Covid-19 disruption forces UK companies to embrace virtual AGMs
06 October 2020
Disruption caused by the Covid-19 pandemic has forced UK companies to radically change their approach to holding physical AGMs and embrace hybrid and virtual AGMs. However, it is paramount any longer lasting changes uphold the rights of shareholders according to a new review
by the Financial Reporting Council (FRC).
The FRC’s review considered the different ways companies held AGMs during the first half of 2020 and whether the approaches taken best served the interests of shareholders.
All companies managed to hold AGMs under very trying circumstances. The review found that the best organised and executed virtual and hybrid meetings enabled increased participation from shareholders. Companies that held closed meetings with retail shareholders unable to participate or vote on the day of the AGM disenfranchised those shareholders.
As part of the FRC’s review, a sample of 202 FTSE 350 AGMs were analysed. The review found:
- 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.
- 30 companies appear to have not made any arrangements for shareholders to ask questions to the board prior to or during the AGM. This is disappointing and has led to concerns that any move to fully digital meetings could disenfranchise retail shareholders.
The FRC’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. The FRC recommends all efforts should be made to ensure shareholders should have the ability to vote following presentations from the board.
The FRC’s Director of Corporate Governance, David Styles said:
The Chartered Governance Institute’s Policy and Research Director, Peter Swabey 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 has produced a very helpful analysis of the different ways in which companies sought to balance their obligation to hold an AGM against the need to plan and hold meetings in a COVID-compliant manner, ensuring the safety of colleagues, shareholders and other stakeholders. The ideal solution will differ for each company, dependent on its own situation and shareholder register, but I was encouraged by the way in which so many companies were able to learn good practice from each other and the FRC has identified a number of good practices for the future. I look forward to working with them on these issues as we move forward.”
The UK Corporate Governance Code sets out good practice for engagement with all stakeholders including shareholders. To achieve this, especially when faced with significant operational restrictions it is critical for boards to continue to engage, and where possible, increase engagement activities, as business models and long-term strategy come under increasing pressure. A well run AGM will help to achieve this.
The FRC 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. To offer certainty to companies we ask 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.
A link to the full review can be found here