‘Virtual’ AGMs threat to shareholder input
7 Oct 2020
The Financial Reporting Council (FRC) says Covid-19 disruption has seen companies embrace virtual AGMs, but warns some risk disenfranching shareholders in the process
7 Oct 2020
The regulator analysed a sample of 202 FTSE 350 AGMs held during the pandemic in the first half of the year.
Its concluded that all companies managed to hold AGMs under very trying circumstances, but that their approaches varied.
The best organised and executed virtual and hybrid meetings enabled increased participation from shareholders, but when companies held closed meetings with retail shareholders unable to participate or vote on the day of the AGM, they disenfranchised those shareholders.
The analysis showed 80.7% of FTSE 350 companies held closed meetings, requiring voting in advance via proxy.
Of the 163 companies that held closed meetings, 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 regulator’s review found shareholder rights are best served by companies which provide highly effective and clear communication before, during, and after the meeting, and allow full participation from those shareholders that wish to attend, either in person (when this is possible) or virtually.
David Styles, the FRC’s director of corporate governance, said: ‘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.
‘Covid-19 has forced many companies to radically alter the way they conduct AGMs and while most have adapted remarkably well, it is disappointing that some companies have not provided for meaningful input from shareholders, in particular retail shareholders.’
The FRC says it will convene a stakeholder group which includes government, companies, and investors to consider recommendations for legislative change, 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.