Large banks and insurers have once again jointly obtained a court order that permits them to hold either online-only or hybrid annual general meetings.Jenny Kane/The Associated Press
Financial institutions: Do right by your shareholders and meet them face-to-face next year.
Large banks and insurers have once again jointly obtained a court order that permits them to hold either online-only or hybrid annual general meetings (a format that allows investors to attend virtually or in the flesh) because of the COVID-19 pandemic.
It may sound inconsequential, but it’s not. The 2023 AGM season will mark the fourth straight year that some of Canada’s largest companies will have legal cover to forgo in-person gatherings entirely even though electronic-only meetings erode shareholders’ rights.
Yes, coronavirus is still with us. But given that many of these same corporations are urging their employees to return to the office, it’s starting feel like one of the lingering effects of the pandemic is that the big banks and insurers are sick of hearing from their shareholders. Why else would they reserve the right to keep them on mute?
Spare us the spin that this latest court order was prompted by concerns about the “unpredictable nature” of COVID-19 or the potential for health authorities to reinstate pandemic protocols.
Rightly or wrongly, mandatory masking, physical distancing and vaccine mandates are largely relics of the past. The public is fed up with pandemic restrictions and premiers won’t risk voters’ wrath by bringing them back.
That’s why, court order or not, any financial institution that is truly interested in shareholder engagement will opt for a hybrid AGM. A webcast alone is a poor substitute for in-person interaction among shareholders, executives and corporate directors.
Banks and insurers should also ensure that any investors participating electronically can be seen and heard live – just as they would if they were to line up at a microphone.
AGMs are about corporate accountability. Shareholders’ ability to make informed investing decisions hinges on their ability to ask spontaneous questions about a range of issues, including potential risks.
Given the slowing economy, rising interest rates, persistent inflation, hefty consumer debt loads and rising capital requirements, financial institutions should be encouraging more impromptu dialogue with investors.
After all, big banks, in particular, are role models for the rest of corporate Canada on matters of governance. So, when it comes to their AGM conduct, investors are counting on them to lead by example.
“I have not attended a shareholder meeting in the last three years that resembles anything that I attended prior to the pandemic, and I think that’s a problem,” said Emma Pullman, capital stewardship officer with the BC General Employees’ Union (BCGEU), an institutional investor that regularly files shareholder resolutions.
“Shareholder rights are being undermined by what has happened with these primarily virtual-only meetings.”
Some companies have certainly made improvements to increase live interactions during online AGMs. But others have failed to resolve problems such as technical glitches, cumbersome registration and the inability of shareholders to pose off-the-cuff questions.
That limited shareholder participation has shielded management teams and corporate boards from sufficient scrutiny throughout the pandemic, prompting BCGEU to file a complaint with the Canadian Securities Administrators (CSA), the national umbrella group of provincial and territorial regulators.
This past February, the CSA updated its guidance on online meetings, urging public companies “to provide for a level of shareholder participation at a virtual meeting that is comparable to that which a shareholder could reasonably expect if they were attending an in-person meeting.”
Trouble is, the CSA’s recommendations aren’t binding because AGMs fall outside the purview of securities regulators. Instead, AGM conduct is primarily subject to corporate law.
The applicable statute could be federal or provincial as it depends on a company’s incorporation process. As a result, AGM rules vary across Canada.
Months after the CSA updated its guidelines, BCGEU had trouble participating in Brookfield Asset Management Inc.’s annual meeting last June.
Although its proposal on emission-reduction targets was included in the company’s circular, BCGEU was unable to speak to the resolution at the virtual AGM because it didn’t submit its speech to Brookfield before its deadline.
That’s a problem because at an in-person meeting, shareholders are generally able to take the floor and present their resolutions without filing their speaking notes with companies in advance.
“We value all shareholder engagement and have engaged with BCGEU several times over the years. Their supporting statement was included in this year’s management information circular, but their additional statement was submitted after the prescribed deadline and therefore could not be included,” Brookfield spokesman Sebastien Bouchard said in a statement.
Although Brookfield hasn’t started the planning process for next year’s AGM, it should scrap this submission requirement for shareholder statements.
This issue, of course, is bigger than just one corporation.
Should we be concerned that public companies may try to screen out investors they deem less than friendly? Absolutely.
It’s an open secret that sell-side analysts are often blocked from asking critical questions on quarterly earnings calls, so why would it be any different for shareholders?
Shareholders have little recourse, aside from costly litigation, if companies ignore the CSA guidelines for virtual meetings.
That’s why financial institutions must do the honourable thing and go hybrid in 2023. Set a high bar for AGM conduct, please. Canadians are counting on you.