If we were tasked today with building a platform to facilitate corporate decision-making between companies and their owners, we certainly wouldn’t start from here!
Annual General Meetings, resolutions, elections, proxy voting, live polls, the institutionalisation of shareholdings, retail nominees, custody chains, registered shares, beneficial ownership, certificated holdings, depositary receipts, dematerialisation - and then you can throw a whole load of cross-border complexity across the top of all of it. The whole plumbing of the set-up is hugely confusing and opaque.
At the same time, there is an ever stricter requirement on companies and investors to promote good corporate governance, with ESG and CSR obligations coming from the ground up as well as top down from the regulators. There is pressure on shareholders to prove their responsible investor credentials, and imminent new legislation such as the European Shareholder Rights Directive II is a key driver intended to enforce change. Companies have to communicate ever more efficiently with their owners - and those owners need to exercise their right to vote and to demonstrate their impact.
While this differs across markets, simply knowing who all the underlying shareholders really are is not a straightforward exercise for most companies. Similarly, voting on company resolutions and receiving confirmation that it was counted and executed is also remarkably difficult for many investors. In order therefore to make it work until now, an industry of advisors, intermediaries and agents has grown around and amongst the companies and their owners, to help them navigate the tangled web of complexity.
However, it seems that most interested parties in this whole ecosystem do want to make it all more transparent, more integrated and just generally easier overall. Easier that is from the point at which companies need to communicate the resolutions which require investor approval, through to the meeting day itself and the subsequent counting of the votes, the publishing of the certified results and the vote confirmations back to the investors.
So how does it get easier? That’s simple. Digitise as much as possible in order to effect digitalisation to deliver digital transformation! Er, what does that mean? Well, I wasn’t sure about the difference between digitising and digitalising so I looked it up ,and actually it is very helpful in understanding what is going on and what needs to happen to make this all easier.
Digitisation is the process of converting information from a physical format into a digital one. At all stages of the AGM process from notice of meeting or convocation through to the end of meeting results, there is still a remarkable amount of paper or ‘physical format’ elements. However, shareholder communications, meeting notices in newspapers, proxy voting forms and ballot cards and even the annual general meeting itself can all be made digital.
Digitalisation is when the process of digitising all these different elements is leveraged to improve business processes. The more each physical format element is digitised, the easier and the more effective digitalisation can be.
Digital transformation is what the results of this process are called. Within the context of the AGM, the ideal outcome would of course be greater transparency and decision making which is quicker, more efficient and much more accurate.
As I mentioned at the start, we wouldn’t start from here. However ‘here’ is where we are starting from. That is why the changes that seem necessary can appear so daunting to the industry players involved in all of this.
The benefit though of digitising one element at a time is that you can deliver digitalisation in bite sized chunks. Moreover, to get the value out of digitalisation, the process of digitisation does not have to be 100% pure. While a standardised messaging format (such as ISO 20022) to notify meetings makes it much better, we will probably still see the physical newspaper notice for some years to come.
Similarly, an emerging digital proxy voting platform such as Proxymity from the investor straight through the custody chains to the company, together with the online real-time participation at a virtual meeting, will not put an immediate end to the paper ballot or the physical meeting at a real venue either. There are many ways in which the actual meeting is digitised today anyway to integrate the online and in-room experience. However, the more it is digitised and the more digital options there are, the more accuracy and efficiency will be improved.
Most companies know there is only one direction of travel, and the future AGM is going to be increasingly digital. However there are many aspects to this, and it is not an all or nothing event. More importantly, so many of these digital elements exist and are in use today - and since Lumi is a major provider of these solutions around the world, you will not be surprised to hear that I encourage you to get in touch if you want to explore any one of them!
So, as discussed, it’s simple. Digitise in order to digitalise and deliver digital transformation.