Chapter 15 - Board Engagement with Stakeholders Flashcards
What does the UKCGC recommend regarding stakeholder engagement?
PRINC.D
* To meet responsibilities to shareholders / stakeholders board should ensure active engagement with, and encourage participation from these parties
* It is vital for the smooth running of the company that shareholders and other stakeholders are on good terms with company
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PROV.3 / FRC G.B.E - in addition to formal general meetings
* Chair seek regular engagement with major shareholders
* Chair seek engagement with sharheolders on significant matters related to their area of expertise (ex. committee chairs if appropriate reporting back to the board)
* SID, when called upon, meet with sufficient range of major shareholders to develop a balanced understanding of all views
* BoD to find ways to engage/not overlook smaller shareholders (ex. via webinars/round-tables)
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PROV.5 - take stakeholder views into account and describe re s.172 in the annual report
Can engage the workforce
* Appoint director from the workforce
* Formal workplace advisory panel
* Designated NED
What are 3 limitations on an AGM in regards to stakeholder engagement?
- Only held once a year
- Limited duration
- Physical time/location may make it difficult for shareholders to attend
What ways , in addition to GMs, should boards use when engaging with their shareholders?
PROV.3 UKCGC- in addition to formal general meetings:
* The chair should seek regular engagement with major shareholders in order to understand their views on governance and performance against the company’s strategy.
* Chairs of board committees should also seek engagement with shareholders on significant maters related to relevant areas of responsibility. Where relevant the committeechair should make board aware of shareholders views on a particular matter
* SID, when called upon, should meet with a sufficient range of major shareholders to develop a balanced understanding of their views.
* Boards should consider additional ways to engage with smaller shareholders, for example, by way of roundtables, and webinars.
What does prov.5 of the code suggest the company can do to gather views from the workforce?
- Designated NED
- Set up a formal workplace advisory PANEL
- Appoint a director from the workforce.
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Where it does none of these - company should explain what alternative arranagements are in place.
In recent years, what have been the most common areas of questioning for shareholders at AGMs?
- Impact of Covid19
- Executive pay/bonuses/targets (re: Covid 19 and dividend cancellations)
- Share price / AGM arrangements
- AGM logistics
- Board compositions
- Living wage/pay/climate change/net zero emissions/gender pay gap etc…
- Voting procedures
What are the two main benefits of voting by poll?
COMMONLY USED ACROSS THE BOARD IN LARGER, LISTED COMPANIES
* All shares owned by shareholders counted not just one per person (as with show of hands)
- Votes sent by proxy are included
What is the Company Secretary’s role in undertaking a poll-vote?
Liaison with share registrar / vote scrutineer (as applicable) ensure process/system in place for poll voting
What are the 2 key points to remember regarding the option for ‘vote witheld’ option on poll votes?
- Indicates displeasure without directly voting against
- Withheld votes are not a vote in law- do not count to proportinate of votes cast for/against.
What are the rules regarding the reporting on results of a poll vote?
- UKCGC - when 20% or more against resolution, when announcing poll results, company should explain what actions it intends to take to consult with shareholders in order to understanding reasoning behind the result.
- Within 6 months of GM - company should publish an update on views from shareholders/actions its taken
- Final report on the matter should be provided by the board in next AR
CA2006 s.360A - permits UK companies to allow electronic participation in GMs, but what should companies ensure?
- Can be held in real time
- Allows for two way conversation
- Includes a voting mechanism for shareholders
What should be considered prior to holding a virtual AGM or other virtual meeting generally?
- Amend of Articles of Association;
- Consider views of their shareholders;
- Tech considerations
- Meeting notice
- Proxies
- Provision of a helpline;
- Preparing chair and board
- To address BMs, so members of boards hear from stakeholders directly about their concerns and issues.
- Documenting concerns and issues of stakeholders and lessons learned and feeding this into the risk management, strategic planning, and business continuity processes, so that the company is able to leverage opportunities and lessen negative impacts.
- Recognising that different stakeholder groups may have different interests and ideas. Tailoring engagement and dialogue to better represent stakeholders’ disparate interests to help them understand the reasons for board decisions.
- Developing policies on who within the organisation should be the prime communicator for each stakeholder group.
- Advising the board on any reputational-risk aspects to stakeholder engagement.
- Coordinating with management to ensure that the board is advised on how to engage with different stakeholder groups
What allowances were brought in by CORPORATE INSOLVENCY & GOVERNANCE ACT 2020 (from 31 March 2021) in response to the Covid-19 pandemic?
- Permitted virtual meetings on temporary basis - allow companies to meet requirements despite C-19
- Meetings need not be held at a particular place
- May be held/vote permitted to be cast - by electronic or any other means
- May be held without number of participants being in the same place
What were the main findings of Equiniti AGM Trends 2021?
- Vast majority of AGMs held between March-June 2020 were:
- Closed - no attendance by shareholders permitted
- Quorum provided by board / CoSec
- Shareholder engagement via Q&A submitted only (electronically)
- Voting was by proxy only
What is a virtual AGM and why do shareholder bodies have concerns about them?
CA2006 S.360Aof the CA2006 permits UK company to offer shareholders an electronic means for participating in a GM.
The electronic means has to be real time, allow for two-way conversation and have a mechanism for
shareholders to vote. These electronic meetings are also referred to as virtual AGMs.
Shareholder representative bodies, such as, the Investment Association (IA) and Pensions and Investments Research Consultants (PIRC) have expressed concerns in their guidance materials about companies only holding virtual meetings.
The IA in their Position Statement: Virtual-Only AGMs published in December 2017 stated:
‘Our members believe that virtual-only AGMs are not in the best interests of all shareholders and should not be used by investee companies, as their use could be detrimental to Board accountability. IA members are unlikely to be supportive of amendments to Articles of Association which allow for virtual-only AGMs.’
This is because the AGM is seen as the only opportunity that shareholders have to meet and question the whole board of a company. In reality though many institutional shareholders do not send representatives to attend AGMs unless there is a controversial issue. It is the retail shareholder in many FTSE100 companies who would be affected the most by this change in format of AGMS.
What are the main benefits of electronic communications?
- Cheaper
- Environmental
- For some shareholders (especially foreign) -faster / more reliable
- Should be able to provide more communications - ex. posting poll results on site, leading to generally more informed shareholders
- Large institutional investors - electronic information is more likely to be seen by key decision makers - printed copies more likely to be handed off to jrs
- Ability to appoint proxies electronically improve the probability shareholders will participate by submitting proxies
