Research by D.F. King, the specialist proxy solicitation and transaction support team at Orient Capital, found that FTSE 100 companies saw AGM participation levels increase in 2020, up by over 1.5% to almost 76% of issued share capital on average, compared to 74.3% in both 2018 and 2019.

AGM proposals also continued to pass with high levels of shareholder support, averaging at 96.75%.

The team said major themes including board composition, financial capital, renumeration and ESG remain high on investors’ agendas, as they grow increasingly demanding about their expectations of what needs to be achieved to receive their support.

Board composition turned out to have been one of the most heavily scrutinised topics during this year’s AGMs, with Covid-19 prompting investors to further challenge corporate governance principles.

The research found that shareholders were increasingly questioning companies about so-called ‘over-boarding’ issues, demanding that those directors not demonstrably available and committed during the pandemic be reassessed and potentially not re-elected.

Those FTSE 100 companies that received under 80% approval rates for one of their proposed director re-elections did so as a result of over-boarding and commitment concerns.

Overall, average approval rates for UK director re-elections have decreased year-on-year, from 98.2% in 2019 to 97.51%.

 As almost one out of every two items proposed by issuers was a director re-election, this has had a knock-on effect and reduced the average approval rate of FTSE 100 resolutions by almost 1%, now standing at 96.75%, the analysis showed.

Alison Owers, CEO, Orient Capital and director at D.F. King, said: ‘Covid-19 has demonstrably accelerated the rise of the virtual AGM, as the social restrictions imposed by the pandemic has forced many companies to embrace a virtual-only model.

‘Despite some doubts, proper governance and shareholder access has been maintained and it also resulted in greater levels of engagement in the UK this year.

‘There remains a significant amount of uncertainty as to the economic outlook for the next 12 months and companies will need to be focused on the continued themes the pandemic has brought into focus more clearly, such as adopting ESG into the heart of the governance framework. 

‘Yet one thing that is certain in a year like no other is that the adoption of a more digital AGM should become a staple for UK companies long after the pandemic is a distant memory.’

Early this year the Financial Reporting council (FRC) analysed a sample of 202 FTSE 350 AGMs held during the pandemic in the first half of 2020.

This showed 80.7% of FTSE 350 companies held closed meetings, requiring voting in advance via proxy, and of these 81.6% made some arrangements to allow for shareholder Q&As with the board.

Of the 30 companies that held open meetings, 60% were facilitated through webinar or audiocast with live voting capabilities.

However, the FRC said 30 companies appear to have not made any arrangements for shareholders to ask questions to the board prior to or during the AGM, a development which it described as ‘disappointing’.

The FRC said it will convene a stakeholder group which includes government, companies, and investors to consider recommendations for legislative change and propose alternative means to achieve flexibility, whilst maintaining the integrity of the AGM.

It is calling on the government to consider as soon as possible what measures may need to be brought forward to ensure AGMs are able to take place either virtually or as a hybrid during 2021, in order to bring certainty to companies.