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12 July 2018

As we enter the latter part of the AGM season, Chairmen and Company Secretaries may be mulling over difficult issues raised by shareholders, or unexpected voting results.

Throughout the season, we have gathered unique data on both the questions being asked at AGMs and voting levels, at across both the Main and AIM markets. How actively are shareholders using the opportunity to ask questions, and which topics are they raising? What proportion of shareholders actually vote, and which resolutions are most common?

In our third instalment of this series we look across continuing trends in both the shareholder questions and resolutions, and examine why engagement rates are so low.

Headlines

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  • 1/3rd rule holds fast: our unique data on shareholder questions - from over 100 of our client companies’ AGMs - shows that at 33% of AGMs, no questions are asked. This figure rises to 47% amongst AIM-listed companies. Although this may seem unsurprising given that AIM-listed companies often have a smaller shareholder base, it is worth noting that several companies in this category are at the top end of the market (the FTSE AIM 100)
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  • Financial performance and corporate strategy continue to dominate: a trend which became apparent in the first few weeks of the season, we continue to see investors holding companies to account over strategic and financial issues, particularly those market or policy issues that are not covered by the standard list of resolutions
  • Early activism trends continue: remuneration reports, director re-elections and authority to allot shares continue to be the most contentious topics, attracting over 20% votes against according to the Investment Association Public Register*

What’s in a name?

Our analysis has shown that the annual general meeting is often just that – very general indeed. Following the set list of resolutions, anything and everything can be questioned, and often is. For those companies with physical outlets, complaints or questions around product availability, design, or customer service are not infrequent. Shareholders are also using the opportunity to question the AGM itself – the format of the reports, location of the AGM, or even the timing. Together, those issues (product queries, customer service, AGM logistics), make up nearly 10% of all questions asked at AGMs.

Should we be asking ourselves - is this what an AGM is for? Surely the purpose of the AGM is to hold the Board to account over critical corporate and financial issues, rather than raise queries around specific products? Or, given that the Companies Act does not specify what ‘informal business’ must be transacted at an AGM, is it the ideal platform for shareholders to raise all of their queries, whatever they may be?

The law of the few

At the beginning of July, only 6% of shareholders actually vote on any resolutions at the AGM, based on our analysis of actual votes lodged amongst our client companies. This 6% represents 46% of the issued share capital of the companies on average, reflecting the trend for larger holders or institutional investors to exercise their right to vote more actively.

Amongst our client companies alone, over 2 million shareholders (institutional and retail) are not exercising their right to vote. Is there more that companies can do within the existing legal and regulatory framework to boost voting and engagement?

Technology can make voting easier and simpler, and help to make AGMs more approachable for new or nervous investors. While there has been some criticism of moves to introduce completely virtual AGMs, hybrid AGMs are a very viable and positive solution which combines the merits of physical and online attendance. Link Group was the first ASX200 company to hold a hybrid AGM; it attracted twice as many attendees as its physical meetings and saw participation from shareholders across the USA, Australia and New Zealand.

Read more about this.

“We are working closely with Link Group to enhance the voting experience, with the aim of offering a hybrid solution in the near future. AGMs must be fit for purpose in the 21st century, and we hope that increased voting options will enable more shareholders to have a voice, and use it effectively”Jai Baker, Head of Industry, Link Market Services

About Link Asset Services

Link Asset Services is the UK’s largest registrar, providing services to more than 1,300 companies across the UK, connecting issuers with 5 million shareholders around the world. With a Relationship Management team who provide dedicated support with meeting management, as well as one of the UK’s largest company secretarial teams, we provide expert guidance to companies through major shareholder events including AGMs and corporate actions.

Link Asset Services’ clients who wish to find out more or discuss these results further should contact their Relationship Manager.

Methodology
Link Asset Services has captured data from clients’ AGMs attended by LAS employees, including listed companies for which it provides registrar services. This data is intended to present an overview of trends and does not provide a comprehensive picture of all UK and Irish AGMs and does not constitute investment or voting advice. All client data is confidential and is not being shared with any third parties.

*https://www.theinvestmentassociation.org/publicregister.html