Annual general meetings as great moments of communication

The Covid-19 legislation approved by the German government has created some significant opportunities. German annual general meetings that have, to a certain extent, fallen behind the times, could finally enter the digital age. To ensure they do so, companies, shareholders and German legislators must continue boldly down the new path they have taken, so that mandatory shareholder meetings can become real moments of great communication.

It is the same procedure every year: powerful top managers hold long speeches to their shareholders, but painstakingly consider every word they utter on this day as they walk through a minefield fraught with legal risks. In a best-case scenario, shareholders will fire back with a barrage of critical questions, unless they happen to be more interested in the culinary delights that German companies serve during their annual general meetings (AGMs). This is not what real communication looks like. 

Many of the voting decisions are already a done deal, made long before the shareholders convene. A large proportion of the companies listed on Germany’s blue-chip index, the DAX, has been in foreign hands for many years now. These mostly Anglo-Saxon investors talk with the management and supervisory boards weeks ahead of the AGM and cast their votes a few days before the buffet is even set up. They no longer have the time to attend a German meeting in person. By the time the chairman of the supervisory board steps up to open the meeting at 10 a.m., the die has already been cast.  

Creating a new form of AGM by using the right communication strategy 

Nonetheless, you cannot just abandon the shareholder meetings that are attended in person as there would be legitimate resistance from the German investors who attach great importance to live debate.  However, the opportunities offered by the virtual world during this crisis year of 2020 should be seized now and used in the long term: they could give every shareholder around the world the chance to attend and cast votes at a German AGM – either in person or online. Companies conducting such a “hybrid AGM” would express true interest in their shareholders. It would require a little extra effort, but with the right communication strategy, companies could score some big points with all their stakeholders – and not just with shareholders. 

The chairmen of the supervisory board and the management board usually get the ball rolling at the AGM and fill its opening segment with their speeches. At a “hybrid AGM,” they would have to do something more. They would have to give speeches that would inspire and convince both shareholders who are sitting in the audience as well as those viewing them from screens around the world. For the speakers, it would be even more important to find the right tone, use compelling language, make the appropriate facial expressions and create the right impression. They should also take their digital audience’s limited attention span into account, for instance giving shorter, more compact speeches. To help break up the potential monotony of these speeches in an online context, they could use digital formats (such as videos, animations that display numbers, graphics, photos and key quotes).    

Twitter & co. are already a key part of a company’s communication mix. Why not take this even further and let followers participate in the AGM events inside and outside the hall? Video portraits of the new candidates for the supervisory board, or visual explanations of complex or controversial issues, could contribute to a better understanding and guide decisions in the desired direction. In addition, if the CEO summarizes the results of the meeting shortly afterwards in a personal video message, and thanks the shareholders for their participation, he or she would complete the company’s positive image as a successful and contemporary company. 

There are many ways to make German AGMs more modern and shareholder friendly. However, at a more fundamental level shareholders viewing the meeting online must also be granted a comprehensive right to speak and ask questions virtually. The 2020 emergency legislation fails to go far enough for this in some respects. For example, the opportunity of submitting questions before the AGM can even have a positive effect on the quality of the dialogue with investors because the answers provided by a company’s management can be compiled with less time pressure than they currently are. In return, the speeches held by the chairmen of the supervisory and management boards should be made public in advance, giving shareholders an opportunity to raise relevant questions. Some companies already took this step during the 2020 AGM season. 

Catapulting the AGM into the digital age and creating new “shareholder value” 

Companies should use the momentum being generated right now to catapult German AGMs into the digital age. For legislators, this could mean that parts of the emergency legislation must be permanently incorporated into the German Stock Corporation Act – the provision for the “hybrid AGM” to take place irrespective of the articles of association, for instance, or the limitation on the right of appeal so that the general debate can be conducted in a more focused manner. All of this would represent true progress to shareholders who are seriously interested in their companies.  

Despite the crisis we are facing right now, German companies should be expected to aim for something more than simply getting through their AGM without hitches or criticism. Instead, they should use the new opportunities to demonstrate solidarity and transparency, and to set new market standards. By doing so, they would not only be pioneers of good corporate governance but would also create a new form of “shareholder value”.  

Please find the full Impulse publication by Dr Daniela Favoccia with contribution of Dr Lisa Kopp, Hengeler Mueller, here or get in touch with Thomas von Oehsen.