Board engagement with shareholders Flashcards
What does the UK CG Code say in relation to stakeholder engagement?
• Principle D = in order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure effective engagement with, and encourage participation from, these parties
What 4 ways, in addition to general meetings, should boards use when engaging with their shareholders?
Provision 3 and accompanying FRC Guidance on Board Effectiveness:
1. The chair should seek regular engagement with major shareholders to understand their views
- Chairs of board committees should seek engagement with shareholders on significant matters related to their areas of responsibility
- The SID should meet major shareholders to develop a balanced understanding of their views
- Boards should consider additional ways to engage with smaller shareholders e.g. roundtables and webinar
What does the 2013 ICSA ‘Enhancing Stewardship Dialogue’ provide?
What is its aim?
What are the 4 main elements?
provides guidance on the relationship between companies and their investors
• Aim = improve the process of engagement between the company and its shareholders, by focusing conversations on strategy, risk and long-term comparative performance
- Develop an engagement strategy, review annually, and refer to it in the CG section of the company’s annual report
- Get the housekeeping right = company should ensure that it invites the ‘right people’ to meetings = mainly large shareholders and investors with a strong track record of engagement
- Strengthen the conversation = meetings should discuss matters that are of direct relevance to the company’s value
- Provide feedback = should be feedback in both directions
When should the notice of the AGM and related papers be given to shareholders?
FRC Guidance on Board Effectiveness recommends at least 20 days before the meeting
CA2006 requires a minimum of 21 clear days
What are the 4 procedures for AGMs?
- Giving shareholders an opportunity to ask questions = should be a formal question and answer session at the AGM
• Cosec should ensure that the chair is fully briefed on any potential questions that may arise - There should be a separate resolution for each substantially separate issue = Listed companies should vote by way of poll
- Proxy voting forms should include a ‘vote withheld’ box = allows shareholders to indicate their displeasure about a company’s proposals without actually voting against the resolution in question
- Disclosure of information about proxy votes = company should indicate the level of votes lodged for and against the resolution and the number of shares where there was a specific instruction to withhold a vote
What are the 3 limitations to the use of AGMs as a method of dialogue between companies and their shareholders?
- The fact that the meeting is held only once a year.
- The location may make it difficult for shareholders to attend = usually in central London during the week
- AGMs often have a limited time duration imposed by the venue, the shareholders or the company - Chairmen wherever possible should allow all shareholders wanting to ask a question to do so
What is a virtual AGM?
Name 4 things a company should consider when planning to hold a virtual AGM.
Why do shareholder representative bodies have concerns about virtual AGMs? (2)
• S.360A CA2006 = permits a UK company to offer shareholders an electronic means for participating in a general meeting, but the electronic means has to be real time, allow for two-way conversation and have a mechanism for shareholders to vote
- amendment of Articles
- technological considerations
- Amendments to proxy form
- Possible helpline
- state they are not in the best interests of all shareholders and should not be used by investee companies = detrimental to Board accountability
- Investor Association members are unlikely to be supportive of amendments to Articles which allow for virtual-only AGMs
What is a hybrid AGM?
Which companies have used this?
What does the Corporate Insolvency and Governance Act 2020 temporarily permit?
= providing shareholders who could not attend the physical meeting access
through either a web browser, conference call dial-in, or satellite links
Marks & Spencer Plc
Jimmy Choo Plc in 2016 held first fully electronic AGM for a UK listed company
temporarily permits virtual meetings as a response to Covid
Name 3 trends that Equiniti’s Registration Services ‘AGM Trends 2020’ report identified
- The rise of the hybrid AGM
- Board diversity and director elections
- Climate change risk reporting
What 2 provisions did the CA2006 introduce on how a company communicates with its shareholders?
- Documents and information can now be sent by or to companies either in hard copy form or electronic form
○ Under DTRs, listed companies need to obtain a shareholder resolution for communications to be sent by email - Companies are permitted, if a shareholder has not opted out, to communicate with their shareholders by means of a website
What are 4 benefits to communicating with shareholders electronically?
- Cheaper to produce documents in electronic form
- Environmental benefits = less paper usage
- Communication should be faster and possibly more reliable
- Shareholders better informed = provide more communication easier through a website
What 3 things does the ICSA’s guidance note on ‘Electronic communications with shareholders’ (2013) recommend?
- Facility to communicate in electronic form should be offered to all shareholders on equal terms
- Shareholders should be able to retain a copy of any document or information sent to them in electronic form
- Shareholders opting to communicate electronically should be warned that if they file an electronic proxy voting form containing a virus, the company will not accept it
