Board Engagement with Shareholders Flashcards
What does Principle D 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 FRC Guidance Effectiveness)
- 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
When should the notice of the AGM and related papers be given to shareholders?
What are the 4 procedures for AGMs?
CA2006 requires a minimum of 21 clear days
- 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
- 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?
- Only once a year.
- The location may make it difficult for shareholders to attend = usually in central London during the week
- 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
1.state they are not in the best interests of all shareholders and should not be used by investee companies = detrimental to Board accountability
2.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?
= 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
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 5 benefits to communicating with shareholders electronically?
- Cheaper to produce documents in electronic form
- Environmental benefits = less paper usage
- Faster and possibly more reliable
- Enables better engagement with foreign shareholders
- Improves voting participation
What are 5 recommendations from the ICSA ‘Enhancing Stewardship Dialogue’ for engagement with shareholders?
- One-to-one meetings with the largest shareholders and group meetings for a number of smaller investors
- 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
- EDs may be invited to strategy and
performance meeting, but asked to leave so shareholders can discuss issues with the chair and other NEDs
What 2 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
