Status: 12.05.2022 6:14 p.m
Listed companies should be allowed to hold virtual general meetings on a permanent basis. Business associations have criticized the government’s plans, as have shareholder advocates – for different reasons.
What has proven itself in the pandemic should now be made possible on a permanent basis: the virtual general meeting. Listed companies have to answer questions and give an account to their shareholders once a year. Important decisions for the company are also made at the general meeting. Because face-to-face events were sometimes impossible during the pandemic for reasons of infection protection, the federal government allowed virtual general meetings.
According to the will of the federal government, this instrument should now be made possible on a permanent basis – this is the view of a government draft that is being discussed in the Bundestag for the first time today. According to Federal Minister of Justice Marco Buschmann from the FDP, he is pleased that a “temporary solution caused by corona” will become a permanent solution.
The right to ask questions
According to the draft, a general meeting can decide to only meet digitally. Votes, applications and questions should continue to be possible in digital form. A first draft had imposed even stricter restrictions on this right to ask questions. However, the federal government corrected its position on this point and has now expanded the right to ask questions – also under pressure from shareholders’ protectors. While questions may still be submitted prior to the meeting and written responses may be received, additional questions and motions may still be asked at the actual meeting.
This point goes far too far for many business associations. in a dem NDR This association letter, signed by the Federation of German Industries (BDI), the Association of the Chemical Industry and the Deutsches Aktieninstitut, among others, states that the draft “ignores practice”.
BDI sees risks of lawsuits
The associations are taking the government’s draft to court harshly: Actually, the draft law is just an “unreflective transfer” of the already known face-to-face event into the virtual world. The associations would have liked that the shareholders’ right to ask questions at the meeting could only be exercised to a limited extent. The same should also apply to applications. Motions could only be submitted during the meeting under certain conditions.
The associations hope that this will “streamline” the general meeting. “Legislators have to get away from the idea that a virtual general meeting is nothing more than a large team conference,” says Christine Bortenlänger from Deutsches Aktieninstitut. If the draft becomes law in this way, the BDI fears it will “burst the pipe” and sees the risk of legal action being taken against companies if questions are answered incompletely.
Less critical questions?
But why shouldn’t well-paid managers with a lavishly endowed staff be able to respond spontaneously to criticism from their owners? Doesn’t every club board have to answer questions for their actions? And doesn’t such a “tightening” ultimately lead to the board “clearing up” critical questions in advance?
If you speak to shareholder protectors like Markus Kienle from the Protection Association of Capital Investors (SdK), then the government should rather expand the face-to-face meeting to include virtual elements. For example, shifting questions to the run-up to the conference is a step in the right direction, but there must still be the opportunity for detailed follow-up at the meeting. This is the only way a lively exchange can take place, and this is the only way for a shareholder to observe the Management Board’s reaction to questions. “You would also like to know from a contractual partner how someone reacts in critical situations,” says Kienle.
Better debate culture needed
Large general meetings are usually characterized by the fact that many people come together and discuss things in the foyer or during breaks, for example. According to shareholder protector Kienle, such elements are completely absent from a virtual meeting – to the detriment of the culture of debate. We are also hearing more and more frequently from business associations that the culture of debate is currently not in place and that it absolutely must be improved.
Business associations and shareholder protection groups agree that hour-long annual general meetings are not very productive. Similar questions are often asked again and again – sometimes shareholders almost abuse their right to ask questions.
Incidentally, the fact that virtual meetings are cheaper does not play a role in the discussion. “If a company can no longer bear the costs of the general meeting, then it has completely different problems than the dividend,” says shareholder protector Kienle.