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The Board And The 2021 AGM Season 900 X 330

Board Scrutiny During The AGM Season

Thursday, 9 December 2021

During the 2020/2021 AGM season shareholders have continued to use their voting power to highlight concerns around governance by voting against the chair of the board and their committees.

COVID-19 continued to play its part in voting decisions

This AGM season in particular, diversity, time commitments and how executive remuneration has been managed during the pandemic were issues that resulted in a relatively poor voting record for director resolutions.

Companies with a controlling shareholder often received the lowest votes for the election or re-election of an independent director as listing rules require approval by all shareholders and by the independent shareholders of the company.

Investor relations bodies were active during the difficult months of the pandemic in setting out how they intended to call out companies who were seen to be acting inappropriately, either in terms of executive remuneration or in how they dealt with their workforce.  Early in 2021, Blackrock reported on a review of voting against directors on various issues and concluded that this was an effective tool for bringing about change.

How did the votes play out?

There has been a significant fall in votes for the Chair of a company during 2020/2021 over previous years. 

It is interesting to note that reasons given for a higher proportion of votes against included:

  • Concerns over board diversity.
  • Time commitments of the chair.
  • Length of tenure.
  • Having an executive chair. 

At some companies, there were internal circumstances where protest votes were made by large shareholders that resulted in a high level of votes against the Chair.

Votes in favour of the Chair

Voting for the Remuneration Committee Chair

Most notable in 2021 was the decrease in the percentage of Remuneration Committee Chairs receiving 95% of more votes in favour (from 83% to 79%). We also saw a significant increase (by 7.5%) in Remuneration Committee Chairs receiving less than 90% of votes in favour.

The increase in dissent centred on concerns over how Remuneration Committees dealt with executive bonuses and pay packages during the pandemic.  It also reflects the continuing disquiet over director remuneration generally, with high numbers of votes against remuneration policy and remuneration report resolutions.

Votes in favour of Remuneration Committee Chair

Voting for the Nomination Committee Chair

The Nomination Committee Chair often receives the lowest number of votes for of all the Board Committees. 

This is frequently the case where the Chair of the company is also the Nomination Committee Chair, so concerns over governance generally or company performance are reflected in the voting outcome. This year nearly 74% of Nomination Committee Chairs received more than 95% or more of votes in favour compared to almost 79% in 2020.  In addition, 26% of chairs received 95% or less votes in favour compared to 21% in 2020.  

In their Stewardship and Voting Guidelines for 2021, the Pensions and Lifetime Savings Association (PLSA) included a recommendation that investors should consider voting against the Nomination Committee Chair where there is a failure to meet Davis or Parker report targets for gender and ethnic diversity on boards. It is interesting to note that our analysis showed that this year in particular concerns over board diversity often resulted in high levels of votes against the Nomination Committee Chair.

*The difference in total number of companies is caused by instances where the chair or chair of a committee has stood down at the AGM but the replacement has been made after the AGM or where a company does not have a separate audit, remuneration or nomination committee.

Votes in favour of Nomination Committee Chair

Percentage of Male and Female chairs

This year, we looked at the proportion of male to female Company and Committee Chairs. We can see a small but significant increase in the number of women becoming Chairs of FTSE 350 companies and Audit Committee and Nomination Committee Chairs. Women hold well over half of Remuneration Committee Chair positions, very likely reflecting the high number of women in top human resources jobs.

This shift to greater female representation will be of no surprise, given the drive for diversity and the recognition of its benefits on company boards. It is a trend that is set to continue.

Percentage of Male and Female Chairs

Board Diversity in 2022 and beyond

There has been a concerted drive and some progress made towards having greater diversity on company boards in recent times. Gender diversity has been at the forefront of this but there is recognition that companies have a long way to go to ensure diversity in all its forms including race.

Nomination Committees need to reach the widest selection of candidates possible when recruiting and actively seek to promote diversity on the board as part of their diversity policies so that companies can benefit from having the highest quality management.

About the stats

  1. Unless otherwise indicated, statistics quoted in this article are taken from research undertaken by Equiniti’s AGM team. The statistics include all companies in the FTSE 100 and FTSE 250 indices as well as Equiniti clients outside of these indices (referred to as other/smaller). All 2021 statistics are for the 2020/21 year ended on 31 July 2021.
  2. Statistics based on Equiniti clients only.