KCB revision - SLIDE DECK 13 - Engagement with shareholders Flashcards
Where can you find guidance on shareholder engagement?
UKCG Code - 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’.
FRC Guidance on Board Effectiveness - Provision 3
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 matters related to their areas of responsibility. Where relevant, the chair of a board committee should make the whole board aware of shareholders’ views on a particular matter.
The senior independent director, when called upon, should meet 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.
CGI paper called Enhancing Stewardship Dialogue 2013
Develop an engagement strategy.
Voting should reflect the outcome of discussions held as part of the engagement process.
Strengthen the conversation
Provide Feedback
One of the most important ways companies communicate with their shareholders is through the annual general meetings
(AGMs).
How can companies used AGM’s to engagement with shareholders?
- Enough notice - CA2006 requires a minimum of 21 calendar days to provide the notice of the meeting and related papers.
- Q&A sessions for shareholders at AGM. Could be:
Shareholders free to ask questions using roving microphones
Shareholders walk to a fixed microphone to ask their question
Shareholders to register their questions either before or at the meeting - The board chair should arrange for the chairs of the audit, nomination and remuneration committees to be available to answer questions at the AGM, and for all directors to attend the meeting.
- Voting process involving shareholders.
What is best practice for effective voting at AGM’s for shareholders?
At the AGM, there should be a separate resolution for each substantially separate issue.
The company also needs to decide how the resolutions should be voted on – by poll or by a show of hands.
Listed companies should vote by way of poll, that is by indicating on a voting card at the meeting how they wish to vote on each resolution.
The advantage of voting by poll is two-fold:
all the shares owned by the shareholder are counted not just one per person present as is the case on a show of hands; and
votes sent in by proxy are included in the count.
The company secretary would usually liaise with a company’s share registrars and the vote scrutineer to ensure that the process and systems are in place for the poll vote. Many companies now use electronic poll voting at the meeting.
What is proxy voting?
Prior to a company’s annual meeting, eligible shareholders may receive voting and proxy information before a shareholder vote.
Rather than physically attending the meeting, shareholders may elect someone else to vote in their place.
A person designated as a proxy will cast a proxy vote in line with the shareholder’s directions as written on their proxy vote
Are hybrid and virtual AGM’s permitted?
Section 360A of CA2006 permits a UK company to offer shareholders an electronic means for participating in a general meeting. The electronic means has to be real time, allow for two-way conversation and have a mechanism for shareholders to vote.
The Corporate Insolvency and Governance Act 2020 permitted virtual meetings on a temporary basis to enable companies to meet their annual requirements in a manner consistent with preventing the spread of covid.
This Act permits that company meetings:
need not be held at any particular place;
may be held, and any vote may be permitted to be cast, by electronic means or any other means;
may be held without any number of those participating in the meeting being together at the same place.
What have been recent trends voiced at AGM’s?
According to Equiniti’s Registration Services 2019/2020 some common AGM trends were:
The rise of the hybrid AGM
Stakeholder engagement
Executive Remuneration
Board diversity
Climate change risk reporting
What are the limitations of the AGM?
Only held once a year
The location may make it difficult for shareholders to attend
Limited time duration
What did the CA2006 provide in connection with electronic communications?
The CA2006 introduced the following provisions into law relating to how a company communicates with its shareholders.
Documents and information are now able to be sent by or to companies either in hard copy form or electronic form, i.e. email or fax. Under the Disclosure Guidance and Transparency Rules, listed companies need to obtain a shareholder resolution for communications to be sent electronically
Companies are also permitted, if a shareholder has not opted out, to communicate with their shareholders by means of a website. The use of the company’s website for shareholder communications requires the passing of a shareholders’ resolution or permission in the company’s articles.
Shareholders always have the right to ask for a hard copy of the communications they receive electronically.
What are the benefits of electronic communication?
Cheaper
Environmental
Faster and more reliable
Enables better engagement with Foreign shareholders
Improves voting participation
