Virtual and hybrid AGMs adopted during the pandemic have sparked an increase in shareholder engagement – and could yet inspire further “profound change” in that field, according to research from debt and equity advisors DF King.
In its latest General Meeting Season Review – subtitled A Year Like No Other – the firm notes that FTSE 100 corporates have seen their AGM participation levels rise by 1.7% this year to reach 76% of issued share capital, after flatlining at 74.3% over the previous two years. AGM proposals have also passed with high levels of shareholder support, averaging 96.75%. (DF King Insights, October 2020)
Among the themes and topics that have piqued shareholders’ interests, the most pressing are financial capital, environmental, social and governance (ESG) issues, executive remuneration and board composition – with investors becoming increasingly demanding in their expectations of what must be achieved to merit their continued support.
Indeed, in a statement, DF King indicated that the virtual / hybrid format has led to tighter scrutiny, with board composition emerging as one of the most heavily examined areas.
As the pandemic prompts investors to challenge corporate governance principles, and as its effects continue to force firms into unchartered waters, the floor has been seeking greater reassurance that senior management will address ‘over-boarding’ – and that directors who aren’t demonstrably committed during the crisis should be reassessed and potentially refused re-election.
With investors keen to ensure that FTSE 100 directors are present, competent and dedicated enough to tackle the Covid challenge, firms that received approval rates of less than 80% for director re-elections this year attributed those dips in enthusiasm to over-boarding and commitment concerns. The practical upshot: just because AGMs have switched to a new format doesn’t mean that leaders have a place to hide.
DF King director Alison Owers said that despite initial doubts over virtual AGMs, proper governance and shareholder access has been maintained and the format has resulted in greater levels of engagement.
She added: “There remains a significant amount of uncertainty as to the economic outlook for the next 12 months … Yet one thing that is certain in a year like no other is that the adoption of a more digital AGM should become a staple for UK companies long after the pandemic is a distant memory.” (DF King Press Office, 3 November 2020)
What should leaders take away from this?
The Institute of Leadership & Management’s head of research, policy and standards Kate Cooper says: “What I’ve noticed about online conferences, such as the recent Global Peter Drucker Forum, is how democratic they are, and how much closer you feel to the speakers when they’re on your screen. That comes through particularly strongly when you have the chance to ask them questions directly – it feels more like a one-to-one situation.
“In its pre-pandemic incarnation, the Drucker Forum took place in the splendid, opulent surroundings of Vienna’s Imperial Palace. The speakers were high up on a stage, far away from the hundreds of assembled delegates. Overall, that made for a much more hierarchical experience than everyone being together on a screen. And I think that the level of debate and challenge this year was far greater than what I’d seen in previous years.”
Cooper points out: “When celebrities discuss these issues, so many of them talk about how they have harnessed digital platforms to maintain – and, indeed, create more intimate connections with – their audiences. And I think that people and communities are drawing closer with the aid of these tools, which have freed us to a large extent from ceremonial fuss. So, I’m not surprised that they have also positively impacted AGMs.”
However, she notes: “I’m a bit surprised by the relatively slim, 1.7% increase in participation rates, which – given the improvements I’ve already discussed – one would expect to see a larger rise in. However, if the broad message is that shareholders find they have a greater voice, or a more visible platform, to be able to challenge some of the decisions they’re hearing about, then leaders must certainly recognise they have no place to hide.”
That said, Cooper acknowledges a potential flipside to these developments, adding: “What I fear may happen is that firms could get so accomplished at staging online AGMs – which, of course, have the organisational attraction of huge cost savings – that they end up reasserting all the old hierarchies that are currently fading into the background.
“For now, though, this is undoubtedly a radical change, and genuinely seems to be one for the better. Particularly when we’re thinking about engagement, inclusivity and flattening all the tired pecking orders that are part and parcel of traditional corporate events.”
For further insights on the themes raised in this blog, check out the Institute’s resources on engaging stakeholders