The Covid-19 pandemic is forcing companies to rethink arrangements for their annual general meetings (AGMs) as UK residents come to terms with advice to avoid “mass gatherings”.
A partnership of regulatory, legal and professional bodies has now issued guidance to company secretaries on their options for AGMs—key events for most companies in the corporate governance calendar—given the social distancing advice for people to remain at home and restrict their movements to non-essential travel.
The guidance, produced by law firm Slaughter & May and the Chartered Governance Institute (CGI), with the support of a number of other bodies including the Financial Reporting Council, aims to help companies negotiate their way to a solution.
According to Paul George, executive director for corporate governance at the FRC, companies need to consider alternative ways of offering AGMs to their shareholders.
“As the AGM season rapidly approaches, companies need to manage the risks presented by the spread of coronavirus transparently whilst ensuring shareholders continue to have the maximum opportunity to have their say,” George said.
Legal implications
As early as last week, before Number 10 asked people to restrict their movements, boards had been discussing whether AGMs could go ahead and what the legal implications might be.
Peter Swabey, policy and research director at the CGI, said companies would need to balance “pragmatism” against their legal obligations.
Swabey added that a key principle would be a general rule of thumb that aims “maximise” the ability of shareholders to take part.
Encouraging proxy voting, the establishment of an online shareholder Q&A for AGMs and live streaming are all sensible measures to consider and companies may also choose to offer an opportunity for retail shareholders to engage with the board later in the year.
“Companies should also remember that it may become necessary to postpone or adjourn the meeting if the situation changes.
“A dedicated area on the company website should be established to provide shareholders with the most up-to-date information.”
Adapting arrangements
Companies have a number of options for managing the difficulties of their AGM:
• Adapt the basis on which they hold the AGM
• Delay convening the AGM, if notice has not yet been issued
• Postpone the AGM, if permitted under the articles of association
• Adjourn the AGM
• Conduct a hybrid AGM, if permitted under the articles of association.
Delay remains an option to companies who have not yet issued a notice, though companies with a year ending on 31 December have little leeway given that AGMs must take place within six months of the financial year-end.
The arrival and spread of Covid-19 has presented companies and their leaders with enormous difficulties both in terms of crisis management, as infection begins to affect the economy, and leadership, as executives confront key decisions.
This week Andrew Kakabadse, professor of governance and leadership at Henley Business School, told Board Agenda that companies should focus on “leadership” not “leaders”, while decisions should be based on evidence.
“The powerful CEO sometimes uses their strength to hold back from deciding until all necessary evidence has been gathered and analysed,” he said.
Investors have been advised to support companies. The International Corporate Governance Network says avoiding demands for short-term gains “reflects not only on some level of enlightened self-interest, but also the moral imperative to contribute positively to the broader threats to public health and social stability”.
