July 26, 2022 Effective AGMs
Companies cannot exist in isolation. Every organisation sits at the centre of a web of roles and responsibilities; interacting with investors and lenders, employees, suppliers and customers, and with the wider society.
In June 2022 we took a look at the strategic report, highlighting the importance of company reporting being fair, balanced, and understandable. But reporting is only one element of the dialogue between companies and their stakeholders. Annual General Meetings (AGMs) and other General Meetings (GMs) also play their part.
With this in mind the Financial Reporting Council (FRC) has released a good practice guide to meetings between companies and their shareholders. The guide lists seven steps covering both pre and post meeting actions as well as the meeting itself.
Following on from the need for clear and transparent reporting, the first steps in the guidance call for the information sent out prior to the meeting to be clear; ensuring that shareholders know what options they have to participate in the meeting, whether virtually or in person, and to engage with the discussion. Taking this need for engagement a step further, Principle 4 emphasises the need for shareholders to be able to raise questions pertinent to the meeting, with Principle 5 recommending that shareholders are able to either cast their vote in real time or by proxy.
Highlighting the fact that company reports are not the only way for companies to disclose issues which shareholders may wish to consider, Principle 3 calls on the board to provide an update at the AGM on matters raised by stakeholder groups; provided these matters are considered to materially affect strategy, performance and culture. Principle 6 goes on to comment that companies should also be as transparent as possible with shareholders in relation to these and other matters which are discussed or raised at the meeting.
Finally, Principle 7 makes the point that effective and transparent shareholder engagement is not simply a once a year exercise. Ongoing engagement throughout the year not only helps shareholders to understand the direction of the company and any challenges it may be facing; it also helps them to assess their own investment risk/reward matrix.
Commenting on the guidance Peter Swabey, Policy & Research Director at The Chartered Governance Institute UK & Ireland, said: “The AGM has always been, and remains, a fundamental element of corporate governance and both the march of technology and the pandemic have seen us look at delivery of the AGM in new ways.” Echoing his words, Richard Stone, CEO of the Association of Investment Companies (AIC), said: “This guidance is helpful and timely, offering practical advice about how to make meetings work better for shareholders in a post-covid world, whether they are attending virtually or in person.”