It is cheaper, but above all it is easier to control if shareholders annoy the management board and supervisory board with unpleasant questions: No wonder that the virtual general meeting (AGM), introduced in the corona pandemic, is probably mutating from an exception to a permanent state. In the struggle over how shareholder meetings in Germany will take place in the future – whether in person, digitally or hybrid – the corporate lobby has now won another interim victory: the influential voting rights advisor Institutional Shareholder Services (ISS) no longer automatically recommends voting against purely online shareholder meetings, writes the Reuters news agency. ISS will evaluate the planned changes to the company’s articles of association in each individual case. US funds in particular follow the advice of ISS when they vote as shareholders at general meetings.
In addition to the Management Board and the Supervisory Board, the Annual General Meeting is the most important decision-making body in a stock corporation. Only once a year do shareholders have the opportunity to express their opinion personally to the management of their company and to ask questions that the board of directors must answer. It’s often about central things: management mistakes, the payment of management and more and more about how sustainable a company works – so it’s also about a kind of shareholder democracy.
So far, ISS had recommended voting for the hybrid model and against pure online HV. Influential lobby organizations such as Deutsches Aktieninstitut and the German investor relations association DIRK, on the other hand, were up in arms. From their name, the associations give the impression that they are concerned with the interests of the shareholders, but the interests of the companies are usually in the foreground.
They had already ensured that the federal government anchored the virtual general meeting as a fixed option in the German Stock Corporation Act from 2024 – but only if the shareholders agreed. From 2023, the shareholders of most listed companies in Germany are therefore called upon to clear the way for virtual general meetings on changes to the articles of association. Until then, the transitional arrangement from the pandemic period will still apply. As a rule, a three-quarters majority is required for amendments to the articles of incorporation. Proxy advisors like ISS and Glass Lewis often get a quarter of the votes, so a lot depends on them. However, they are not free from conflicts of interest: ISS, for example, also lives from the consulting contracts of the companies and belongs to the German stock exchange, which is also listed on the stock exchange.
General debate deprived of the basis
Large German fund houses such as Union Investment and Deka or the Fondsverband BVI, on the other hand, have spoken out in favor of maintaining face-to-face events. In view of the virtual general meeting, you see the Participation rights of the shareholders circumcised. For example, if the Executive Board stipulates in future that shareholders must submit their questions no later than three days before the AGM and these will then not be answered at the AGM but on the shareholder portal one day before. “This means that the basis for a general debate that lives on questions and answers has been removed,” says the representative of a fund company. Major shareholders, such as sovereign wealth funds from the Middle East, can also exercise their influence at any time outside of the general meeting – unlike private investors. The BVI fund association recommends that companies should only be authorized to hold a virtual general meeting for two years and not for five years, as is required by law.
In 2022, only Telekom of the Dax companies returned to face-to-face meetings. The first decisions about the future format should be made in February when Siemens and Thyssenkrupp invite you to their general meetings. At Deutsche Bank, it has been heard that they are once again striving to go digital.