The Financial Report Council (FRC) have recently published a report on AGMs with a subtitle of “An opportunity for change”. The report covers how Annual General Meetings have functioned during the Covid-19 epidemic. With restrictions on physical meetings, companies have adopted different approaches. Some have provided only the legal minimal which means ordinary shareholders have not been able to attend or ask questions. Other companies have provided virtual AGMs, with questions needed to be asked in advance, while others have provided a more comprehensive solution with questions capable of being asked and answered on the day, and votes capable of being submitted on the day.
I have commented on these different approaches and on the general issue of how to operate hybrid AGMs in future on this blog – just use the search function to search for “AGM” to see the articles.
The FRC report is a very good analysis in general of this subject (see below). It’s not too long or tedious for the casual reader but there are a few points worth noting:
They suggest that all shareholders be encouraged to use electronic communication and that they should provide an email address when purchasing shares. It would certainly be good to have an email address on the share register which I have long argued for. It would assist communication from companies to their investors, and enable other shareholders to communicate with their fellow shareholders (a basic prerequisite for shareholder democracy). But the need to have the same information on the register for those in nominee accounts is also required.
Some share registrars already maintain a record of email addresses of shareholders and have electronic systems for recording voting but these can be complex and waste shareholders’ time. They also claim that these records are not part of the official “share register” which is dubious.
However, there are practical issues here that are not mentioned. I don’t mind receiving some information from companies via email but maintaining a record of which companies have my email address (and which one from multiple email accounts, particularly after I have changed them) would not be easy. We really do need a secure central register of all public company shareholders that the shareholders can maintain themselves as regards names, postal addresses, bank accounts (for dividend payments) and email addresses. Also there is the problem that I don’t like trying to read Annual Reports that can be several hundred pages long, on-line. Much better to receive a paper Annual Report.
For the above reasons, I gave up opting in for on-line communication and have all my reports on paper.
It is important for shareholders to be able not just to ask questions at AGMs but to “speak” on anything relevant to the business of the company. Some companies have adopted Articles providing for virtual AGMs that limit this. They also need to be able to ask “follow-up” questions.
The FRC suggests splitting the AGM into two meetings – an initial one for presentations and questions/answers with a formal meeting for voting later. That seems a good approach.
The FRC Report is present here: https://www.frc.org.uk/getattachment/48c4ee08-b7be-4b7c-8f19-bcaf3d44e441/Corporate-Governance-AGM.pdf
The FRC is proposing to bring together a “stakeholder group” to consider the need for legislative changes or propose alternative means to achieve the required flexibility.
Defensive Tech Stocks
On another subject, why have technology stocks proved to be such good defensive holdings during the pandemic? The editor of Techinvest spelled it out in these words in a recent edition:
“Driving the high demand for FAANG stocks since the start of the Covid-19 crisis has been the flight to safety after markets sold off heavily in early March. While it may seem counterintuitive, big tech has been attracting buyers-this-year because if its perceived defensive qualities. At a time when many other industries are being adversely affected by the Covid-19 disruption, tech appears to be emerging in a stronger position, with demand increasing in areas such as online shopping, remote working, and digital connectivity. According to research by McKinsey, the speed of digital adoption has been so quick in response to the pandemic that five years’ worth of progress has been made in just a few weeks. Big tech, in particular, is seen as a major beneficiary of the accelerated demand for digitalisation and investors have been backing this theme”.
Yes the world is changing rapidly and investors need to take note of that.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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