Essential AGM best practice strategies for board directors

The AICD focus is on the current AGM season and Safe Work Australia’s best practice review of the model WHS laws.

AGM good practice

This year’s main AGM season is now in full swing. Boards across all sectors are focused on delivering effective and efficient meetings for this pivotal moment in their organisation’s annual governance calendars.

Public companies must hold their AGMs within five months of the close of their financial year. Most companies and organisations hold AGMs during October and November. Hybrid AGM formats continue to dominate larger company meetings, but across all sectors, technology provides increased opportunities for shareholder and member participation — such as physical AGMs with the opportunity for live online questioning.

The law enables boards to adopt the meeting format most appropriate for their organisation and its members, subject to the organisation’s constitution. There is no “one size fits all” approach. In recent years both the law and good practice on facilitating meetings with technology have been updated.

In June — in collaboration with the Governance Institute of Australia, the Law Council and the Australasian Investor Relations Association — the AICD issued updated guidance for boards and company secretaries. This guide features hands-on advice on running effective AGMs using technology.

This practical resource covers considerations in choosing an AGM format, good practice in chairing and providing members with reasonable opportunity to participate, managing technology risks and up-to-date legal obligations.

The Australian Securities and Investments Commission has also issued FAQs on virtual and hybrid AGMs, outlining expectations on ensuring members have equivalent opportunities to participate at AGMs using technology as they would in person.

The Australian Shareholders’ Association and the Australian Council of Superannuation Investors recently cautioned companies against the use of AI in AGM presentations. They noted the importance of chairs and CEOs delivering AGM addresses and answering questions in person and in real time.

Issues most likely

The 2024 AGM season and meetings held earlier this year can provide some insights on likely issues for the main 2025 season.

ESG-related resolutions continue to evolve. At the large company level, advisory votes on climate transition plans this year are showing less contention. The number of shareholder proposals on ESG issues is also trending down, but across a broader range of topics — for example, biodiversity and paid parental leave.

Remuneration outcomes and alignment to performance and accountability through consequence management will continue to be a key AGM focus for companies.

Last year, according to proxy adviser CGI Glass Lewis, ASX 300 companies recorded their second-highest number of remuneration report strikes (40, second to 2023 at 41). It remains to be seen how the rate of strikes and protest votes against director elections will trend, but expectations of transparency and accountability are clear.

Targeted votes against standing directors, while not common, will be closely watched. Of the 2024 AGM season, Georgeson AGM Review noted that the drivers for votes against director nominees are often complex and can sometimes appear to impact specific directors unfairly or randomly, depending on factors beyond their individual control. Georgeson recommended that, “boards and investors alike should recognise the collegiate nature of these matters and address them across the entire board”.

On this front, the AICD is engaging with members on new guidelines issued by the local arm of global proxy adviser Institutional Shareholder Services (ISS) on director nominees who formerly worked at their company’s auditor.

The AICD view is that the scope of this guideline is too broad, capturing directors who have held any position at the audit firm without regard to the length of time in the role or since, and experience following that time. There is potential to diminish governance outcomes — such as a disincentive to rotate audit firms, and potential limitations on boards appointing directors with relevant expertise.

The ISS approach is not reflected in guidelines issued by other Australian and international proxy advisers in our market, nor ISS guidance in other jurisdictions.

The AICD acknowledges the vital importance of auditor independence, and transparent and effective management of potential, perceived or actual conflicts of interest.