What we’ve noticed in the first half of 2023
Virtual, physical or hybrid?
In the aftermath of the COVID-19 pandemic, trends relating to the format of Annual General Meetings (AGMs) appear to have levelled out. According to our analysis:
- unsurprisingly, the majority of the ASX200 that held AGMs in the first half of 2023 held hybrid AGMs (62%);
- the percentage of fully-virtual AGMs has dropped by about 2% (compared to full year data for 2022)[1], with that format only being chosen by companies which are incorporated in the United States; and
- the number of fully-physical AGMs has increased compared to full year data for 2022, notwithstanding that some shareholder activists continued to raise concerns over fully-physical AGMs (with one shareholder activist standing for election at Aristocrat’s AGM, partly due to Aristocrat holding a fully-physical AGM).
Note: In this article, we’ve compared data from the first half of 2023 against the full year data for 2021 and 2022 as we believe this paints a more accurate picture. Due to the COVID-19 pandemic, results from 2021 and 2022 are significantly skewed when looking only at the first half of the year.
Shareholder Q&A
There continues to be mixed practice in terms of the format for Q&A. Some ASX200 companies that held AGMs in the first half took questions in one lot (either at the beginning or at the end of the items of business) while others invited questions after each resolution or each subject matter (such as after elections, and then after remuneration-related resolutions, etc). Regardless of the format, we again saw persistent lines of questioning by a handful of shareholders/proxyholders, which tended to dominate the Q&A session.
In addition to questions relating to the company’s operations and financial performance, common shareholder questions included topical issues ranging from review of external auditors (including whether the company has considered appointing alternative external auditors), the outlook of the economy and inflation, climate change and other broader ESG issues, and the usual technical questions we’ve written about earlier.
Remuneration reports
There has been a higher level of shareholder dissatisfaction over remuneration reports in the first half of 2023, compared to full year data for 2022. The number of strikes has increased to 12% (compared to 8% in 2022), as well as the average vote against remuneration reports increasing to 11%, from 7% in 2022. The number of remuneration reports which received over 90% shareholder approval has also dropped to 73% from 83% (compared to full year data for 2022). These trends suggest a lower overall level of support for remuneration reports so far in 2023.
Based on shareholder questions/comments at AGMs, this appears to be driven at least in some cases by shareholder discontent over executive remuneration in light of the company’s share price volatility or contentious acquisitions, combined with inflationary pressure.
And in some cases, companies experienced unfavourable remuneration report outcomes despite the company performing well for the year. For instance, Nufarm received a 47% vote against its remuneration report despite posting positive full year results and growth across their operating segments. According to media articles, this followed proxy advisors raising their concerns with the structure of a new executive incentive plan, which would have seen the managing director and CEO receive almost $2.43 million under the plan, with a third paid in cash and the remainder in the form of an issue of performance rights (which was also voted down).
Climate change and ESG
Shareholder questions on climate change continued to demonstrate a high level of interest in, and close perusal of, climate change disclosures and sustainability reports. At some AGMs, shareholders cited specific disclosures (including page references of the relevant report) when posing their questions. Questions also focused on the practical steps the company is taking to achieve its disclosed sustainability ambitions and how progress is being measured.
Other ESG-related topics that frequently arose in questions included board composition (such as the number of directors on the board and the appropriateness of the board’s skills matrix), as well as gender diversity at Board and senior executive levels.
Interestingly, shareholder-requisitioned resolutions relating to climate change and other ESG issues are down significantly compared to 2022. So far, in the first half of 2023, there has only been one requisitioned shareholder resolution relating to climate.
Directors’ elections
The average vote for directors for the first half of 2023 (94%) is largely in line with full year data for 2022 (96%), 2021 (96%) and 2020 (95%). All candidates who ran for election in the first half of 2023 were successful, except for the aforementioned shareholder activist, who was not board endorsed. This is consistent with previous years, with the exception of 2022 where 3 non board-endorsed candidates were elected to the board of AGL
What should ASX-listed companies do to prepare?
- Engage early with proxy advisers: With continued frustration over engagement by proxy advisers, companies should devise a strategy to optimise engagement with proxy advisers, including seeking to engage early to reduce the risk of not being able to do so.
- Prepare for shareholder questions: Prepare your chair and attending executives for questions on topical and other common questions (including those mentioned above). In particular, prepare for detailed climate-related questions and ensure executives with detailed knowledge of the company’s climate/sustainability practices and disclosures attend the AGM. As we’ve written about elsewhere, ensure any statements made in relation to climate/sustainability practices have been verified and are consistent with other disclosures. And with hybrid AGMs remaining the clear favourite, companies who are not holding hybrid AGMs should also prepare for questions on why they have decided not to hold a hybrid AGM.
- Structure of notice of meeting and resolutions: Consider the appropriate format for shareholder Q&A. If questions are to be taken by subject matter (rather than after each individual resolution), consider sequencing the relevant resolutions so that resolutions on the same/similar subject matter (for example, the remuneration report and CEO equity) follow one another, and questions relating to those resolutions can be taken in one lot.
- Managing persistent questioning: Consider reminding shareholders or proxyholders to keep their questions short and focused, and to limit their questions to allow other shareholders and proxyholders an opportunity to speak. Brief your chair on procedural matters including the chair’s general discretion in managing an orderly meeting and process. Prepare the chair on common questions that may arise, based on reported trends and engagement with stakeholders.
