The 2022 season of companies’ annual general meetings (AGMs) kicks off in earnest this month. For ShareAction’s corporate engagement programmes - where we work with investors to drive improvements in companies’ environmental and social impacts - it is a particularly important time of year.
ShareAction AGM activists ask questions at more than 100 AGMs each year. Our experience is that by engaging with shareholders, companies can anticipate and navigate risks, identify opportunities, and ensure long-term success. We’ve seen AGM questions provide the nudge that leads companies to become accredited Living Wage employers, transition to renewable energy supplies, and set science-based climate targets.
AGMs are also the time of year when shareholders vote on standing resolutions - such as appointing or re-appointing company directors - and special resolutions, which challenge companies to address their harmful social and environmental impacts.
ShareAction has published a list of this year’s resolutions to watch - for which we have urged investors to vote in favour - and our voting expectations of asset managers for this AGM season.
As COVID-19 restrictions lift, companies are split on how to hold their meetings
When the first COVID-19 lockdowns were introduced in March 2020, just weeks before the start of AGM season, governments scrambled to update corporate governance rules. Too many companies held AGMs behind closed doors, shutting out shareholders entirely. Some companies were able to arrange virtual AGMs, but too many of these provided little or no opportunity for dialogue between shareholders and the Board.
But this year, with the lifting of COVID-19 restriction, companies are faced with a choice about whether they return to in-person meetings or adopt some of the benefits of virtual meetings, in effect creating hybrid events. In most cases, at least in the UK, pure ‘virtual only’ AGMs are not permitted unless the company has explicitly updated its governing documents.
In the UK, ShareAction has written to the Chairs of FTSE 100 companies holding AGMs over the coming months, urging them to hold hybrid AGMs. But of the two dozen that have responded, 1 in 4 plans to revert to an in-person only AGM this year.
Meanwhile, in Europe, large numbers of German and Swiss companies are opting to hold ‘virtual only’ AGMs. At these events, companies only accept questions in advance and the meeting itself is purely a webcast, with no interactivity.
Good hybrid AGMs should support deeper dialogue
While it’s positive that most of the UK’s biggest companies appear set to hold hybrid meetings, their responses suggest that this means a variety of different things in practice.
A hybrid AGM can be the ‘best of both worlds’, enabling the more inclusive range of contributors of a virtual event, while simultaneously supporting the deeper dialogue that in-person meetings allow. But that means question and answer sessions should be held live, with virtual participants able to participate as fully as those in the room. It shouldn’t depend on sending questions by email in advance or via a chat box.
The downside of requiring questions in advance means that key environmental, social or governance (ESG) questions risk being missed as material considerations for the board, particularly if they are screened out by investor relations teams or deemed too problematic to answer. They also often lead to very scripted responses, which lack sufficient detail and provide no recourse for investors to challenge answers.
Climate continues to dominate shareholder proposals at AGMs
Beyond the routine business of AGMs, climate change continues to dominate discussions of ESG issues at company AGMs. This year, an increasing number of companies are bringing forward their own climate transition plans and putting them to shareholders in an advisory vote, often described as a ‘say on climate’ vote. Energy giant BP is one example. Another is Barclays. We’ve set out our own analysis of why Barclays’ climate plan is inadequate, and we hope that investors and their proxy advisors will vote and recommend against it.
But it isn’t just Barclays falling short on climate action. Investor-led initiative Climate Action 100+ recently published their latest corporate decarbonisation benchmark assessments. The results show that less than 12 per cent of the initiative’s 166 focus companies – responsible for 80 per cent of global corporate greenhouse gas emissions - have short-term emissions reduction targets, decarbonisation strategies, or lobbying practices aligned with the goals of the Paris Agreement. This is clear evidence that too many companies aren’t taking the action needed to limit global warming to 1.5C.
Investors must confront these climate laggards and their main financiers this AGM season, not only by rejecting insufficient ‘say on climate’ transition plans, but also by voting against auditors and boards of directors.
NGO-led shareholder activism continues to push for greater corporate action. Dutch NGO, Follow This, has been coordinating shareholder proposals at big oil companies for many years. Support for their resolution at Shell rose to 30 per cent last year. It will be interesting to see how much this has grown this year.
ShareAction, too, has been working with a €2.2 trillion investor coalition including Ethos Foundation to file a shareholder resolution at Credit Suisse, calling on the bank to disclose details of how the financing it provides aligns with the goals of the Paris Agreement. We’re urging investors to vote for it and to consider pre-declaring their voting intention ahead of the bank’s AGM on the 29th of April.
Russia’s invasion of Ukraine will weigh heavily on investors’ minds
The war in Ukraine and economic sanctions on Russia have placed unprecedented pressure on energy supplies. In light of this, some investors may be less willing to vote for ambitious climate resolutions, even though policy makers and economists agree that current events strengthen the case for an accelerated transition to renewable energy.
Western companies have been heavily scrutinised for their own connection to Russia since the outbreak of war. In the first case of its kind, proxy advisor Glass Lewis recommended votes against directors at companies Schlumberger and Rockwool over ongoing Russia ties, on the basis of “insufficient risk disclosure.”
In the event, only Tatiana Mitrova, an independent director at Schlumberger, received a notable vote against (77.8 per cent still voted in favour of her reappointment). She is also a professor at the Energy Centre of the Moscow School of Management and on the board of PAO Novatek, a Russian gas company.
Investor action on social issues still lags, but is growing
Under the UN Guiding Principles on Human Rights, business and investors should be conducting enhanced due diligence on companies’ direct operations and their supply chains in conflict zones. It remains to be seen whether this will drive further investor action against companies for links to Russia.
More broadly, shareholder action to address companies’ social impacts continues to lag behind that on climate. Our analysis of 2021 voting showed that only 15 per cent of social resolutions received majority support. Eleven assessed asset managers even voted against human rights-related shareholder proposals at companies supplying weapons to states engaged in conflict with a record of alleged human rights violations.
This year, ShareAction has also led pioneering shareholder resolutions to challenge food manufacturer Unilever to do more to support healthy diets and UK supermarket Sainsbury’s to become an accredited Living Wage employer.