AGMs in the US move online:
Meeting postponements/cancellations diverged significantly between US and non-US companies:
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.
of European companies
with AGMs scheduled in the Spring had held them by the end of July
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.
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.
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.
“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
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.
“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
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.
> 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
Its wide-ranging nature means that responsible investment involves a host of associated language and jargon. Here we explain some of the most commonly used terms.
Discharging responsibilities as investors and owners in a company through engagement and voting to influence the management of environmental, social and governance (ESG) issues.
The responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.*
A framework that breaks the broad concept of sustainability down into these 3 key issues.
Entering dialogue with companies after investment, to support and encourage positive change in the management of key ESG issues.
The 17 goals set by the United Nations in 2015 are a global framework for achieving a better and more sustainable future. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity and peace and justice. The UN is targeting completion of all 17 interconnecting goals by 2030.