During the pandemic, general meetings were moved online. Many companies are now sticking with this virtual format. This is causing criticism among shareholders.
Once a year, shareholders can probe their company’s board members, vent their anger and ask questions. During the Corona pandemic, these general meetings were held virtually. Even now, many companies are sticking to this format. Shareholder advocates criticize this because of the vulnerable technology and because they see shareholder rights being restricted.
Technical problems have occurred at every third online general meeting in Germany this year, especially with video and sound. The German Association for the Protection of Securities Ownership (DSW) found this in a survey that it published in its current “AGM Report”.
It is said that almost 30 percent of all disruptions not only led to short-term interruptions, but also extended shareholder meetings for hours. DSW cites Covestro’s general meeting as a negative example, where the interruptions totaled three hours. In total, the event lasted more than nine hours.
Restricted Right to speak
“We are not fundamentally against the virtual general meeting – in clearly justified exceptional situations,” said DSW managing director Christiane Hölz. “However, technically flawless implementation is an essential prerequisite.” The virtual general meeting was initially introduced as an emergency solution during the Corona crisis, but is now legally permitted as an alternative to face-to-face events. According to the law, technical malfunctions are not a reason for a challenge.
Nevertheless, the disruptions left shareholders feeling restricted in their rights. Particularly with regard to the right to ask questions and obtain information, they complained about significant disadvantages compared to in-person general meetings. “The constructive exchange between shareholders and the administration but also the dialogue among each other are the important elements of a general meeting,” criticized Hölz.
Shrinking number of participants
According to the DSW study, DAX companies in particular use the virtual general meeting: 28 shareholder meetings took place online this year, only ten in person. For smaller companies from the MDAX (25 in person, 24 online) and SDAX (40 to 26), where the effort is lower due to the significantly lower number of shareholders, the face-to-face format predominates. The argument that the online general meeting enables more shareholders to participate does not hold water, explained the DSW. Attendance at shareholder meetings in the DAX this year is lower than at the beginning of the corona pandemic.
The DSW, which primarily represents private shareholders, continues to advocate for a hybrid format that gives shareholders the choice of whether they go to the general meeting in person or follow it online. Most shareholder associations in other European countries also preferred the hybrid variant, and those in Austria and Luxembourg even spoke out in favor of the in-person general meeting. There were also technical problems in Austria, France and Portugal.