26 June 2017
The latest survey of the Governance and Compliance/Core community
Now the company AGM season is at an end we decided to canvass the Governance and Compliance/Core community on whether the current format is still valuable to companies. The responses are pretty evenly split, with slightly more than a third saying ‘yes’, just under a third saying ‘no’, and 34% responding ‘maybe’.
‘It depends on how much value the company places on the AGM,’ commented one respondent. ‘Some see it as a tick-box exercise, damage limitation, to get through the event with the right decisions achieved. Others see it as an opportunity to engage with members, inviting challenge and discussion.’
There are good reasons to hold AGMs said another person. ‘It provides a formal venue for engagement with shareholders. While for most well-run companies with good shareholder communication the AGM might seem irrelevant, maintaining it as part of the governance framework can provide a focal point for key issues to be addressed.’ One respondent acknowledged: ‘The process before the AGM helps increase engagement with large shareholders keen to speak about certain topics at this time, such as remuneration. However, the meeting itself is of limited value given turnout can be relatively low, compared to the effort and expense of organising it.’
Another respondent believes the AGM’s value ‘depends on the shareholder base. For a company with retail shareholders it is still incredibly valuable as an opportunity for them to engage. However, where the majority of shareholders are institutional investors, the channel for communication and investment has shifted.’ Finally one person said: ‘If I am brutally honest the company gets nothing from the AGM other than ratification of a number of resolutions. The proxies cast mean it’s a slam dunk anyway.’
Having asked whether companies still find AGMs valuable, we asked if shareholders gain any benefit. There was a significantly more positive response than that given when asked about companies. 45% believe it is valuable for shareholders, with fewer than one-fifth responding ‘no’. The ‘maybes’ polled a similar percentage as they did with the first question, at 36%.
The value to shareholders was summed up by one individual who said: ‘It remains about the only opportunity for private shareholders to engage personally with the board.’
The value to small shareholders was emphasised by several respondents, because they ‘are able to voice their concerns at the same level, no matter their holding size. Also, if a company chooses to showcase new products this can be a valuable way for shareholders to better understand the business.’ Another agreed, stating: ‘It can provide value to smaller retail shareholders who would not otherwise get an audience with the directors and their questions answered. It is of limited use for institutional shareholders, although it does provide some leverage with management with the risk of publicity should votes go against them.’
One person added: ‘In my experience the board liaises with institutional shareholders throughout the year, and at the AGM you tend to get only smaller shareholders who are there for the food or any freebies they can get. It is the small shareholders’ one opportunity to challenge the board and they do not utilise it.’
A final suggestion was: ‘I think more could be achieved by having regular shareholder events. Most resolutions for most companies have already been passed by the time the AGM is held and it often ends up being a tick-box exercise.’
Conducted in association with The Core Partnership