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Trends in ASX 200 AGMs in early 2020

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Written by Joseph Muraca, Will Heath and Lauren Taylor.

The AGM season for the first 5 months of calendar year 2020 has just ended, with 30 ASX 200 companies having held AGMs in the period to 31 May.

This AGM season has been heavily affected by COVID-19, with many companies adapting the format and/or timing of their AGMs to comply with COVID-19 restrictions and social distancing protocols.

This note briefly summarises the trends emerging from the early 2020 AGMs and the insights those early AGMs may have for ASX-listed entities planning AGMs in the second half of this year.

There were fewer strikes in the early 2020 AGMs

  • As at 31 May, only one ASX 200 company had received a strike against its remuneration report. This contrasts with the same period last year, in which 3 ASX 200 companies had received a strike.   
  • In this period, we were also yet to see a company receive a second strike. Companies receiving a first strike in 2019, including Iluka Resources and Adelaide Brighton Limited (now ADBRI Limited), successfully responded to shareholder concerns and avoided another strike this year.
  • As at 31 May, we have already seen 42 ASX 200 companies announce changes to executive and/or NED remuneration as a result of COVID-19. To date, proxy advisors and institutional shareholders appear to have been facilitative and supportive of changes. However, we expect 30 June companies may face more pressure and more scrutiny on remuneration-related decisions at AGMs held later this year including as a result of ASIC's recent information sheet on board oversight and the exercise of discretion on variable pay outcomes.

The heat is slowly rising on director elections

  • Continuing the trends in 2018 and 2019, directors facing re-election (as opposed to election for the first time) at AGMs in early 2020 tended to face incrementally higher votes against their candidature.
  • Despite this, every candidate so far has successfully secured or retained their board seat.
  • As in previous years, we would not be surprised to see a continuing incremental increase in negative voting as activists and other interest groups personally target directors as a way of putting pressure on Boards. We expect voting on elections and re-elections could be affected by decisions made by Boards around remuneration, capital raisings and responses to COVID-19, as well ESG related issues and 'cross contamination' as a result of performance (or perceived performance) on boards at other companies or in previous executive roles.

ESG activism continues regardless of COVID-19

  • ESG activists continued to put forward resolutions in the early 2020 AGMs, despite the onset of COVID-19.
  • As at 31 May, all ESG resolutions that were put forward have not been passed.
  • However, some of these resolutions have gained significant support from shareholders indicating that there may be no relaxation of scrutiny or pressure in the COVID-19 era.

COVID-19 caused AGMs to go 'hybrid' or 'virtual'

  • COVID-19 and government restrictions caused ASX-listed companies to change the way they ran their AGMs. This has affected the format of the AGM, voting mechanisms and methods of shareholder participation, even when the meeting is held. A key concern has been balancing the use of technology with obligations to allow shareholders reasonable opportunity to participate in meetings.
  • 16 of the 26 ASX 200 companies holding AGMs after COVID-19 hit (ie between April and May) made further ASX announcements subsequent to dispatch of the notice of meeting updating AGM procedures due to COVID-19 related matters. As time went on, the move to fully virtual meetings became more common.
  • Many of these companies were dealing with a high degree of uncertainty surrounding the nature and extent of COVID-19 related restrictions as well as uncertainty as to responses from regulators and the legislature.
  • As we have outlined in our separate note changes were made to the Corporations Act on 6 May which provided more clarity on the legal position surrounding shareholder meetings. Not all of the companies who held AGMs before 31 May were able to take advantage of these changes.
  • The temporary changes will be in place until 6 November and should allow many 30 June FY end companies to hold their AGMs using virtual or hybrid meeting arrangements. The position is less clear for AGMs that are held after 6 November, when the temporary changes expire.
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