Poor take-up of electronic voting

Mar 03, 2010

But DIRK survey shows IROs’ overall mood improving

German issuers are cautious about adopting electronic voting and online annual meetings, according to the findings of new research from DIRK, the German investor relations association.

The caution exists despite moves by European politicians to encourage electronic shareholder communications at the annual meeting. Last year saw the deadline for the implementation of the Shareholder Rights Directive, which expressly permits companies to use electronic voting and meetings.

DIRK’s survey finds 75 percent of respondents are not considering allowing electronic voting this year. By contrast, just 3 percent have permitted it and a further 23 percent are considering the option for the future (figures have been rounded).

‘The reticence among German companies to implement electronic voting does not come as much of a surprise,’ comments Bernhard Wolf, president of DIRK and head of corporate communications at GfK, the market research group that conducted the survey on behalf of DIRK.

‘Although the legislature has put the necessary framework in place, the problem lies in the implementation. A veritable culture of dispute has developed in Germany, especially among the prominent and major DAX companies: the greater the extent to which a minority escalates an issue during an annual general meeting, the greater the number of column inches dedicated to that company.

‘The grounded discussion preferred by the board of management and the majority of the shareholders is thus often overlooked. In this sort of environment, companies are unwilling to take any risks, for fear of opening themselves up to further objections and actions for annulment.’

Online meetings are also failing to take off. Only a quarter of respondents plan to broadcast their annual meeting over the internet to the public, finds DIRK. Bigger companies are at least showing strong interest in this area, with 75 percent of DAX companies considering taking this step.

The survey notes, however, that broadcasts that take place usually only contain speeches from the chairmen of the management and supervisory boards, while the general discussion and voting ‘are seldom broadcast’.

DIRK conducts its survey – called the sentiment indicator – twice a year to measure sentiment among IROs across Germany, Austria and Switzerland as well as gauge feelings on key issues.

This spring’s results offer some encouragement for the future. The indicator’s primary aim is to ascertain how positive issuers are about the present and future situation and this latest indicator sees an improvement in sentiment for the second consecutive year. This follows a steep decline in sentiment that began in 2007 and continued until spring 2009.

The survey also asked some more specific questions, which further reveal the optimistic mood among many IROs. The proportion of German companies expecting to make cuts to their IR teams fell to 5 percent, in line with the long-term average and down from 10 percent in the autumn 2009 survey. In addition, the number of issuers predicting a drop in the number of IR-related events fell to 6 percent, which is way down from the 24 percent that expected cuts this time last year.

Finally, the number of companies anticipating a fall in analyst coverage dropped for the fourth consecutive survey: three quarters of respondents expect coverage to remain stable during the first half of 2010.

The DIRK sentiment indicator is based on a poll of 460 IR departments in Germany, Austria and Switzerland. Response rates usually stand at around 50 percent, according to DIRK. 

By Tim Human