2020 marked an interesting year for AGMs, brought about by government restrictions on large gatherings, concerns about public health and safety, and restrictions on travel. This culminated in the holding of multiple wholly virtual AGMs (a 'first' for many) and enlivened strong debate on the future of AGMs in Australia.
Meeting format – virtual and hybrid AGMS
The ability for Australian companies to convene wholly virtual meetings was made possible by temporary measures introduced by the Commonwealth Treasurer in response to the COVID-19 pandemic. These modified the operation of certain provisions of the Corporations Act 2001 (Cth) to temporarily remove any legal uncertainty concerning the validity of wholly-virtual meetings in Australia. They are currently due to expire in March 2021.
Many Australian businesses and business groups have supported calls for these temporary reforms to be made permanent, citing the need to embrace technology as well as the cost benefits for businesses. A number of investor groups and proxy advisers have countered this proposal, raising concerns that virtual meetings generally do not afford shareholders the same opportunity to participate as attending a physical meeting or hold directors to account, and that hybrid meetings would be a better solution.
Remuneration
In 2020, the number of strikes has remained steady across the ASX 100. However, executive remuneration may rise up the list of shareholder concerns in 2021 as companies face scrutiny over how well their business (and their workforce) weathered the pandemic.
Shareholders continue to use director reappointment resolutions to voice concerns over a range of issues (including executive remuneration). 2019 saw a marked increase in the number of directors who received a ‘protest vote’ (more than 10% of votes against his or her election) as compared with previous years. In 2020, the number of directors who received a 'protest vote' remained stable at 27 (unchanged from 2019).
Environmental, Social and Governance
Meeting heightened expectations around climate risk governance and disclosure is likely to remain a significant challenge for many companies. Stakeholder focus on the issue appears to have increased, despite the pandemic.
In 2020, despite the COVID-19 pandemic, the number of companies targeted continued to increase. Twelve ASX 100 companies (eight in the resources sector and four in the financial services sector) faced shareholder ESG resolutions, the vast majority of which were climate related. Having said this, the number of shareholder resolutions that proceed to a vote at meetings, though increasing, remains relatively modest.
Over the past five AGM seasons, the level of investor focus on ESG has intensified. In 2020 despite the pandemic, the focus on climate risk (climate risk assessment, management, transition planning and disclosure) in particular, only continued to accelerate. Looking forward to 2021 and beyond, the issue will continue to be a key challenge for every board.
Gender diversity on boards
In 2020, most female board nominees were incumbents seeking re-election. Raising the female director replacement rate (putting forward female replacements for retiring female directors) is an opportunity for companies to maintain board gender diversity.
