The ESG implications of COVID-19: Annual General Meetings (AGMs)

Discover how COVID-19 has pushed AGMs around the world into an online format.
October 2020

David Sneyd

Vice President, Analyst, Responsible Investment

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Risk warnings

The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Ahead of the 2020 proxy voting season, the main environmental, social and governance (ESG) themes due to be considered were relatively predictable. What could not have been predicted was the significant impact that the COVID-19 pandemic would have on the global economy, and in turn, on the proxy voting season itself.

Formal shareholder approval of certain agenda items may seem insignificant during a global crisis, when many businesses were fighting to survive. Nonetheless, for most companies, shareholder approval for certain matters were still required by law to take place within a set period.

Against this backdrop, an extraordinary voting season unfolded, with companies and regulators taking unprecedented measures to adapt both the processes and content of their meetings.

Interested in discovering more? Read on or use the links below.

Risk warnings

The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.


The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

The global switch to virtual meetings saw mixed successes

The requirement for all parties to meet physically at the AGM provides investors with one of the few opportunities to question the Board, engage directly with management, and hear the views of other shareholders. However, with widespread bans on large gatherings, travel restrictions and venue closures, companies were instead required to take these meetings online.

Although virtual shareholder meetings (VSMs) are not new, they weren’t popular prior to 2020 as the reduction in physical access and control was seen to outweigh the benefits of greater participation by those who chose to not attend the physical meeting. There has also been long-standing scepticism by investors that VSMs would undermine the opportunity for direct interaction with Boards and, therefore, their accountability. However, with few companies able to conduct physical meetings regional regulators took steps to temporarily waive physical quorum requirements and allow greater use of online platforms: switching to virtual-only meetings was the norm this year.

With bans on large gatherings, travel restrictions and venue closures, companies were required to take their AGMs online.

+ The good…

Aside from ensuring compliance with pandemic safety procedures, this switch to VSMs promises certain advantages. The proxy distributor BroadRidge, who facilitate voting at AGMs, reported that shareholder participation in VSMs, overall, exceeded levels seen in recent years compared to typical meetings held only in a physical location1.

And the bad…

However, there have been instances recorded of companies using the virtual format to either curate or selectively filter the questions put to management, or block shareholder proponents from properly presenting their proposals due to be voted on the ballot. Fears of this occurring had previously been a reason for the hesitation to the virtual model. Limited technical ability or intentional action by certain companies to stifle shareholder democracy were confirming investor concerns.

Global divergence

AGMs in the US move online:

2,263 ………. virtual meetings were held in the US market this year.

289 ………. The number of virtual meetings held in 2019.

1st ………. The vast majority of these companies were holding a virtual AGM for the first time2.

Meeting postponements/cancellations diverged significantly between US and non-US companies:

59% ………. of non-US companies opted to cancel/ postpone their meetings.

7% ………. of US companies did the same3.

Some regions appeared to be more resistant to the adoption of VSMs than others, particularly China and Japan. For example, although China did not change its laws to allow virtual-only meetings, the three largest Chinese technology companies listed in Hong Kong – Tencent, Xiaomi and Meituan – still decided not to broadcast their physical AGMs online4. Given the lower priority given to minority or non-domestic shareholder rights in these regions, this approach is not surprising.

AGMs in Europe

Across the main European markets, a significant majority of AGMs were restricted in some way, with limitations on both the physical and virtual ability of shareholder to cast voting rights live, during the meeting5.

European union flag


of European companies

with AGMs scheduled in the Spring had held them by the end of July

Austria flag

Except Austria,

where only half of companies in their main index had done so6.

The timing of the pandemic delayed audits in Japan

Given that most Japanese companies have a 31 March financial year end, the timing of the pandemic and the resulting introduction of ‘stay home’ orders in late March caused a unique level of disruption to the audit process for these companies. Not only were auditors no longer able to physically interact with the companies that they were audited, but they were required to make judgements on the going concern of businesses at a time of great uncertainty.

Although the deadlines for publishing preliminary (and unaudited) results were extended, the legal requirement to report their audited financial statements by their AGM was not, leaving companies with the choice to either adjourn or postpone their AGM.

> With the adjournment option, the AGM would go ahead as scheduled with investors voting on matters other than the accounts such as the election of directors, with the audited accounts published and approved at a later date.

> The postponement option would push the date of the whole AGM back to a point where the audited accounts can be published in advance of the meeting.


Given the difficulty in making a fully informed vote decision without audited financial results, our preference was for 

companies to adopt the postponement option, particularly given that account is often taking of metrics such as return on equity when deciding whether to support the election of directors.

In practice, we were pleased to note that more companies postponed their AGM rather than adjourned them.

33 companies with fiscal years ending in March adjourned their meetings.

57 companies postponed their meetings to a later date, mostly in July7.

Given how condensed Japanese proxy season is, with half of those companies with a 31 March year-end holding their AGM in a single week, having season more spread out was a welcome side-effect, which will hopefully inspire a similar change in future years.

The timing of the pandemic caused a unique level of disruption to the audit process for Japanese companies.

“Unlike other staples of our lives such as the Premier League or school exams, the cancellation of proxy voting season was not an option, and investors continued to reflect their expectations of companies in their voting.”


David Sneyd, Vice President, Responsible Investment

UK companies were most forthcoming on executive pay cuts

As a result of the current crisis, many companies will miss short-term and long-term incentive plan targets, with significant implications for pay awards granted to executives. In addition, investors have suffered from significant declines in share prices, dilutive capital raisings and dividend suspension, alongside some companies having to enact widespread cuts to their workforce. Within this climate, rewarding executive directors with bonuses or even having them continue their current levels of pay may be considered inappropriate. Although most companies will not disclose how they have reflected the pandemic in their 2020 pay outcomes until the end of the financial year, UK companies, more than those in any other market, proactively disclosed their intentions throughout proxy season.

During the season this year, we systematically monitored announcements of decisions made by companies in the FTSE 350 on pay in response to the pandemic. In the three months up to July:

122 companies disclosed some form of temporary pay reduction for executives

20% salary reduction was the most common form of pay reduction

The majority of these reductions were in the consumer discretionary, financial and construction sectors.

Around one-third announced either that they would defer, or cut, bonuses based on 2019 performance but due to be paid in 2020, or that they would waive bonuses for the 2020 financial year all together.


Poison pills resurged while proxy fights were on hold

Poison pills were established over 40 years ago in the US market, typically taking the form of a highly dilutive share issuance authority that can be used as a defence mechanism to protect against unsolicited takeover attempts. Over the last decade, poison pills have fallen out of favour with investors and companies alike, and fewer have been adopted because they are often seen to entrench poor management rather than enable the greatest value creation for investors.

That all changed this season:

59 poison pills

were adopted during the 2020 proxy season… …compared to just

21 in all of 2019.

Source: Council of Institutional Investors

This was due to companies worrying about their vulnerability to hostile bids from activist funds and potential opportunistic acquirers due to extremely depressed share value, or the anticipation of significant net operating losses, which in turn create tax credits that are seen as attractive assets.

Generally, we are not supportive of the adoption of poison pills, and where companies have implemented them without 

explicit shareholder approval, we would typically vote against those Board directors who are considered responsible. This year, given the unique circumstances that the pandemic caused, we were more accepting of companies that adopted poison pills, as long as they had a short shelf life and were not overly restrictive. In these instances, we did not vote against Board members where these protections were in place, but will consider reverting back to our original voting stance next year, pending the state of the market at that time.


Proxy fights on hold

Despite being the traditional home of activist investors, the US market saw a substantial 41% drop in year-onyear campaign activity8, with the lowest number of proxy fights recorded in decades. A typical proxy fight involves a disagreement over corporate strategy escalating to shareholder meeting, where investors vote on either of two options, one proposed by management and the other by the dissident. Most likely, activist firms, reliant upon broader shareholder base support in order to impact change, were worried that such activity during a crisis would have been seen as tone-deaf. At the same time, the expectation is that there will be a substantial uptick in 2021 as investors reflect on how well the management navigated their respective companies through the crisis.

“Taking a robust voting stance reinforces the messages we deliver to companies though our engagement on a range of ESG issues.”


Kalina Lazarova, Director, Responsible Investment

Engagement at BMO GAM

We have adjusted our voting policies on some key issues to account for the pandemic – but also set out best practices on how companies should now act, to avoid the crisis becoming an excuse to undermine good governance standards.

During our engagement throughout this season, we encouraged companies to move back to normal in-person AGM arrangements once this current crisis passes, whilst maintaining the virtual option as part of a ‘hybrid AGM’ model, combining an in-person meeting with opportunities to join online as well. This leverages technology to allow maximum access, whilst retaining the ability to hold Boards to account by providing physical attendance.

We will continue to urge companies to follow emerging good practice guidelines for holding virtual meetings, and expect them to:

> Provide live video and audio transmission of the entire meeting

> Allow shareholders to ask questions in writing before and ‘live’ during the AGM, and receive a response during the AGM with the possibility for follow up questions

> Make registration for virtual attendance as straightforward as possible while meeting data protection and information security needs

Thoughts for 2021:

what will the impact be on the next proxy voting season?

Our anticipation is that next year’s proxy season will be just as impacted as this year, but in a different way. Although our hope is that the logistical and regulatory barriers to conducting AGMs in a COVID-world will be ironed out in time for next year’s season, what we will see is investors making vote decisions following the reflection of how companies and their management fared during the crisis. This is reflected in not only financial performance, but also how they treated and prioritised their employees and other stakeholders.

As we witness how COVID has exposed broader issues within society, such as racial injustice and inequalities, our expectation is that these will be much more significant on the investor agenda next year when voting at company meetings. In a world of continuing uncertainty, what is clear is that the impact of the pandemic on future proxy seasons is far from over.

1 BroadRidge

2 Institutional Shareholder Services (ISS)


4 Asian Corporate Governance Association


5 Georgeson’s 2020 AGM Season Review

6 ISS 2020 European Voting Results Report


8 Lazard

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