With Covid-19 forcing AGMs behind closed doors, ShareAction outlines framework to safeguard investor engagement.
Non-profit organisation ShareAction has published a proposal outlining the future of AGMs, in order to encourage more engagement between corporates and investors, despite access difficulties created by the Covid-19 pandemic.
‘The Future of the AGM’ report is based on discussions with ShareAction’s AGM of the Future Working Group, including representatives from Rathbone Investment Management, the Financial Reporting Council (FRC) and Jupiter Asset Management.
In 2020, four out of five FTSE 350 companies held their 2020 AGMs behind closed doors, limiting physical access due to the need to observe social distancing measures.
“This conversation has been triggered by the way that Covid-19 has shaken up company AGMs in 2020, but it must be a longer, considered discussion,” the report noted.
The report outlined the key three criteria for investors should consider when deciding AGM attendance. In 2021, investors should attend: the AGMs of the top 10 companies they hold in terms of market value; any company where they hold more than 3% of the total share capital; and companies not fulfilling ESG targets.
The AGM typically represents the main opportunity for individual investors to engage with companies and is a key channel for institutional investors to hold investee companies to account. This includes compliance with the recently updated Section 172 of the 2006 Companies Act, which requires corporates to provide ‘enlightened shareholder value’.
ShareAction has emphasised that the AGM should be “the culmination of ongoing dialogue”, better supporting companies’ efforts to tackling ESG challenges, as well as enabling investors to fully hold companies accountable when their performance falls short.
“The report does not seek to address the pros and cons of virtual versus physical AGMs. Instead, it addresses the fundamental long-term issues that will make AGMs of the future functional and useful for all concerned,” ShareAction said.