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Mid-AGM Season Review: Reflecting On H1

Tuesday, 16 June 2020

Over the last couple of months, we have provided regular information on how the AGM landscape has evolved and how businesses who have already held their 2020 meetings have managed to conduct safe and compliant AGMs during the COVID-19 situation. 

As we are now in mid-AGM season, we wanted to provide you with our insights into the following: 

  • Progressed vs postponed meetings 
  • Temporary best practice and legislation ensuring COVID compliant meetings 
  • Early voting trends 

AGMs Progressed vs AGMs Postponed 

FTSE 350 companies for the period 01 February – 07 June. 

2019: 204 vs 2020: 185 

Across the FTSE 350, 10% of companies have postponed their AGMs and have up until 30 September to hold them, and across all indices, the reduction of AGMs in 2020 was 21.8% 

While the vast majority of companies within the FTSE 350 committed to their AGM schedules, it appears that COVID-19 impacted a more significant number of companies outside of the FTSE 350, who took the opportunity to postpone their meeting to a later date.  

Companies who have decided to push ahead with their AGM have made significant changes not only to the running of the meeting but also in their approach to shareholder communications. So far, we have seen a regular pattern of: 

  • Encouraging shareholders to submit votes via proxy  
  • Questions being registered and lodged in advance 
  • Closed meetings using remote or virtual quorums 

The Corporate Insolvency And Governance Bill 

Based on this best practice, the industry has long been awaiting new temporary legislation to support. This has been introduced to parliament through the Corporate Insolvency and Governance Bill (the Bill) and expectto receive royal assent this month. The Bill closely follows the FRC and BEIS guidance, so we do not expect to see any dissent or significant changes. Key elements of the legislation states: 

  • The company need not state a specific location for the meeting to be held 
  • The meeting may be held, and any votes may be permitted to be cast, by electronic means or any other means.  
  • The meeting may be held without any number of those participating in the meeting being together at the same place. 
  • A member of the qualifying body (shareholder) does not have a right; 
    (a) to attend the meeting in person, 
    (b) to participate in the meeting other than by voting, or 
    (c) to vote by specific means.  

Voting Impact 

Given that the new Bill allows for a similar type of meeting format that we have already been seeing over the first part of 2020, it is worth reflecting on the voting behaviours of investors, as we may see a similar pattern for future AGMs. 

So far, the average percentage of votes for resolutions has remained at a steady 97.5%, consistent with the same period in 2019.  

However, where we have seen some level of change is with remuneration policy renewals. Despite the fall in the number of AGMs held, there has been a significant uptick in the renewal of remuneration policies given the three-year cycle. In the period 01 February to 07 June 2020 (across all indices), there have been 207 resolutions to seek approval for a remuneration policy, compared to only 93 in 2019. 

Overall, shareholder dissent on remuneration-related proposals has been lower with average votes FOR on both the remuneration report and policy proposals increasing from 92.61% to 94.09% and 92.94% to 94.02%, respectively. 

Finally, while there were no failed remuneration policy votes in either 2019 or 2020, the number of resolutions that received less than 80% support (and therefore landed the company on the Investment Association’s Public Register) increased slightly from eight to 10 in 2020. However, this represented an overall reduction in percentage terms (from 8.6% to 4.8% in 2020). 

The Remainder Of 2020 And Beyond 

While the first half of the year has thrown some unknowns, we expect the second half to be calmer with: 

  1. The remainder of the 2020 AGM season following the framework that has been collectively structured by the regulators, industry bodies, institutional investors, proxy advisers and issuing companies; 
  2. A continuation of the same for the AGMs to come in Q3 and Q4, but with potentially increased scrutiny from proxy advisers and investors and hopefully more normalised levels of engagement; 
  3. The number of general meetings concerning recapitalisations and shareholder activism increasing; and 
  4. Green shoots of M&A and corporate actions.