The government’s proposals form part of its response to its Financial System Inquiry that ended in 2014, which committed the government to improving financial regulation by making it technology neutral. It consulted on a range of electronic methods companies could use to ensure they were still providing shareholders with information on AGMs and that shareholders could exercise their voting rights. The aim is to reduce the burden and costs for companies when distributing company meeting papers but also recognises the high levels of mobile phone and internet usage by Australians.
The AICD supported the changes but argued that shareholders should be notified individually of meeting documents unless they expressly choose to rely on general public notices. “The AGM process is failing to keep pace with our changing world, both in terms of technology and options for shareholder participation,” said John Brogden, Managing Director & Chief Executive Officer of the AICD.
“This is an example of where the Corporations Act has become outdated. Allowing meeting notices to be distributed by prevalent forms of technology by default, rather than by post, is a sensible first step in removing parts of the Act that restrict the use of digital communication,” said Brogden. “It is the AICD’s view that the proposal should go further and recognise email as an acceptable default mode of delivery,” he said.
The government suggested that if shareholders opted to receive a hard copy notice of meeting this should be provided by the company but the Australasian Investor Relations Association in its response said this should be an option that companies could choose not to provide if they did not wish to.
The consultation paper 2016 cited a Computershare report which indicated that attendance by shareholders at Australian company meetings had dropped by 25% over the past 10 years and approximately 10% per year, while the number of shareholders voting had dropped by 13.1 per cent since 2010. Responding to the issues of declining shareholder voting AICD said the use of technology at AGMs should extend beyond the distribution of meeting papers to allow for direct electronic voting by shareholders rather than the use of proxies.
The AICD recently conducted a poll of its members and found strong support from directors for this with more than 88% agreeing that all listed companies should be required to offer direct voting, so that shareholders who do not attend can vote without a proxy and more than 84% believing that electronic voting should be permitted, with only the reporting, questioning, deliberating functions occurring at a physical meeting.
“The majority of respondents favour retaining the physical AGM but also believe that meeting protocols and voting procedures should be modernised,” said Brogden.
“Directors recognise participation of shareholders is a crucial component of good governance. Smarter use of technology could enhance shareholder engagement in AGMs, from distribution of notices through to direct voting,” Mr Brogden said.
Sarah Wilson, chief executive of Manifest, backed the AICD’s opinions on direct voting saying, “we have long argue that direct electronic voting is the way forward for companies and investors. We very much welcome the Australian move and look to see it replicated around the world so that shareholders can have open, secure access to their voting rights.”