The 2021 AGM: facilitating engagement
By Kate Bundy, Head of Events
In the current AGM season, with shareholders becoming increasingly vocal around issues such as sustainability and executive remuneration, investor engagement at AGMs is arguably more critical than ever.
This week marks a significant step in the relaxation of lockdown restrictions. As well as being able to (cautiously) hug, indoor hospitality is reopening, and large events – including in-person corporate AGMs – can restart. As vaccination programmes are rolled out, other markets round the world will likely soon follow suit.
With AGMs across the globe having been held almost exclusively via digital platforms for over a year, shareholders are keen to see the level of access to company boards restored to pre-pandemic levels, when live AGMs were the norm.
Following the first national lockdown in March last year, emergency legislation was brought in which temporarily enabled companies to hold AGMs more flexibly. The Corporate Insolvency and Governance Act 2020 (CIGA) included a provision for holding closed meetings – an almost unprecedented practice.
With little time to adapt to the drastic change, several companies opted to delay their AGMs, whilst others decided to go ahead behind closed doors. Several common features emerged during the 2020 AGM season, including:
- Only the quorum being present, comprising board members and the company secretary.
- Questions submitted and answered in advance of the proxy deadline by post and/or electronically and published, alongside answers, on the company website.
- Voting solely by proxy, also facilitated by board members and the company secretary.
As the year progressed, it became clear that restrictions brought about by the pandemic would continue for longer than expected and the legislation was extended. Prolonging the legislation has, however, driven shareholder unrest over the sometimes dramatically reduced level of access to company boards, with many arguing that submitting questions via post or email was an unsatisfactory solution.
In its 2020 annual review of corporate governance reporting, the Financial Reporting Council (FRC) highlighted the critical importance of effective shareholder engagement at AGMs, recommending that hybrid meetings be considered, stating that the evolution of the required technology during the pandemic supported this.
Since the CIGA legislation expired on March 30th this year, UK-listed companies are no longer legally permitted to hold closed meetings.
The call to improve shareholder engagement in the new world of virtual or hybrid AGMs has clearly been heard. Of the 59 FTSE 100 companies that have held or are scheduled to hold their AGMs during the first 6 months of 2021, 40 are providing shareholders with the opportunity to ask questions ‘live’, either via conference call, or typed over a virtual platform. Some are even facilitating virtual video engagement. Additionally, many have offered shareholders the opportunity to ask questions ahead of the proxy deadline, publishing these on the company website and reading them out at the AGM. As well as voting by proxy, 15 of those companies also provided live voting via electronic platforms.
Another emerging trend is for companies to hold a separate shareholder engagement event ahead of proxy deadlines. This is usually a conference call with the chairman, board and company secretary, or a live audio or video broadcast, often preceded by pre-recorded presentations. These types of events have been lauded for giving shareholders ample opportunity to not only ask questions, but also to do so in good time ahead of casting their votes.
So, what can we expect in the second half of this year? Despite the accelerated adoption of technology to facilitate hybrid and fully virtual AGMs, shareholders are still keen to return to in-person meetings, ascribing much value to their ability to engage with boards face-to-face.
Venues are reporting a leap in bookings, albeit with more flexible cancellation policies in place due to ongoing uncertainty around how the pandemic will continue to unfold, and the threat of restrictions returning. As things stand, where in-person or hybrid AGMs have been arranged, the Notice of Meeting still strongly advises shareholders to attend virtually.
While there have undeniably been great leaps in the technology used to enable hybrid and virtual shareholder meetings, questions persist around its reliability. In addition, much work needs to be done by the industry to make the cost of such events less prohibitive. Despite these obstacles which will undoubtedly improve over time, there are clear benefits to the digital format – such as being able to reach shareholders who are unable to travel to a physical AGM – which clearly outweigh the negatives. Companies have been communicating financial results digitally, using webcasts, for some time, so why not incorporate elements of this into the AGM?
Ultimately, today, only a small number of companies have a provision in their articles of association enabling them to hold hybrid AGMs. Many are proposing a change in their resolutions this year, and the London Stock Exchange and others are lobbying the UK Government to make amendments to the Companies Act to allow hybrid AGMs as standard. In addition, several campaign groups are also pushing for resolution voting to be separated from AGMs.
What has become clear over the past twelve months is, like so many aspects of life that have been impacted by the pandemic, AGMs and shareholder engagement have been irrevocably altered by the acceleration of advances in technology, with more change still to come.