Companies split over value of AGMs
Our poll out today in conjunction with the ICSA: The Governance Institute finds that only 36% of companies surveyed consider that the current system of annual general meetings (AGMs) is still valuable for companies. Almost a third (30%) feel that it is no longer valuable, while a further 34% of respondents are undecided.
Responses ranged from the negative ‘It is [primarily] targeted towards retail shareholders and I would be surprised if any company takes much heed of any feedback they receive on the day. That’s if any shareholders turn up!’ to the more positive:
- The process before the AGM helps increase engagement with large shareholders
- It gives a sense check for the board particularly in areas such as remuneration and audit
- The discipline of seeking shareholder approval and circulating the relevant papers has some value
- AGMs still have a value for smaller companies trying to increase shareholder engagement interest
- It’s beneficial for directors to hear from smaller shareholders first hand.
“Even though some respondents consider the physical AGM to be a waste of time in terms of the amount of time, money and management resources spent for a very small percentage of a company’s shareholder base, there remains some feeling that putting directors ‘on the spot’ for a few hours once a year retains some value, particularly in terms of holding the board to account,’ says Peter Swabey, Policy and Research Director at ICSA. ‘Moreover, while some companies might see the AGM as a tick-box ‘damage limitation’ exercise, with the majority of shareholder votes sent by proxy and shareholder concerns already generally known, there is arguably still some value to be obtained from engaging with members and inviting challenge and discussion.’
When questioned as to whether or not the current AGM system is still valuable for shareholders, 45% of respondents said ‘yes’, 19% said ‘no’ and 36% were undecided.
Those in favour of the current format highlighted the following points:
- It remains about the only opportunity for private shareholders to personally engage with the board
- It provides a focal point for press to call out poor corporate behaviours that a company might be trying to get through.
Suggestions as to how to change the AGM ranged from banning proxy advisor input to making it more of a discussion forum so smaller shareholders have a voice. Other responses included:
- Virtual meetings
- Holding meetings at a time when most shareholders can attend
- Applying a shareholding threshold for attendance
- Making meetings more interactive and fun with more presentations about the business from management or subsidiary companies
- Removing the option of voting on a show of hands/encouraging votes electronically.
When questioned as to how the AGM will evolve in the future, the majority of respondents thought that the AGM would become more interactive through the use of technology for voting and attendance.