We look at trends from the 2022 AGM season and analyse insights on key issues across Australia’s evolving governance landscape for 2023.
In February 2022, the AICD issued joint guidance to support boards on electronic governance reforms that enabled virtual annual general meetings (AGMs) and electronic documents. Fast forward one year, and we unpack several trends that have occurred since the reforms were implemented to analyse the AGM landscape.
New year’s resolution
Climate change has been the dominant focus for shareholder activism in recent years, particularly with the emergence of ‘Say on Climate’ resolutions. However, shareholder activists also continue to put the heat on boards with core governance demands.
- Shareholder requisitioned resolutions – King & Wood Mallesons (KWM) in their AGM Report 2022 observed there was a decrease in the number of companies required to put a requisitioned resolution at their AGMs (11 in 2022, down from 17 in 2021), whilst the number of total requisitioned resolutions was lower (29 in 2022, compared to 40 in 2021). Market Forces and Australasian Centre for Corporate Responsibility (ACCR) were responsible for all the requisitioned ESG resolutions.
- Say on Climate resolutions – In its recent 2023 AGM Intelligence report, Australian share registry Computershare observed these resolutions were increasing, but not rapidly. In 2022, it noted “eight companies (AGL Energy Limited, APA Group, Origin, Rio Tinto, Santos, Sims Metal, South32 and Woodside) included climate plan-related resolutions at their AGMs, all of which passed.” In Australia, an average of almost 25 percent of shares voted Against, which was more than double the global average. This has been attributed to Australia’s “lower maturity of environmental, social and governance (ESG) disclosures”.
- Remuneration reports – KWM noted that shareholder support increased slightly for ASX 200 companies in 2022, with fewer strikes overall (8 percent in 2022, compared to 10 percent in 2021) but more second strikes (8percent in 2022, compared to 10 percent in 2021). Similarly, Computershare noted that for the ASX 300 in 2022, a total of 21 companies (7 percent) received a remuneration strike. Rio Tinto, Dexus, Transurban, and Westpac were among those which avoided a second remuneration strike in 2022, after receiving one in 2021.
- Targets – Insightia’s recent annual analysis of the level of global shareholder activist activity in 2022 found Australia was the third most targeted jurisdiction from shareholders (61 companies), after Japan (107 companies) and US-based companies (511 companies). KWM’s AGM analysis noted that no new sectors were targeted in 2022 in Australia.
- Director elections – The most common form of activist demands aimed at Australian-based companies in 2022 concerned the appointment or removal of personnel. Insightia noted activists had secured 33 board seats in 2022 of which 18 were secured through settlements, compared to 15 by contested votes.
Say on Climate:
Launched in the UK by activist investor Chris Hohn, the ACCR has joined the ‘say on climate’ initiative to campaign for company transparency on climate reporting and annual non-binding votes by shareholders.
Say on Climate resolutions call for (at a minimum):
- An annual vote on the plan at the AGM.
- Annual disclosure of emissions;
- A strategy to reduce emissions;
Hybrid meetings – Catering to shifting expectations
Computershare noted the 2022 AGM season return to in-person meetings, with 61 percent choosing this format, whilst 23 percent conducted hybrid meetings, utilising technology to increase shareholder participation. Additional 2022 findings from Link Group revealed a similar client trend, which said this was expected as Australia came out of COVID-19 restrictions, with boards and shareholders being able to attend meetings again in person.
Overall, AICD’s most recent analysis of ASX 200 general meetings held between 1 June 2022 and 1 March 2023, also shows that around 73 percent of general meetings were delivered in a hybrid format, whilst 24percent were delivered solely in-person and 4 percent were delivered virtually. Under ASIC Corporations (Virtual-only Meetings) Instrument 2022/129, all listed companies continued to have the option to hold virtual-only meetings until 31 May 2022. Looking at these results holistically, it suggests a strong preference for a hybrid AGM form, followed by a return to in-person meetings, with a small minority opting for virtual only.
The state of play
Although around 70 percent of the ASX 200 have held their AGM for the 2022-2023 financial year, there are clear trends emerging when you look at the data by size, sector and state.
- By size – Across the ASX 50 (74 percent), ASX 100 (80 percent) and ASX 200 (73 percent), hybrid AGMs are the clear preference for companies.
- By sector – Energy companies so far have preferred to deliver their AGMs in-person, whilst hybrid AGMs are the clear preference in most sectors such as Financials, Materials, Industrials, Consumer Staples, Real Estate, and Information Technology. However, several companies in the Energy and Materials sectors are still yet to hold their AGMs.
- By state – Computershare noted their Western Australian clients (includes many beyond the ASX 300) held the most proportion of in-person meetings (85.3 percent). Queensland held the most hybrid meetings (41.5 percent) whilst Victoria held the most virtual meetings (24.3 percent).
It’s the constitution, it’s the vibe
There are two possible explanations for these AGM trends:
- Legislative reform – In February 2022, the Corporations Amendment (Meetings and Documents) Act 2022 established the permanent use of virtual-only meeting technology, if this is required or permitted by the company’s constitution expressly, which would require shareholder approval. KWM noted “26 of the ASX 200 companies proposed refreshes in 2022, with 19 companies proposing constitutional amendments and seven proposing completely revised constitutions”. KWM added that all except one of these resolutions passed. Another company withdrew its proposed fully virtual meeting amendments prior to its AGM but managed to pass its remaining constitutional amendments.
- Investor pressure – Australian Council of Superannuation Investors (ACSI) and Australian Shareholders’ Association (ASA) have strongly discouraged companies from enshrining virtual-only AGMs in their constitution arguing they do not generally provide the same opportunity for shareholder participation and company engagement. Proxy advisor, Glass Lewis, supports constitutional amendments only where boards have provided reasonable assurance that virtual meetings will allow for reasonable shareholder participation and have demonstrated virtual meetings are not intended to replace in-person meetings.
Key issues for directors to look for in upcoming AGMs
- Cybersecurity – Computershare argues that ESG is now a “fundamental, front-line issue” that has become broader in scope, and now includes cybersecurity and privacy issues. In the US, Glass Lewis highlights that investors are increasingly demanding that companies disclose information about their cybersecurity risks and incidents in their financial filings, given its potentially material impact on revenue, expenses and reputation.
- Cultural heritage and First Nations protections – ACSI continues to “strengthen its analysis for proxy voting recommendations on resolutions that relate to First Nations people and cultural heritage”. Over the coming years, ACSI plans to expand the number of companies and sectors it engages with, beyond 11 higher-risk Australian-listed companies.
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