5 Steps for effective AGM governance

With AGM season in full swing, directors need to ensure they’re up to speed and prepared to tackle the curly questions.

The annual general meeting is the once-a-year opportunity for shareholders to direct questions to the directors. Whether meetings run smoothly or make headlines for all the wrong reasons likely depends on meticulous planning, insist the experts. Here’s what you need to know.

Put your ear to the ground early to avoid surprises on the day

Like many leaders of large, listed corporations, for Debbie Goodin MAICD — chair of global toll roads operator Atlas Arteria and the privately operated Port of Melbourne, and a non-executive director at Ansell — the groundwork for a successful AGM starts many weeks ahead.

Immediately after the release of the annual report, including the well-scrutinised remuneration report, every year she leads a roadshow visiting major shareholders and proxy advisers to discuss any queries or concerns they may have — ahead of time.

“AGMs were put in place as an exchange of communication between shareholders and companies,” says Goodin. “Nowadays, a key focus is the remuneration report.”

Proxy advisers can wield significant influence. “As the votes come in leading up to the AGM, we’re constantly monitoring to understand if we have any issues,” she says. “If a proxy adviser advises against the remuneration report, we start working with them and the investors who seek their advice to make sure they understand the company’s perspective.”

Remuneration is a burning topic. Lately, shareholders have beaten the drum over salaries and bonuses at Macquarie Group, accounting software company Xero and Qantas, among others.

Theoretically, assiduous preparation should mean no surprises, but not always. In 2023, Goodin walked into an AGM uneasy when Atlas Arteria’s major investor, IFM Investors, withheld its votes until the day, with approximately 51 per cent of all votes ultimately cast “against” the remuneration report in an unsettling first strike. A second strike and board spill was avoided last year by paving the way for a second IFM investor to join the board. The message is clear: Start early.

Share the question load

“It’s the chair’s meeting and the chair’s prerogative to say what goes ahead,” emphasises Sue Cato AM, whose expertise is special situations management at advisory firm, Cato & Clive. Essential prep for a smooth AGM means pinpointing potential issues, agreeing ahead of time how to handle difficult queries and learning to expect, or at least deal effectively with, the unexpected.

“The chair must be elegantly authoritative, to ensure they keep control of the meeting and aren’t controlled by it,” says Cato. “Rule number one is, don’t lose your cool. A lot of chairs want to take everything on themselves because they think they can answer the question better than anyone else — or perhaps to take the heat off a non-executive director who may be under fire. If a testy shareholder demands the head of a particular division stand up and explain themselves to the meeting, it’s the chair’s job not to throw an unprepared executive under the bus.”

Not all chairs prefer to fly solo through the Q&A session. Self-described “contemporary chair” Goodin, for instance, fields as many questions as possible and shares the job of replying with the CEO, CFO and heads of the remuneration or audit committees. “Shareholders like the opportunity to hear from all of the board and the management team,” says Goodin. “We practise answers and prior to that we’ll have brainstormed a detailed Q&A. It’s easier on me, because my capable colleagues can answer and I don’t have to remember everything.”

Lean into your reports, speak plainly

A lot of work goes into an entity’s annual report. The CEO and chair’s reports therein do considerable heavy lifting for the AGM, pre-emptively covering off any topics that are likely to be raised.

Months in the making, an annual report should have captured the key information required, so AGM speeches can be locked down, allowing for minor changes. Cato suggests making these a week before. Responses to questions in meetings invariably begin, “As I said in my comments…”. What follows needs to stay “on message”, she adds.

Peter Wilkinson GAICD, whose Wilkinson Butler consultancy works with boards of companies of all sizes, says his team often translates annual reports from corporate speak into everyday English. “Do you want to be honest and transparent or not?” the former 60 Minutes producer asks. “Some want to skate over information. Some want to hide it. Risk-averse lawyers may say, ‘Don’t talk about it’ or couch it in a particular way. That worked before social media, but the game has changed.”