June 29, 2020

When Annual General Meetings met coronavirus

AGMs are an opportunity for the shareholders of a company to hold the chief executives and the board to account. The meetings provide a chance for investors, both big and small, to speak out about bad corporate behaviours and they are a vital element of good corporate governance.

Back in May, influential pension fund, Nest, announced ahead of Total’s AGM of its intention to vote in favour of a resolution for Total to set absolute emissions reduction targets that are aligned with the Paris climate goals as it was unhappy with the company’s approach and lack of environmental targets.

The trend amongst some of the country’s biggest companies to hold their AGMs behind closed doors led to ShareAction to write to all companies on the FTSE 100 calling on them to hold 'virtual AGMs' allowing for real-time questioning by the shareholders and online voting.

The letter from Simon Rawson, director of corporate engagement at ShareAction, told boards that this "is not a moment to hide away".

"The Covid-19 crisis has seen the value of pension assets and shareholdings fall sharply. Management teams are making vitally important decisions that will affect the long-term success of companies, as well as the lives of their workers and customers."

Morrisons held a virtual AGM at the beginning of June which gave its investors the chance to have their say – with over a third of the investors voting against the current pension deals for the company’s chief executive and chief operating officer.

Corporate Insolvency and Governance Bill

On 25 June 2020, Corporate Insolvency and Governance Act 2020 (Act) received Royal Assent.

The Act brings in temporary measures (until 30 September 2020) where companies will be given greater flexibility as to the manner in which AGMs are held, regardless of what is stated in their articles of association.

Some of the measures include:

  • extension of the period in which to hold an AGM. Companies with a deadline for holding an AGM expiring between 26 March 2020 and 30 September 2020 have until 30 September 2020 to hold their AGM;
  • meetings can be quorate without attendees being physically in the same place;
  • meetings may be held, and votes may be cast by electronic means or any other means; and
  • meetings do not need to be held in any particular place.

The FRC has published a Q&A to provide additional information on the proposed legislation.

With good corporate governance firmly on the agenda, our advice to clients is to take ShareAction's comments on board and ensure that all stakeholders are provided with voice and platform to question boards. Denying this opportunity is unlikely to be a successful short or long term strategy.

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