Shareholder jitters as leading listed firms cling to virtual AGMs post-pandemic

Even though the COVID-19 pandemic has long since abated in Kenya, listed companies are facing growing scrutiny from shareholders over the continued use of virtual annual general meetings (AGMs), raising concerns over transparency and investor engagement.

Lockdowns and social distancing measures initially drove the shift to online-only AGMs during the height of the health crisis, which made in-person shareholder gatherings unfeasible.

 Data from the Nairobi Securities Exchange (NSE) shows that majority of listed companies held virtual or hybrid (partly virtual, partly in-person) AGMs for the calendar year ended 2023, just as in the prior year.

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 Among listed firms that have clung to virtual AGMs are Co-operative Bank of Kenya (Co-op Bank), Kenya Reinsurance Corporation (Kenya Re), Equity Group, and DTB, among others.

Safaricom announced Thursday that it will also hold its AGM virtually.

However, this new norm has drawn criticism from some investors, who argue virtual meetings limit their ability to directly question executives and exercise proper oversight.

During the Total Energies AGM held virtually on June 28th, a shareholder questioned why the listed oil dealer was clinging to virtual AGMs.

“The AGM being streamed live via a link that has been provided to all shareholders who registered to participate accommodates as many shareholders as possible. Concerning next year's AGM, decisions will be made taking into account the prevailing circumstances and environment at the time of the AGM,” said Total in response to a question from a shareholder on why it has not yet reverted to physical AGMs.

In response to a similar question from a jittery shareholder, NCBA Group said: “In our experience, the introduction of virtual Annual General Meetings, which were absolutely necessary during the period of the COVID-19 pandemic, brought several benefits including improved participation by a far greater number of shareholders including those in the diaspora, greater convenience and time management efficiency, and cost-effectiveness, thus further enhancing profitability for shareholders.”

“A move towards hybrid meetings would require careful consideration and planning in order to ensure that the technology used and capacity for hosting mixed meetings allow for a uniform experience in terms of shareholder participation and value-adding engagements in a seamless manner through consistent and stable high-quality facilities.”

“The Board will continue to consider available models for conducting our AGMs while ensuring that they achieve the desired outcome vis-à-vis value to shareholders.”

In response to a question on when Tier One Equity Group intends to hold a physical or hybrid meeting for its shareholders, it said: “Based on the prevailing circumstances, the company may consider physical meetings in future.” The lender held its Twentieth AGM virtually on June 26, 2024.

DTB said it “strives to ensure its online meetings facilitate robust shareholder participation.” when a shareholder raised similar concerns.

The use of virtual AGMs which has persisted even as life has largely returned to normal in Kenya, seems to worry shareholders.

“The pandemic may have been the initial trigger, but many companies seem reluctant to fully revert to in-person meetings," said John Kimani, a Thika-based shareholder of several leading blue chip companies.

"There's a real risk of shareholder disenfranchisement with these virtual AGMs," added Beatrice Kiptum, another Nairobi-based shareholder. 

"Shareholders want to be able to engage face-to-face and have their voices heard, which is more difficult in an online format."

The Capital Markets Authority (CMA) had earlier cautioned corporations about clinging to virtual meetings, saying that good corporate governance means enabling shareholders to effectively engage with and hold management accountable.

The CMA had warned that virtual AGMs, if not done properly, can undermine this fundamental principle.

The CMA therefore urged for reforms to protect shareholder participation in virtual meetings to enable them to hold companies accountable both online and offline.

The CMA had said it was jittery that the CMA virtual AGMs could lead to unequal power dynamics in which some shareholders are left out in the digital cold.

The COVID-19 pandemic sparked a revolution in how Kenyan companies hold their AGMs.

From boardrooms packed with shareholders to screens filled with avatars, virtual AGMs have become the norm.

Analysts have long feared that the virtual AGMs risk excluding participants who might be unfamiliar with the required technology, such as older retail shareholders.

As Kenyan firms navigate the post-pandemic landscape, pressure is mounting to find the right balance between shareholder accessibility and operational feasibility when conducting annual general meetings.

"Going forward, the Authority calls on issuers to ensure that the virtual AGMs mirror physical AGMs to the extent possible by allowing shareholders enough time to ask questions and seek clarifications on the company’s performance or any relevant matters," said the CMA earlier this year.

"Issuers are strongly encouraged to make available, on their websites, a comprehensive record of questions posed by shareholders during the AGMs along with the corresponding responses provided by the directors/management."