As more investors get materials and voting information, here’s what they need to know about the AGM process and what some of the key resolutions to look out for are, according to ii.
1. Getting involved virtually and in person
Getting involved with the AGM of companies you own shares in has never been easier now that more events are being held virtually as well as in person.
Savings on time and travel are usually accompanied by the benefit of a more engaged meeting, as Marks & Spencer found out in 2020 when it hosted 1,500 shareholders on its digital platform compared with 561 at the physical AGM the previous year. Some 86 questions were put forward, an increase of 28 from the year before.
Through attendance, you will be doing your bit for shareholder democracy as well as improving your understanding of the business where your money is invested.
2. What happens at an AGM?
The event is an opportunity for the board to present company strategy and performance, for shareholders to hold directors to account through Q&A discussion and for them to subsequently vote on various resolutions based on all the information presented. The chair will usually deliver a speech and companies will sometimes use the AGM as an opportunity to update on trading so far in the new financial year.
3. How do I find out about an AGM?
The Companies Act 2006 requires a UK-incorporated public company to hold an AGM within six months of its financial year-end. The notice of an AGM must be sent at least 21 days in advance of the meeting being held. It contains all the information a shareholder needs to participate in the meeting, including a list of resolutions and explanatory notes.
4. Can I attend the meeting online?
Jimmy Choo held the UK’s first wholly virtual AGM in 2016, but until Covid-19 the pace of digital adoption was slow. Pandemic requirements forced many events to take place with the minimum quorum of two board members in attendance. Engagement events were held online in advance of some AGMs so that shareholders had the information they needed before voting remotely. In-person only meetings are now making a return, but other firms have been happy to continue hybrid meetings allowing shareholders to attend in person or virtually. Marks & Spencer now holds its AGM under studio conditions and found that three times as many as shareholders engaged with its digital meeting in 2020.
5. How do I vote?
Shareholders who do not wish to attend the actual meeting can appoint the chairman as proxy to cast votes on their behalf. The deadline for submitting the voting forms is usually 48 hours before the start of the meeting. If you have already voted by proxy, you will still be able to vote at the AGM in person should you wish by completing the paper poll card so that your vote on the day replaces your previously lodged vote.
6. Can I ask a question?
Big institutions regularly get the chance to talk with companies through investor relations teams, whereas the AGM usually offers the once-a-year opportunity for shareholders to question the board and to seek further information prior to voting. Shareholders are often asked to submit their questions in advance so they can later read the answers on the company’s website before casting their votes. It also enables companies to group answers by theme in order to avoid repetition at the meeting.
7. How should I vote?
The annual report contains everything you need to know, ranging from full disclosure on the remuneration decision-making through to how the company is doing on boardroom diversity or climate change targets. Taking time to read the report ahead of the AGM also serves as a great opportunity to understand why you’re invested in the company in the first place!
Governance experts from voting advisory services such as Glass Lewis and Institutional Shareholder Services go through the reports in great detail before providing recommendations to their clients on how to vote on each resolution. Their views can be very influential and will often be picked up in the press ahead of the meeting. interactive investor follows up on many of these reports in our weekly AGM previews.
8. How do I find out the AGM result?
Companies publish the result on the regulatory news service immediately after the meeting. The ‘fors’ and ‘againsts’ are usually expressed as a number as well as percentage, but look out for occasions where there is a high figure of withheld votes. If there’s been significant dissent, the chair of the meeting will often include some remarks and a pledge to seek feedback from shareholders. Where a single party controls more than 30 per cent of the votes, such as Mike Ashley at Frasers Group, certain resolutions will need approval by a majority vote of independent shareholders as well as the usual vote by all shareholders.
9. What are the key resolutions?
The agenda usually starts with those resolutions that appear every year, the so-called ordinary resolutions such as to receive the annual report, re-appoint the auditor or to approve the annual remuneration (director pay) report. There may also be some special resolutions to consider as one-off business, for example the BHP climate change action plan.
Some of the resolutions to look out for are:
10. Remuneration report
Plenty of companies have suffered ‘bloody noses’ in the past when shareholders have felt boardroom pay and bonuses don’t adequately reflect the performance achieved in the year. But this is an advisory vote and won’t change what’s already been paid. However, if enough votes go against the report, there’s an obligation under good governance for companies to understand the cause of discontent and possibly take action in future pay awards.
11. Remuneration policy
The framework for salary, bonus and long-term incentive plan – so-called LTIPs – is set out every three years and is subject to a binding vote of shareholders, although companies are free to change policy and hold an AGM vote more often if they feel there is a need. There’s usually plenty of consultation in advance to take on board the views of major shareholders.
12. Election of directors
Non-executive and executive board members retire and offer themselves for re-election, while those who joined the board in the period since the last AGM stand for election. These votes are not always a formality, for example if shareholders are concerned a director has too many other commitments or if they want to send a message to the chair of the nomination committee about a lack of boardroom diversity. Serving too long on a board is another issue because directors are then seen as losing their independence.
13. Political donations
In reality, most companies have no intention of making donations, but the Companies Act of 2006 is broadly drafted and may catch the funding of seminars and events where politicians are invited. The amount under the authority is capped for the coming year and is then disclosed in the subsequent annual report.
14. To declare a dividend
Occasions where shareholders believe a company doesn’t have the resources to fund a dividend might trigger a vote against this resolution, but unsurprisingly that’s a rare event.
15. Authority to purchase own ordinary shares
Plenty of companies are using surplus cash at the moment to buy their shares, which are then cancelled. The idea is that fewer shares in circulation will have a benefit on the company’s earnings per share. The resolution gives them the flexibility to do so at some point in the year ahead. Note the word ‘authority’ though, as it doesn’t mean it will happen. When companies scrambled to conserve cash during the pandemic the idea of a share buyback was the last thing on their minds, but this resolution still appeared on AGM agendas to the bemusement of shareholders.