Virtual AGMs: dialling down shareholder democracy

One of the alleged sins committed by the recently fired chair of BP, Albert Manifold, was the proposal to allow virtual-only AGMs.

It was one of two issues that triggered something of a backlash among BP shareholders – the other being the proposal to reduce climate-related disclosure reporting.

It showed in the voting: the proposed change to the articles of association needed for the AGM to go virtual-only failed, with just 47.12% support; the climate-reporting proposal was also rejected. In addition, Manifold’s re-election was opposed by 18% of shareholders – a significant level of opposition in the staid world of AGMs. Days later, he was out.

In fact, a number of large pension funds were so irked by the proposals that they signalled their intention to vote against Manifold ahead of the AGM. Again, in the staid world of AGMs, that classifies as a radical step.

Ahead of the meeting Railpen, a £34bn UK-based pension fund, said allowing the BP board to host online-only AGMs would “further limit opportunities for meaningful shareholder engagement”. It also said BP had given limited clarity on shareholder safeguards, stating that the parameters so far set out by the oil giant were insufficient to ensure genuine engagement and that shareholders are truly heard.

It probably wouldn’t have made any difference to Manifold’s destiny if he’d abandoned the virtual-only bid. But it certainly didn’t help.

AGMs, South Africa-style

Board chairs across South Africa who were watching on must have breathed a sigh of relief for the whimsical serendipity that gave them section 63(2) of the 2008 Companies Act.

No-one seems entirely sure how it came about – at the time it was out of step with many of our peers, except perhaps Canada – but section 63(2) of the act allows a meeting to be conducted entirely by electronic communication. This means that in South Africa, unlike the UK and other jurisdictions, the decision to switch to a virtual-only AGM is taken by the board without any reference to shareholders – as long as there’s nothing in the company’s memorandum of incorporation that would prohibit it.

For the first decade after the act’s 2011 implementation, the section was largely ignored by JSE-listed companies. Then came Covid and the severe restrictions on congregations. Very quickly company secretaries discovered how corporate life could continue with the aid of section 63.

And, just as quickly, boards discovered how much easier it was to manage a virtual-only AGM. What a pleasure when technological lapses muted a pesky activist shareholder.

It fell to NGO group Just Share to prompt the Companies and Intellectual Property Commission (CIPC) to rein in the widespread contraventions of section 63(2). Rather belatedly, the CIPC issued a compliance guideline reminding companies of their legal obligations.

What many companies seemed to have overlooked was that section 63(2) did impose some requirements on the handling of a virtual AGM. For a meeting to be compliant, shareholders had to be able to hear the proceedings in real time, ask unmoderated questions during the meeting, and communicate with the board and other participants concurrently.

All reasonable and straightforward stuff, you might think. And yet scores of companies had not bothered to adhere to even these basic requirements. Many still don’t.

One company secretary, responding recently to a shareholder’s question about the company’s non-compliance with the CIPC guidelines, said rather matter-of-factly: “We note the guidelines are advisory in nature and we will consider compliance therewith going forward.”

Given that the CIPC is evidently not monitoring the conduct of virtual-only AGMs, it continues to be down to the likes of Just Share and other shareholder activists such as Chris Logan to ensure some standards.

Governance risk

That generally lax attitude stands in stark contrast with international governance standards.

The International Corporate Governance Network is unequivocal about the importance of maintaining an in-person option for AGMs. In a recent blog post it captures the essence of the issue: “Technology should make shareholder meetings more accessible. It should not make boards less accountable.”

Unlike South Africa, where the decision is entirely down to the board, in many European countries investors and policymakers have successfully pushed back against attempts to make the Covid-era virtual-only AGMs permanent. “The right to attend in person has value even if many shareholders choose not to use it every year,” writes ICGN adding: “A well-run hybrid AGM widens participation while preserving the trust-building benefits of physical engagement.”

As has become evident in South Africa, the worry, says the ICGN, is that virtual-only formats can make shareholder participation more fragile, more controlled and less interactive.

“In a physical meeting shareholders can usually see who is present, whether questions are being taken and whether the board is engaging properly. In a virtual-only meeting, much of that process becomes invisible. Shareholders may not know how many people have logged in, how many questions have been submitted, whether similar questions have been grouped together, or whether difficult questions have been deprioritised. The result is not only a technical risk, but a governance risk,” warns the ICGN.

Going hybrid

Remarkably, unlike their international counterparts, institutional investors in South Africa have expressed no opinion on this crucial governance issue. The assumption is that the AGM is of little importance to them, given their year-round access to boards.

This rather slack institutional approach risks undermining governance standards, which may help promote the fear that the JSE is a dying market.

Chris Logan remains convinced that hybrids are the best for all concerned. “If you’re really serious about your investment, you should attend the AGM,” he says. An in-person or hybrid AGM gives retail investors an opportunity to access the board and executives. It’s the one time they’re equal with institutional shareholders, says Logan.

Just Share analyst Déna Jansen is also adamant that hybrids are the best way to give retail shareholders a voice. While she acknowledges there’s generally been a significant improvement in handling AGMs since the CIPC issued its guidelines, there are still some shockers. “It’s also disappointing that some companies seem not prepared to even consider going hybrid,” Jansen says.

It’s encouraging that Standard Bank this week held a hybrid AGM, bringing it in line with the other four major banks, she adds. In 2024 and 2025, it had reverted to virtual only.

Perhaps, given the relative power of institutional investors in South Africa and the tendency of regulators to bend to corporate demands, we should be grateful AGMs have not turned meetingless.

A meetingless AGM would seem to be the ideal of a worrying number of institutions and company boards. At present, section 60 of the Companies Act allows resolutions to be passed by a written round-robin process (recall how Steinhoff’s move to Amsterdam was approved). It does not allow the same for AGM resolutions; these have to be voted on at a meeting of shareholders.

For now.

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_{Top image collage: Rawpixel; Currency.}