Key points
- In a time of technological change and disruption, annual general meetings (AGMs) remain a key accountability mechanism for corporate Australia.
- The ability of investors to engage with directors and management and hold companies to account is a fundamental driver of good corporate governance.
- ASIC has released updated guidance on virtual meetings for companies and registered schemes to clarify expectations and support shareholder participation.
I would like to begin by acknowledging the traditional owners of the lands on which we’re meeting, the Gadigal people of the Eora nation.
I would also like to congratulate AIRA for hosting this inaugural conference. As Ian [Matheson, AIRA] mentioned, I’ve been involved in other conferences that have been put on and I’ve always found it really interesting and topical and on the pulse of what’s happening in corporate Australia and investors and consumers, which is where ASIC focuses our attention.
I also wanted to say AIRA is good at writing very well-written, brief, and to the point submissions, so when I think about the Statutory Review and the communication of key issues, I think you do a great job, whether it be bringing it to Treasury and others’ attention issues that aren’t always front of mind for people who are working in the policy and regulatory space. The corporate perspective, particularly your perspective, is always really welcome and well expressed, so thank you.
I will be responding to some of the issues that were raised through the Statutory Review and I think as the punchline, you’re going to have mixed views about where we’ve landed, but hopefully some of it is welcome. I am also keen to leave time for questions because it’s great to hear people’s views on things.
AGM best practice is a fantastic thing to focus on. Technology is entirely reshaping industries, businesses, and daily life – particularly in your profession. Today really is a great opportunity to reflect on the technology changes that affect AGMs more broadly and embrace them.
To frame my discussion, I want to remind you of the phrase “the medium is the message”, which was coined by a Canadian communication theorist, Marshall McLuhan. At the time, the idea of “the medium is the message” was revolutionary because it recognises how and where something is said shapes what is said – and often speaks volumes more.
Where and how in our context for today is the AGM and that context really does affect what your CEOs, chairs, and other leaders in your organisations are conveying and also what they’re hearing from your shareholders at the AGM.
Through that lens of the medium being the message, we can really see how important AGMs are as a powerful mechanism for facilitating good governance, even as technology disrupts and redefines how we communicate.
Where else other than the AGM are leaders of businesses required to meet stakeholders – in this case, investors – to look them in the eye, and explain what they are doing? So that medium being the message is really important.
From ASIC’s perspective, this ability of investors to engage with directors and management effectively, exercise their rights, and hold companies to account is a really fundamental driver of good corporate governance – and obviously good corporate governance is essential for the effective operation and performance of both companies, our market, and our economy. So that form – the AGM – really enables the function of governance.
There really are a lot of governance challenges in Australia at the moment. I don’t want to get drawn on them particularly but that heightens the focus of AIRA today on AGMs and more generally on getting the fundamentals of governance right.
We’ve framed today’s discussion as “meeting expectations” – both the verb and the noun – specifically how you as trusted advisers can support compliance with the regulatory requirements that apply in relation to AGMs in circumstances of technological change.
The price of flexibility
But first, a moment to step back in time. Last Thursday (20 March) was somewhat of an unsung anniversary.
It marked five years since ASIC first took steps to facilitate companies and registered schemes to hold virtual-only member meetings, in the beginning days of the COVID-19 pandemic. This was done by way of a no-action position if these entities could not otherwise comply with the Corporations Act requirements to hold virtual AGMs.
It was clear this flexibility was needed. We can all remember the challenges of that time, particularly in February, March, April. The dizzying series of “unprecedented measures”, borders being closed, the quick maths to determine how many people you could have in a room, including one supposed to be hosting an AGM. It was pretty mind blowing at the time.
So that decision was pretty straightforward but it also proved to be a sensible first step into the 21st century for company meetings, and we were really pleased at ASIC to see it later become a permanent feature of the Act in 2022.
Like many other pandemic-era developments, the expansion of virtual and hybrid AGMs has presented both benefits and challenges. I’m sure you could talk to me about those in detail, we recognise that’s been so. And like other reforms of this period, sometimes it’s a little hard to tell at this point if it’s a permanent shift or a pendulum swing.
On the one hand, the ability to hold hybrid and virtual meetings has really democratised and improved access to meetings and facilitated greater shareholder participation.
This is an outcome we support, given one of our objectives as a regulator is to promote the confident and informed participation of investors in the financial system. Supporting shareholders to exercise their rights is entirely consistent with that objective.
On the other hand, we are mindful that flexibility comes at a cost and can impose a burden. I note the representations from AIRA on this topic to the Statutory Review[1] consultation last year.
Just as an aside, I would like to mention to you that ASIC has recently convened a Simplification Consultative Group[2]. Our Chair Joe Longo spoke about it at our Annual Forum last year in which he stepped back as the regulator and looked at the regulatory framework – statutory instruments, guidance, info sheets, all these different elements – and reflected on the cost associated with very high levels of complexity in the frameworks we administer and that your companies are complying with.
Recognising that there’s been efforts before – including by the Law Reform Commission and others – to think about regulatory complexity, we are starting an additional push to see what we can do at ASIC to achieve practical examples of simplification in relation to areas preferably within our gift. We create instruments, guidance, info sheets, surveillance data requests, so we are asking can we do them more simply or in a way that simplifies how they are felt by people who are receiving them?
But it will also generate some ideas about law reform as well and we can’t do that – it’s the parliament who does that. But we can act as a conduit between areas of the law and the legislative framework that are particularly complex and work up examples of why they are particularly problematic. We can contribute to that wider debate as well. So if there are people interested in that, I’m happy to take that offline and take any questions on it, but I did want to let you know about that body of work in relation to simplification that ASIC has started.
Speaking of guidance though, I am pleased to announce today that in response to the recommendations of the Statutory Review of the Meetings and Documents Amendments and the Government’s subsequent response[3], ASIC has released updated guidance on virtual meetings for companies and registered schemes[4].
Of that statutory review, there were a number of recommendations and one of them was directed to us – and I’ll come back to it, it’s ‘us plus’ this idea of guidance being valuable in relation to AGMs.
The guidance further explains the amendments which permit hybrid and virtual only meetings and clarifies how ASIC views the law operating in certain areas. So, we did have some guidance but we’ve enhanced it. We’ve gone into some more detail on issues and made some adjustments.
Specifically – and I think this might be one of the areas that’s welcome – one of our FAQ updates notes that we do not view the Corporations Act as always requiring a telephone line, so long as the virtual meeting format allows members to exercise any rights orally and in writing, and the virtual meeting technology meets the broader requirements of meetings. That’s something I think we heard from AIRA that was of particular concern, so we’ve been pleased to clarify our thinking on that.
You’ll recall what I mentioned earlier regarding the medium and the message. Where we’ve come from in relation to that is [from the perspective of] is there another way, or a way in which people can ensure members have the ability to have their voice heard. For us, this is a compromise which balances the burden of compliance with the expectations of shareholders.
We have also clarified that providing a webcast of a meeting at a physical venue does not meet the requirements of a hybrid meeting. Our view is if that’s the only piece of technology, that’s not allowing a member to participate by asking questions or indeed by voting. That’s the second clarification I wanted to highlight but there’s others and I hope that’s helpful. There is more information available in the guidance, and that’s available on our website[5].
So having covered the specific new information in relation to AGMs, I would like to spend the remaining time I’ve been given to speak with you outlining principles or goals that underlie a lot of the other requirements – one being information about the meeting and the second being access. The third thing I’d like to finish on is how these things that already exist in the framework can be supplemented by best practice guidance, whether it be developed by industry or otherwise.
Clear information about the meeting
The first clear purpose that underlies a lot of the provisions is around investors getting information about the meeting.
As you know, listed entities in Australia are required to provide members with a minimum 28 days of notice prior to a meeting. These notices must include the date, time, and details of the meeting format, as well as any planned business, information about any proposed special resolutions and proxy votes, and an email contact. So these are the core requirements and I think companies have an opportunity to think about how they provide and present information to assist investors make decisions. This will help meet the requirement for the notice to be clear, concise and effective. I mean, we’ve all received unclear instructions on an important invitation to various things and [understand] the value of them being clarified or as clear as possible.
But it also comes back to that objective of confident and informed participation that I spoke of earlier and that fundamental right of the shareholder to be heard. If the medium is the message, logistics really matter.
Additionally, certain notices of meetings – or NOMs – are required to be lodged with ASIC prior to dispatch to members.
We recently examined a sample of the NOMs lodged with us, in addition to those publicly available on the ASX Market Announcements Platform. We found that some of the entities that held virtual-only meetings during our review period may not have had constitutions that expressly permitted meetings to be held in that format. Or if they did, they didn’t notify us as required. So, we’ve taken the steps of writing to those companies just to make sure that these rules that apply to when you can have a virtual-only meeting are complied with in our system.
We have also received a small number of reports of misconduct from the public[6] relating to insufficient notice periods being provided to shareholders prior to meetings, or meetings being switched from hybrid to virtual-only at short notice, including in circumstances where it wasn’t provided for in the constitution.
While these reports are few in number and have not suggested widespread issues to date, I would like to remind you that ASIC is monitoring these reports and NOMs and expects compliance, as a fundamental part of enabling shareholder participation.
Meetings are accessible
The second key goal underlying a lot of these provisions is accessibility. This should not be misinterpreted as meaning that meetings are required to be in a certain format.
ASIC’s approach here is technology-neutral, as it is with many areas that we regulate. We don’t have a preference as to what format your meeting is in, as long as it meets three criteria: it is allowed by your constitution, it is properly disclosed, and it provides your shareholders with an opportunity to be heard and participate. After that, there’s flexibility there.
Because participation is the cornerstone of corporate accountability. It is what makes the AGM a key accountability mechanism. It’s not just an obligation, the AGM. It’s an opportunity as well. Shareholders are not just there to listen but to be listened to. Some of the questions can really assist from both a corporate governance and reputational standpoint.
I’m sure you’ve all seen the recent ComputerShare and Georgeson AGM Intelligence report[7]. It was an interesting characterisation that the remuneration vote is no longer just about remuneration, it is an annual referendum on company sentiment. That’s how they characterised it and that’s an interesting way of thinking about it. I think you’ve got some discussions coming up about two strikes so I won’t pre-empt those but I understand that’s an important part of the meeting as well.
Industry development of best practice guidelines
So we can look at the statutory provisions – that’s what we’re really clearly focused on – but the recommendation earlier from the Statutory Review did acknowledge that best practice guidelines can be developed by industry in a way that is really valuable and supplements anything done by the regulator or indeed in the statutory provisions themselves.
Today is a good example, talking about it and discussing options, ideas, and developments, in a way that is helpful for other colleagues in other companies. I wanted to also shout out that the idea of developing best practice guidelines was explicitly described in the Statutory Review as being really valuable.
The value of something in that format is that it is written, developed, and informed by the experts – that’s you, in relation to what you see in practices with some of the more difficult issues.
Now I recognise that some parts of the Act are tricky – like “reasonable participation”. What does that mean if the technology goes down and people get disconnected from your meeting? How long do you have to wait for them to come back in or if they can’t come back in? What do they do?
A statutory provision on reasonableness is never going to be able to give you all of the answers and I don’t think you’d want it to. The idea of that level of granularity ends up in what I was talking about earlier – incredibly complex legislative frameworks that get stale or otherwise. So I would encourage you to think through the benefits of that as supplements to what I’ve been talking about.
Conclusion
So, to conclude I just wanted to finish on the concept of trust. Many of the requirements we’ve spoken about today are relatively new for you but they’re also new for your shareholders. Engaging with some of the changes in technology and formats does require a certain leap of faith on their part.
I don’t need to tell you that many retail shareholders have been attending your meetings since everything was done by post, so a lot has changed in a short period of time.
We saw concerns raised through the Statutory Review process that certain stakeholders distrusted virtual-only meetings if they felt it would be denying them their ability to fully exercise their rights and hold the board and management to account.
My observation on that would be that best practice does breed confidence and breed trust.
So, if the medium is the message, there is great value in showing, as well as telling, your shareholders that their rights will be upheld, or even enhanced, regardless of what that format is for your meetings. Because that’s what generates trust and that’s a price we think is worth paying when it comes to good corporate governance.
Thank you again to AIRA and to everybody here. I’m ready to answer questions.
[1] Australasian Investor Relations Association - Submission in response to: Statutory Review of the Meetings and Documents Amendments
[2] ASIC Annual Forum 2024: Bridging generations – regulating for all Australians | ASIC
[3] Statutory Review of the Meetings and Documents Amendments – consultation | Treasury.gov.au
[4] ASIC provides further guidance on virtual meetings for companies and registered schemes | ASIC
[5] FAQs: Virtual meetings for companies and registered schemes | ASIC
[6] Australian Securities and Investments Commission - Submission in response to: Statutory Review of the Meetings and Documents Amendments
