Boards have been called upon to improve and rejuvenate their annual general meetings after a year in which four out of five FTSE 350 companies staged their AGMs behind closed doors.
A letter to company chairs from responsible-investment campaigners ShareAction calls on boards to absorb the lessons of the pandemic and revive the AGM as a “purposeful, on-going, values-based” process through which companies and their boards “gather insight and input from shareholders and stakeholders”.
Simon Rawson, director of corporate engagement at ShareAction, writes: “Unlike in spring 2020, when companies were thrust into uncertainty at high velocity with the rapid onset of Covid-19 restrictions, there is now an opportunity to learn from the experience of 2020 and time to put in place arrangements for 2021 AGMs.”
In a new white paper ShareAction says it wants to see shareholder and stakeholder involvement maximised. It suggests live “interactive questions and answers” involving the full board, including non-executives; videoconferencing allowing participants to eyeball each other; and voting that happens after AGM discussions.
Proposals to reform AGMs
ShareAction sees the AGM as a process for boards to “demonstrate their section 172 duties”—the section in the Companies Act 2006 that sets out directors’ duties.
The white paper lays out its proposals to reform AGMs and potentially turn them into the “culmination” of a year-long process of engagement between boards and stakeholders.
In this new process stakeholders and shareholders will be able to submit questions to the board after publication of the annual report, with answers posted to a company website.
The AGM will be redesigned to allow “nuanced dialogue” to take place between shareholders, stakeholders and the company. There will also be a new voting process, with votes on resolutions taken after the AGM, not before or on the same day.
ShareAction’s white paper says: “For too long, AGMs have been poorly attended, inaccessible and at times unproductive. The AGM of the future will no longer be an expensive waste of time and money.
“Rather, it will be the vibrant, cost-effective forum, which delivers value to stakeholders and shareholders alike, and enables boards of directors to deliver the long-term sustainable success of the company, which is their primary responsibility.”
ShareAction also proposes an anonymised vote during AGMs on the application of section 172 during the corporate year.
“There will be no binding consequence of this poll on a company,” ShareAction says. “However, it will send a signal to voting shareholders in advance of the annual shareholder vote as to how well participants feel that the company is fulfilling its responsibilities.”
Shareholder views
There have been other proposals to reform AGMs. Last week the Investor Forum, a group representing UK institutional investors, called for shareholders to have a “say on climate” vote to air their views on a board’s climate strategy.
The Forum says a “non-binding shareholder vote would provide a powerful investor signal on the effectiveness of any mandated climate disclosures”.
“Such an approach would enable the investment community to take a leadership position in helping ensure that UK companies commit to advancing the UK’s net zero commitment,” it adds.
AGMs were an early casualty of social distancing and then lockdown as Covid-19 took hold in jurisdictions around the world. Just as in many other areas, the pandemic has offered the opportunity for observers to consider improvements that could be made. Many might say it would be a shame if the opportunity were lost.