It was the Berlin venture capital company Advantec that set the ball rolling on March 30 by staging Germany’s first quasi-virtual annual shareholder meeting. Since the end of January, German law has allowed shareholders to indirectly vote on their stock over the internet. However, the recent legal changes do not go so far that an annual meeting can be held purely over the net. Meetings must still take place physically and proxy votes must be exercised by a person present at the assembly. Holders are able to electronically authorize proxies and transmit instructions to their representatives, though a big question mark remains over whether investors can actively participate in the annual meeting through a computer in their office or home.
Since Advantec held its meeting in late March, other larger German companies have followed suit to varying degrees. One of the most advanced of the German blue chips looking at staging a quasi-virtual annual meeting is global chemical concern Celanese, whose May 9 meeting was set to take place at time of going to press.
‘We are doing everything possible under the new German law to serve our shareholders over the internet,’ says Ralf Christner, head of media relations at Celanese.
Both Advantec and Celanese take the view that German law allows shareholders to sit at their computers, listen to the debates and say how they want to vote to proxies during the meeting. Other companies have decided to transmit the speeches of executives but not the debate, for fear of offending shareholders present at the meeting who might like to get up and talk, but don’t necessarily want to have their words recorded over the internet.
Changing shape
Based on Advantec’s experience, it is possible to get an indication of how the recent change in German law will affect the shape of annual meetings to come. Invitations mailed out to shareholders will ask all investors to choose whether they intend to appear in person or vote electronically.
If a holder opts for the electronic path, a personal identification code is then distributed, allowing the holder to assign his proxy electronically, follow the meeting and vote after listening to debates.
Some 53 holders, or around 5 percent of Advantec’s total shareholder base, chose to participate sitting at computer terminals scattered around the globe. Many more expressed an interest, asking to be registered for e-voting, but decided not to participate on the day. ‘Everything went smoothly,’ reports a happy Klaus Hagemann, chief executive of Advantec. Given that this was the first time any German company had attempted to stage a meeting of this type, Hagemann believes that the 5 percent web attendance was a good number. ‘More shareholders will join in electronically in the future,’ he predicts. ‘At the moment, this is very new and a lot of shareholders would have been unsure about it.’
He believes that the advantages for shareholders are obvious. They can vote from whatever part of the world they find themselves in – all they need is internet access, which saves them the cost and time of travel. ‘E-banking today is very much taken for granted,’ says Hagemann. ‘In the future, this will also be the case with e-voting.’
At Celanese, the e-voting organization is similar, with pin code and log-in directions sent out with invitations to attend the meeting. A full transmission of the meeting’s proceedings will be broadcast over the web and shareholders will be able to vote electronically during the meeting. But compared with Advantec, Celanese’s much larger number of shareholders (around 120,000 at the last count) means that preparing the event has been a much more complicated and costly affair. ‘The effort put into preparing the meeting has been enormous,’ confirms Christner. ‘We are a quasi-prototype for other large companies in Germany.’
Despite the costs and extra work, the electronic meeting is well worth the effort, in the opinion of Christner. For him the pay-off results from being ahead of the rest, showing that ‘we are a technology-friendly company.’
Smaller target
Both Celanese and Advantec see electronic share voting primarily as a service for smaller shareholders who find it difficult to attend meetings for professional reasons or because they don’t want to carry the cost of traveling from one city to another. Nevertheless, Hagemann reports that a surprising number of large shareholders participated in Advantec’s recent meeting through the internet. Although only 5 percent of shareholders logged on via the net, they represented around 18 percent of the company’s total outstanding equity.
Among other companies set to offer electronic voting as an option this year are motor giant DaimlerChrysler, financial services groups Munich Re and Allianz, and Deutsche Telekom. Siemens shareholders voted overwhelmingly at the company’s last annual meeting in February to introduce e-proxy voting ahead of the company’s next assembly. ‘More than 90 percent of votes received were in favor,’ says Siemens spokesman Stefan Denig.
However, companies vary in the degree to which they are willing to use the internet for their annual general meetings. DaimlerChrysler still requires holders to nominate their proxies in written form. Once these are received, investors are given a personal identification code that allows them to enter an internet site and fill out a form saying how they want to vote. The speeches of board members and executives are broadcast via the web, but there is no transmission of debates nor are investors granted the opportunity to give instructions during the meeting.
At Munich Re, a shareholder does not have to write in to give proxy power, which can instead be authorized electronically. But in common with DaimlerChrysler, Munich Re investors cannot participate in following debates or engage in instantaneous voting. Both companies say this is because they consider the annual general meeting to be a legally private event. If debates are transmitted, they argue, holders’ right to privacy could be infringed, presumably raising the specter of possible legal action by disgruntled shareholders.
However, this view is not shared at Lai-Con, a Dusseldorf-based e-voting software provider. Because technology ensures that a general meeting can be follow by a closed circle of shareholders who have received an individual code to enter the web site, the meeting remains private and within the bounds of German law, according to Lai-Con executive Jutta Westerfeld.
Ulrich Noack, professor of law at Dusseldorf University and a noted authority on stockholders’ meetings, even sees a public interest in the full transmission of assemblies, including debates. Noack says the privacy issue can be overcome by simply informing shareholders that the debate will be transmitted. ‘And,’ he adds, ‘if there is no objection, there is no legal problem.’
It is the rapid increase in the number of shareholders in Germany in recent years as well as the internationalization of stock markets that underlie the change in laws. The Bundestag, the national parliament, accepted e-voting without opposition, with all political parties backing it as a way of increasing participation at annual meetings by both German and foreign shareholders.
Dirk Zetzsche, CEO of Lai-Con, says that he expects e-voting ‘to increase participation by shareholders in general meetings and ensure stable support for corporate policies.’ German companies have suffered in recent years from falling attendance at meetings. At Siemens’ annual shareholder meeting last February, only 22 percent of holders were present. Indeed, a spokesman for the German Association of Chambers of Industry & Commerce, an umbrella group representing Germany’s 3 mn companies, says the association’s members welcome moves to simplify voting procedures over the internet for this reason.
But not everyone in Germany is enamored of current electronic meeting practices. Jella Benner-Heinacher, managing director at the German shareholder protection association DSW, is skeptical about the benefits of e-voting. She points out that most companies still appoint proxy committees internally. This, she says, is a conflict of interest, and arouses distrust amongst shareholders. ‘It is far from sure that this will take off in its present form in Germany,’ says Benner-Heinacher. ‘There is opposition from shareholders to give their proxies to people within the company.’
Benner-Heinacher argues that proxy committees should be independent of the company and that outside independent proxy agents should be appointed. She believes that the law does not go far enough, and that shareholders should be permitted to cast their vote directly over the internet without an intermediary.
No replacement
Even with the advances made so far, it is unlikely that virtual general meetings will replace floor-based meetings in the near future because German law still obliges a company to hold a physical meeting. This is despite a general consensus that virtual meetings will come in the future. Noack suggests that physical general meetings are not really necessary, and virtual meetings would be more efficient. He points out that a shareholder meeting approves accounts, appoints directors and the like – measures that can be just as easily carried out by a vote over the internet.
Participation in meeting debates by investors attending via the web is a legal gray area that needs to be solved. ‘I don’t know how quickly it will come that shareholders can actually speak over the net. If the general meeting becomes a chat room, it would never end,’ says Advantec’s Hagemann. He suggests that the online chat could take place before the meeting, when company officials can answer shareholders’ questions on the internet.
Although the virtual meeting may have a long way to go, corporate governance advocates have already hailed the reform of German laws governing annual meetings as an important move. ‘Electronic share voting took a big step forward in Germany,’ wrote Global Proxy Watch, a weekly corporate governance newsletter. ‘The move makes Germany an instant global leader in share voting reform. And it sends a clear signal that Berlin is laying a welcome mat for foreign investment.’
Technology round up
English channel
IROs could be forgiven for growing weary with the internet. But one innovation that may interest the cynics is UK-based cantoscomms.com, a new corporate communications channel. Its owners claim cantoscomms.com allows companies to communicate with more institutional investors. Each client company has its own web page, incorporating the latest online video technology, RNS announcements, share price data, links to corporate sites, Q&A and business headlines.
FD Inc
The SEC’s Regulation Fair Disclosure created a whole new market for disclosure-related products and services. Most recent among these is IntegratIR, a software system that automatically updates news releases, financial reports, SEC filings, quotes and other corporate data on a small-cap company’s web site. For more details, visit stockgroup.com.
Web watch
irwebreport.com
Set up by Dominic Jones, a Toronto-based web IR consultant, this site provides advice and comment on investor relations on the internet. Though occasionally slow-loading, irwebreport.com offers IROs useful tips on getting the most out of the internet, providing regular feature articles as well as reviews of major corporate IR sites.
Recommended.
europeaninvestor.com
As a one-stop, all-you-can-eat resource for European markets, europeaninvestor.com is hard to beat. Despite a slightly cluttered layout, the sheer volume of information available on Europe’s markets is excellent. Voted ‘Best of the web’ by Forbes.com, europeaninvestor.com is well worth a look.
