Coronavirus pushes corporate Japan into a ‘virtual’ AGM season

Linda J. Dodson

TOKYO — Japan is heading into its peak season for annual shareholder meetings with companies racing to implement safety measures and find effective ways for investors to meet and vote amid the coronavirus pandemic.

June is usually a whirlwind of AGMs across Japan. Large companies welcome thousands of investors to events that are part official business, part marketing opportunity, with shareholders enjoying corporate hospitality and the odd freebie.

But this year many are scaling back their plans drastically. “Please refrain from coming to the general meeting,” Toyota Motor and Sony both told shareholders. 

In a normal year Toyota would put its signature car brands on display and hand out gifts such as toy cars. The auto company holds one of the biggest AGMs in Japan, with over 5,500 shareholders attending in 2019.

This year’s event, on June 11, will be very different. Seats will be widely spaced and shareholders’ temperatures will be checked through thermal imaging. Attendees will be asked to leave if the meeting is full.

Cancelling the once-a-year event is not an option. Japanese corporate law requires public companies to hold an AGM at a physical venue, leaving companies in a state of flux as they try to balance their obligation as a public company with that of protecting their shareholders’ health.

But many, such as BeMap, a Tokyo-based system services specialist, are moving as much of their AGM online as possible. “We will downsize our physical meeting, but are encouraging shareholders to attend via internet while at home,” says CEO Fuminori Sugino.

The company is developing a system to allow shareholders to vote and ask questions through the internet. Sugino expects participation to increase tenfold compared with its usual AGM, “as it will give shareholders easier access.”

“The number of questions will likely jump, too, since shareholders won’t have to worry about speaking in front of other people when it’s through the internet,” he added, expressing hopes that this year’s AGM will inspire dialogue between management and shareholders.

Even before the pandemic, Japan had begun to inch toward more digital participation in AGMs. Last year, the powerful Ministry of Economy, Trade and Industry established a study group on how to use technology in shareholder meetings, aiming to tackle corporate Japan’s lag in internet use compared with international peers.

In February the ministry formulated guidelines encouraging companies to hold “virtual shareholder meetings,” where businesses can either have shareholders attend and vote at their AGMs through the internet, or have shareholders participate in an online version of the AGM but without real time access to voting. The former version would mean more work for companies as it would require them to put in place technical infrastructure that allows online proxy voting.

“For companies, of course the easiest option would be to just livestream the AGM,” said Pina Hirano, CEO of Asteria, a software company that helps companies host virtual AGMs. “It all depends on whether companies can prepare well enough to host such hybrid meetings, as there are risks like security and internet connectivity.”

The coronavirus has meant the ministry’s guidelines gaining new attention from investors and companies. “It is definitely true that many companies are taking it as an opportunity to try something new,” Hirano added.

Some companies, including system developer Fuji Soft, and V-cube, a webcasting services provider, have already held their AGMs for this year. Osamu Akamatsu, the head of Fuji Soft’s general administration department, was running around frantically in February after top management decided to convene a virtual AGM.

“We were really busy as we had to develop a system in a short amount of time, luckily, we already had an existing infrastructure which we built on.” It took the company three weeks to develop a system, whereas it would likely take other nontech companies up to several months.

Fuji Soft allowed shareholders with iPads to exercise their voting rights and attend the AGM from home, while setting up a call center for shareholders to dial in and ask questions.

In the end, while the company expected around 30 people to attend through the internet, only 11 did.

“We still have room for improvement and are working toward developing a system that offers a one-stop-service,” Akamatsu said, noting that system-operations must be easier for shareholders to make use of it.

Meanwhile, V-cube had over a hundred shareholders take part in their AGM through the internet.

CEO Naoaki Mashita points out that virtual AGMs allow shareholders in rural areas to participate easily. “Even after the coronavirus ends, I think companies must keep offering these options for shareholders,” Mashita said. “If it wasn’t for COVID-19, the shift toward holding hybrid AGMs wouldn’t have come so quickly.”

The shift toward a more digital AGM is also being welcomed by international investors. Jamie Allen, founding secretary general of the Asian Corporate Governance Association, said: “Virtual AGMs encourage wider participation from shareholders and will enhance the value of the meeting.” 

But Allen said a complete shift toward virtual AGMs would be unacceptable. He said investors still value the experience of seeing top management at a physical AGM — particularly retail shareholders who do not have the same opportunities as institutional investors to hold regular meetings with company leaders.

“If companies start diminishing their physical AGMs in size, it could lead to possible manipulation and loss of transparency, which would be a step back in corporate governance,” Allen said.

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