholder meetings has sparked an investor revolt led by proxy advisers as well as small and large shareholders.

ISS told The Australian on the weekend that meetings hosted online restricted shareholder access to senior company officers and limited a fair and transparent exchange of views.

“Due to the potential for virtual-only shareholder meetings to diminish shareholder rights, particularly without sufficient protections in place, we believe it is important for institutional investors with views on this matter to respond to the consultation and make their views known,” ISS head of Australia and New Zealand research Vas Kolesnikoff said.

ACSI, of which the nation’s increasingly powerful industry funds are members, answered that call on Monday, with Ms Davidson saying now was the wrong time to “radically” change the way AGMs were held.

“We are in the midst of the busiest period for company meetings and there are still hundreds of companies that are yet to test new technology and meeting procedures,” she said.

“We should wait and see if shareholder voices are being accurately heard or whether they are being lost in translation.”

The ACSI chief said virtual AGMs were a necessity during the pandemic but they could diminish the ability of shareholders to ask questions and hold companies to account.

Ms Davidson said it was apparent in the AGMs held this year that “something was definitely lost in the new format, like a Zoom birthday party.

“Investors support a review of how AGMs are conducted, and proposals to move away from hard-copy AGM materials make sense,” she said.

“However, changes to the way AGMs are held requires a longer consultation.

“We need time to ensure the lessons from the temporary provisions are appropriately incorporated into the permanent rules.”

Mr Paatsch said he was not opposed to hybrid meetings, where physical gatherings are held in conjunction with online access.

“But giving people who don’t wish to face scrutiny the opportunity avoid it is a recipe for disaster,” he said.

Geoff Wilson, founder of the Wilson Asset Management empire with $3.5bn under management, also threw his weight behind the “no” campaign.

Mr Wilson reportedly said the changes were “undemocratic and grossly unfair to millions of Australian retail investors”, including his own.

The Australian Shareholders’ Association, on behalf of retail investors, is also strongly opposed.

One of the most common complaints is that annual meetings have been shortened considerably under the new regime.

The Commonwealth Bank meeting, for example, ran for only two hours - the shortest in a decade.