Unprecedented. Challenging. Unforeseeable. Extraordinary. Exceptional. As I write what has become my annual end of year blog for Lumi, these words – which have been used consistently when talking about the pandemic that is COVID-19 – are also the same superlatives that can be applied to the change we have seen in our industry.
I won’t talk at length here about what we have seen happen during 2020 – although if you haven’t already, I would recommend you download our 2020 Global AGM Report – but I think there are several key issues that will come to the fore as we move into 2021.
The first of these, clearly, is primary legislation. As the pandemic took hold, it was immediately apparent that the regulatory environment in many regions just didn’t support virtual AGMs. And whilst some governments moved quickly to enact temporary legislation to allow organisations to conduct their meetings, in many other markets meetings were held behind closed doors. There is still so much more to be done here – in the UK, for example, the temporary measures which allow for virtual but also allow for shareholders to be excluded, are only currently in place until March 31st. Nearly a year on from when this all began, it is unacceptable that companies and organisations still have to face uncertainty about what they are permitted to do. For the majority of organisations with an AGM date beyond that, clarification is urgently needed. The key to moving forwards is to ensure that in the short term, legal constraints are removed to prevent a repeat of behind-closed-doors, and then to build a longer term legal regulatory framework that is robust.
This segues nicely into the second key issue for 2021, shareholder voice. Previous criticisms of the virtual meeting format – suggesting that it limited shareholder scrutiny of company boards – meant it had the effect of preserving the physical meeting status quo. With many companies' Articles of Association not already adapted to allow remote, hybrid participation, too many organisations opted for the behind closed doors meetings in 2020 which meant no shareholder participation at all. It Is Interesting that the FRC has been critical of this even though Its Initial (lack of) guidance Is what caused the problem in the first place!
What we have seen is that shareholders – both retail and institutional – have found their voice. Many shareholders didn’t want to exercise their right to have their say, until they realised that they couldn’t. And whilst shareholders were accepting of the behind closed doors option (even if they didn’t like it) this year, given the circumstances, I don’t think that tolerance will be extended into 2021 when the excuse of having not time to prepare has gone. Fortunately, there are very positive signs across multiple markets that both Issuers and their agents are planning for significant virtual and hybrid shareholder participation next season.
The final point to discuss is ‘beyond COVID’. The 2021 season will continue to be impacted by limitations on the size of gatherings, and whilst it is encouraging that Issuers are not letting that impact on good corporate governance, we – by which I mean multiple stakeholders including Issuers, Advisory bodies, Legal Counsels and Governments – should now be looking beyond 2021 at what the AGM should look like. Best practice advice is clearly needed for organisations , institutional investors and retail shareholders to be held accountable to. It Is encouraging that such discussions have already begun.
There is an ever increasing governance requirement on Issuers; there are regulatory changes such as the Shareholder Rights Directive II; there are ESG and CSR obligations coming from the ground up and the top down; there are institutional investors keen to prove their responsible investor credentials and there are retail shareholders wanting to become increasingly enfranchised, and demanding to have their say.
So whilst we have seen huge change in the AGM industry this year, accelerated by the pandemic, I believe this is just the start of a more fundamental shift in how companies and their owners communicate, come together and make informed decisions. . I hope the AGM becomes more relevant to the whole of the governance process, not just a moment in time to ‘conduct the business’.
Before I sign off, I would like to take a moment to recognise the incredible work of my Lumi colleagues around the world again this year. Each member of our team has gone above and beyond to deal with the huge number of virtual AGMs that we have conducted on behalf of our clients, and I am very proud of what we have all achieved, thank you.
Wishing you a happy, healthy and prosperous 2021