28 Oct AGM: Transparency, Accountability & Integrity
How are you structuring your Annual General Meeting (AGM) in the face of Covid restrictions? More importantly, has your new structure enabled you to maintain the same level of investor engagement as before?
That was the question facing the Financial Reporting Council (FRC) when they examined some two hundred FTSE 350 AGMs which took place between March and August 2020. Their review threw up some interesting findings. With a few minor exceptions 14.9% of the sample held open meetings which either allowed shareholder access to the AGM as normal or provided a live webinar or audiocast whilst enabling shareholders to participate in live voting and question and answer sessions.
However, the majority of companies sampled (80.7%) opted to run a closed AGM. This the FRC described as a meeting which either restricted shareholders from attending the AGM with no webinar or audiocast alternative, or which provided a live webinar or audiocast but did not enable shareholders to participate in a live voting or Q&A session. On the plus side, in 81.6% of these cases shareholders were able to e-mail or send in questions in advance of the AGM to be answered at the meeting or subsequently posted on the company website. However the FRC noted that thirty of the companies sampled made no arrangements for shareholders to ask questions of the board; something which the FRC comments could effectively disenfranchise shareholders.
David Styles, the FRC’s Director of Corporate Governance commented: “AGMs are not simply about voting, they are also an important mechanism for shareholders to gain an understanding of board decision-making, strategy and company culture.” As such, the report highlights the information and decision flow which should take place within an AGM with the board presenting information, the shareholders holding the board to account through discussion and questioning before shareholders move to exercise their vote.
So how can boards ensure that their AGM is conducted with transparency, accountability and integrity; delivering effective company governance and open decision-making? Whilst acknowledging that companies may wish to adopt different pathways depending on their size and the nature of their shareholders, the FRC report makes a number of suggestions about structure, Q&A, voting and information flow.
Perhaps the most important of these suggestions is to start preparing now for AGMs in 2021. Technological solutions take time to implement; particularly if you want to put robust plans in place to ensure that as many of your shareholders as possible can partake fully in future AGMs.