Setting the AGM straight

Full marks to the JSE for providing a first-class example of how a listed company should conduct an AGM.

You wouldn’t think it was necessary to have to demonstrate the application of one of the most basic rights of investors, but as frustrated shareholders at Astral, Spar, Nampak, Spur and Coronation will tell you, it is necessary. Those shareholders, and a swathe of others including those of all the major banks, were forced to battle their way through all manner of obstructions in a bid to be heard by their board in recent years; in the case of Coronation’s latest AGM, their battle failed spectacularly. 

As the JSE has had to remind several investors and journalists, it does not have the authority to instruct listed companies on how to conduct shareholder meetings; that authority rests with the Companies Act and the Companies & Intellectual Property Commission (CIPC). But a few weeks ago the JSE did the next best thing; it used its own AGM to demonstrate what should be done.

Its message: AGMs are about ensuring shareholders have an opportunity to engage with their directors. As newly appointed chair Phuthuma Nhleko told the meeting, the JSE board wanted to ensure that all shareholders, wherever they were located, shared in this important opportunity. And, because of the “richness of direct engagement”, the board decided shareholders should be offered the choice of attending not only via the online platform but also in person. “I trust this hybrid approach will serve us well,” said Nhleko at the beginning of the meeting, noting: “We’ve all become skilled at navigating online technology.” 

Not everyone, it seems. A number of companies had adopted a bizarrely aggressive approach, only allowing shareholders to submit questions in writing; they claimed the technology could not accommodate spoken questions. Well, the JSE has now laid that suspect claim to rest.  

Yet there appear to be a few holdouts. Precisely why ArcelorMittal required shareholders attending virtually to phone in questions is hard to know. At its AGM last week, shareholders not physically at the meeting were obliged to make a phone call in order to ask questions. 

Up to now companies have claimed their refusal to allow shareholders to ask questions verbally was in line with the requirements of the Companies Act. The critical part of that Act, which does allow for electronic meetings and was particularly useful during Covid, requires that “the electronic communication employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other, without an intermediary, and to participate reasonably effectively in the meeting”. 

Coronation’s 2023 AGM represented a grim display of disregard for shareholders, with the chair playing a staggeringly assertive role in intermediating shareholders’ questions

As most people who’ve attended an electronic AGM will acknowledge, concurrent communication and reasonably effective participation is achievable; to their considerable credit Sibanye and Old Mutual did it from day one back in early 2020. But a surprising number opted to see Covid as a chance to clamp down on engagement. The standout instance was Coronation, whose 2023 AGM represented a grim display of disregard for shareholders, with the chair playing a staggeringly assertive role in intermediating shareholders’ questions.    

Now the CIPC has stepped in to remove any uncertainty. Lucinda Steenkamp, senior legal adviser: corporate legal at the commission, recently issued a nonbinding legal opinion in which she reiterated the importance of AGMs as essential opportunities for shareholders to interrogate company decision-making and to hold boards to account.

“While virtual AGMs are a viable alternative to having face to face meetings in a global economy, the virtual format increases the risk of infringement of shareholder rights,” said Steenkamp, adding that “Infringement of shareholder rights ... was raised in relation to the ability of shareholders to ask questions of the board of directors and to engage ‘real-time’ with the board and with each other.” She said decisions could not be made, and consensus could not be reached, if shareholders could not interact effectively and efficiently. 

Just in case the message wasn’t clear enough for some board members, Steenkamp warned: “Should a company hold virtual-only AGMs and these meetings do not allow shareholders to ask questions in ‘real-time’, without an intermediary, or requires all questions to be submitted in advance, that meeting will not constitute an AGM for the purposes of the Companies Act 71 of 2008”.

This might have caused some consternation at Coronation, whose shareholders had muttered threats about approaching the courts to have the February AGM declared void. 

Should a company hold virtual-only AGMs and these meetings do not allow shareholders to ask questions in ‘real-time’, that meeting will not constitute an AGM for the purposes of the Companies Act, 71 of 2008

—  Lucinda Steenkamp 

A Coronation spokesperson told the FM it had noted the contents of the nonbinding legal opinion but didn’t have a specific comment at this stage. “Following the comments we received from our shareholders at our last AGM, we are re-assessing the format of the meeting and will take their views and the relevant guidelines into consideration,” said spokesperson Fiona Falk. 

In what could be seen as a rebuke to companies that ran off to expensive lawyers for support for their “no-speak” AGMs, Steenkamp’s opinion makes extensive reference to a note issued by a shareholder activist nonprofit organisation, Just Share, in 2020 describing virtual AGM “best practice”. 

Just Share’s best practice recommendations included the provision of adequate and appropriate instructions for shareholders in the use of secure virtual facilities as well as ensuring sufficient time for a meaningful question and answer session “during which shareholders can ask questions in real time, engage with the board and each other on the questions and be able to ask follow-up questions where applicable”. 

Steenkamp said these recommendations are closely aligned with the CIPC’s interpretation of the Companies Act requirements relating to virtual AGMs. 

Lest there was still an iota of doubt, the Institute of Directors SA (IoDSA) promptly followed up on the CIPC’s opinion with a media release welcoming the clarification on active shareholder participation at AGMs.

“If you consider the Companies Act and King 4 in substance over form, shareholders should have a right to be heard at an AGM,” said Parmi Natesan, CEO of the IoDSA. “It is imperative that companies ensure that AGMs not only comply with the form of the law but that they also enable easy, unrestricted and effective shareholder participation during the meetings, in substance.”

Apart from Just Share, it was left to a handful of activist shareholders to ensure listed companies were not able to cloak themselves permanently in the dark shadows provided by Covid. 

Chris Logan, CEO of Opportune Investments, a fearsome critic of the engagement-unfriendly companies, had enthusiastic praise for the JSE’s conduct of its AGM. “The hybrid meeting provided shareholders with an opportunity to engage meaningfully with the board either in person or electronically and they were provided with insightful and detailed answers to their questions.” He also praised the JSE for providing a recording of the meeting shortly after it had ended. 

Perhaps it’s time to have AGMs such as ArcelorMittal’s formally challenged.