Shareholder disruption and dissent has dominated the headlines this AGM season. Sexism reared its head at Aviva’s recent meeting, with CEO Amanda Blanc facing a torrent of inappropriate comments from unruly investors.
At the same time, businesses like Lloyd's of London strongly encouraged their members to attend their AGM online instead of in-person due to the threat of disruption from climate protests.
One point that sometimes gets lost in the headlines is that this level of disruption and behaviour is rare. Shareholders, particularly retail investors, are more engaged than ever and want to have their voices heard, their votes counted and enter meaningful debates at the most important shareholder event of the year.
However, when disruption does happen, businesses need to be prepared to deal with it effectively, without stifling shareholder voice.
Disruption vs debate
The unruly and the engaged investor are not to be confused. There is a fundamental difference between an unruly investor disrupting an AGM with inappropriate behaviour as we saw at Aviva, activist investors who want to draw attention to a particular issue by causing disruption and a passionate, engaged investor who wants to hold a business to account on its sustainability, diversity or executive pay policies.
There’s no question these issues are high on the agenda for investors this year. The 30% Club UK Investor Group is calling on FTSE 100 companies to address the lack of racial and ethnic diversity in businesses and 77% of retail investors plan to stop buying non-ESG funds this year. Businesses should therefore be prepared to give shareholders a platform for debate and be open to tackling tough questions.
Yet providing shareholders with a voice does not mean abuse should be tolerated. Most companies have the expectation that investors will act appropriately and follow protocol; inappropriate behaviour or comments will not be permitted.
To prevent, or at least deter extreme cases like the Aviva example, businesses should consider issuing a code of conduct ahead of their AGMs – perhaps as part of the Notice of Meeting - to clarify that sexist comments, swearing, racism or inappropriate behaviour will not be tolerated, and members will be removed.
This gives issuers the right and the confidence to shut down an unruly investor and remove them from the meeting. This season we’re already seeing businesses give the chair an extra level of support to be prepared to deal with potentially disruptive situations.
While a code of conduct will not apply to the vast majority of shareholders, it can be a safety blanket and send a message to investors. What matters most this season is that businesses are providing engaged investors with access to the AGM and a chance to share their opinions in a meaningful way.
Providing shareholders with a voice
There are many ways to facilitate healthy debate. Q&A sessions have become such an important aspect of AGMs in recent years (partly driven by digitisation) that managing incoming questions, adding structure to the process and making sure the meeting serves its purpose is now critical to enabling debate on topics such as ESG or diversity. Making sure the meeting serves its purpose is now critical to enabling debate on topics such as ESG or diversity. Hybrid meetings are key to supporting this, to ensure a broad representation of the shareholder base can attend and participate in the meeting.
Shareholder engagement days, or the growth of dedicated ‘think rooms’ which are commonplace in Germany and provide shareholders the ability to ask questions in the advance, will become more important. This gives the board crucial time to prepare a response and provide shareholders with a meaningful answer.
Moving beyond the AGM
To meet the new demands of an engaged shareholder group and the questions they have all year round, companies must think beyond the AGM and continue to invest in IR events.
Providing multiple touch points throughout the year ensures that investor relationships aren't left to fester, only to overspill at critical meetings like the AGM. Inviting directors to make regular contact with investor strongholds can also enhance voting outcomes, thanks to a better perception of transparency and a sense of personal connection with board members.
Previously, investor relations and corporate governance departments operated separately, each taking on an individual aspect of shareholder engagement.
However, organisations are now beginning to take a more holistic approach to both AGM planning and wider stakeholder relations, creating a “hybrid calendar” of events to ensure positive outcomes from the AGM and a seamless experience for both attendees and boards.
Delivering a joined-up programme of events is crucial to improving communication lines between board members and investors and quelling problems before they spiral. Synchronising the work of corporate secretary and investor relations teams is also key to strengthening the bonds between investors that should result in positive, tangible outcomes for businesses.
The reality is AGMs are not always plagued with critics and disruption; they are a fundamental part of enabling shareholder democracy. While disruption will no doubt continue to make headlines this season, it’s important to remember the unruly are the few, not the many.
Businesses might not always agree with investors but allowing for debate and providing shareholders with a say in how the company is run is critical to the success of an AGM.
Kerry Leighton-Bailey is the director of shareholder engagement at Lumi, the AGM provider to the majority of the FTSE 100, including Aviva.
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