The AGM, for most businesses, is the most important meeting of the year. It shows key stakeholders' progress on previous years' commitments and sets the tone for the year ahead. By looking back at what’s occurred during this year's season, businesses can look forward and begin to prepare for what’s to come in the next year.
Below we look at some of the themes we’ve seen emerge at the most important meeting of many companies' year.
- Executive Remuneration and employee
In light of rising inflation, the cost-of-living crisis and a general level of uncertainty in the macroeconomic environment, the subject of executive pay and bonuses came up regularly during this year's AGM season.
Some companies, such as Aviva, reacted to this, with the CEO of Aviva stating: “It would be inappropriate for highly paid Executives to be fully insulated from the impacts of inflation. We expect any increases to executive base salaries to be below the average for the wider workforce.”
Along with demonstrating restraint in executive pay, institutional investors call for FTSE 100 companies to take specific action taken to support employees during today's tough economic environment. These include decisions such as fairer pay that meets Living Wage rates, a one-off cost of living support and working in good faith to achieve agreements on pay claims with unions and other employee groups.
- ESG Reporting
In 2021, the FCA introduced an expectation that listed UK companies must include a statement in their annual report setting out whether their disclosures meet the recommendations of the Taskforce on Climate-Related Financial Disclosures (“TCFD”). This year, the FRC expected companies to build on the findings and has plans to publish a follow-up report focused on metrics and targets for four key industries at the end of 2023.
All this is to say; ESG reporting was on the agenda this year, and shareholders were holding businesses to account. Lloyds Bank AGM was disrupted by activist investors over their use of fossil fuels, for example, with many other FTSE 100 facing activist investors at their AGMs. While disruptions like these are extremely rare, they show that investors care about ESG reporting and targets, which is something companies should be mindful of when thinking about the year ahead.
- Diversity & Inclusion
In 2022, the FCA introduced a 40% board gender diversity requirement for listed companies in the UK, an expectation that one senior position (such as CEO or CFO) should be held by a woman and the requirement that there is one director from an ethnic minority on the board.
While the FCA report on 2023 has yet to be released, and progress has been made, the FCA states progress has been slow.
And there is still progress to be made. Take Tesla’s AGM, where sexism reared its ugly head on the live stream with comments such as ‘What a Karen’ and ‘Another woman!’ hindering productive conversation.
As companies begin to think about the 2024 AGM season, it is important to evaluate the above priorities as a means of supporting direct engagement and avoiding criticism, all of which can lead to more favourable outcomes at AGMs in 2024.
