In the lead-up to Annual General Meeting (AGM) season, we wanted to provide some insight into the AMG process. Whether it’s your first time as a shareholder in a company and you want all the information, or you’re a seasoned investor and just want to learn more about SIX’s perspective on AGMs as a tool for change – this one’s for you! 

We interviewed SIX co-founder and CEO, Adam Verwey, and Trevor Thomas, Managing Director of leading ethical advisory practice Ethinvest, to bring some insight and expertise into the Australian AGM season.

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SIX: Why do companies have an AGM?

‍(AV) Companies listed on the stock exchange hold AGMs because they are required to, by law. The Corporations Act says companies need to hold their AGM within 5 months of the end of the financial year. As most Australian companies have a financial year that ends at 30 June, we see the majority of AGMs in October and November each year. 

A company has to give all shareholders at least 28 days notice before an AGM is held. The notice includes the Company’s annual report (including finances), a report from the Chair and CEO, and a report from an Auditor. The notice also needs to include resolutions that shareholders will vote on at the meeting. Usually these resolutions are about electing or re-electing directors and passing remuneration reports. Occasionally, shareholders will submit a resolution to be voted on. 

SIX: Can I just turn up to one? 

‍(AV) If you’re a shareholder, absolutely. You can also attend if a shareholder has given you their proxy to attend the AGM on their behalf. Otherwise you’ll struggle to get past the door. If you just want to meet the directors and shareholders of the company, you can hang out outside the AGM and greet them as they enter. 

SIX: What do shareholders in SIX’s campaigns need to do to prepare?

(AV) Every vote counts, so it’d be great if you could vote your shares in favour of SIX’s resolutions. You can vote at the meeting, but it’s better if you vote beforehand to make sure your vote counts. The company will email you a Notice of Meeting about a month prior to the AGM, and this will include a link on how to vote your shares. It should only take a few minutes. 

The Notice of Meeting will also include the Annual Report, maybe a Sustainability Report, and details of all the resolutions to be discussed and voted on at the meeting. It’s a lot, and there will be sections of it that may be difficult to understand – particularly the financial statements. Feel free to read as much or as little of it as you like. There won’t be a test at the AGM. 

If you’ve voted, then the main thing you’ll need to do is make sure you’re heading to the right venue at the right time. 

SIX: What is expected of me if I show up to an AGM as a shareholder?

(TT) The AGM looks and feels like any other formal public meeting. As a shareholder, there is not much expected nor required of you during the meeting itself. It will include presentations by the Chair of the Board and the Chief Executive Officer of the company, explaining performance over the previous Financial Year and how the company is tracking.

These presentations will take 45-60 minutes, and are followed by questions from shareholders. This is an opportunity for you, as a shareholder or the proxy of a shareholder, to ask questions about the content of the presentations. 

There are also resolutions put to the shareholders to vote on – appointing directors, approving pay structures, authorising new issues of shares etc. If you haven’t already voted beforehand, you will be invited to vote in the meeting by raising your hand.

SIX: What is a proxy? Why can they be important?

(TT) A shareholder can attend General Meetings of the company, or appoint someone else to attend, and vote, in their place. The appointed person acts as the “proxy” (replacement) for the shareholder, and has all their rights in the meeting.

SIX: What is the opportunity for change at a company’s AGM?

(TT) Companies usually try to stage-manage their AGMs very carefully to cast themselves in a positive light. The main levers for change in the meeting are:

Votes on resolutions

All resolutions are important, as they signal to the directors of the company if they have the support of the shareholders – or the majority of shareholders – for the governance and strategy of the company. The most significant resolution is the acceptance of the Remuneration Report. If shareholders are dissatisfied with the strategy or performance of the Board, they can vote against the appointment of individual directors. One of the best ways to demonstrate dissatisfaction is to vote against the Remuneration Report, because if the Remuneration Report is rejected at two successive AGMs, it leads to an automatic spill of the Board, where all directorships need to be filled. This is nearly always a trigger for the Chair to resign.

Questions

Well-directed questions can push the company into conversations about difficult topics that management and the Board may really want to avoid. A series of well-directed questions that link to operational and financial risks are the best, as the directors cannot ignore them. General questions about a topic of interest can sometimes be fobbed off as issues that sit with management, rather than being shareholder concerns.

Clapping and jeering

A question that gets the audible support of the audience will put more pressure on the Chair to provide a strong answer. A question that gets jeered by other members of the audience will embolden the Chair to be dismissive.

SIX: What does SIX see as important about AGMs?

(AV) A company’s AGM is one of the few occasions where companies are accountable to their shareholders, and where shareholders can have an active say in how the company is run. It will be the only opportunity most shareholders have to speak directly with the ceo or directors of the company they own shares in. 

Shareholder resolutions are one of the biggest ways shareholders can direct a company at an AGM. Although it’s ideal if a shareholder resolution passes, either way it can send a strong signal to the company. Shareholder resolutions overseas, and in Australia, have been able to prompt changes from the company even when the result is as low as 10-20% of votes in favour of the resolution. 

There’s also the chance to influence company executives and directors by asking questions and making comments at the AGM. CEOs and Directors are humans too, even if their decisions don’t always make it seem like it. It’s always easier to ignore the negative impact of your decisions if they’re made in a boardroom separated from the people who suffer the negative impacts. AGMs take down those barriers, and can be an opportunity for directors to hear first-hand stories of how their decisions are impacting on people and the planet. 

Sometimes company directors may not even be brought into the loop on certain issues, particularly at very large companies. The company executives often decide what gets shared with directors at board meetings. So there may be situations where, for example, a Company Director at a supermarket might not even be told about contributing to an extinction event because the company executives didn’t think it was important for them to know. If an executive decides not to raise it with directors, then it’s probably not something they are talking to shareholders about either. If an issue gets raised at an AGM, those company executives no longer act as gatekeepers and it gives the chance for directors and shareholders to take action.

SIX: What happens after an AGM?

(TT) After the meeting there are usually light refreshments served, where shareholders can mingle and even speak to managers and directors.

The outcome of an AGM depends on:

The votes

If the Skate resolution was carried, it would mean management would have to take that issue more seriously.

The media

If the media picks up a story, it can add extra pressure. For example, when 25% of people supported Market Forces’ first resolution against CBA, the bank suddenly jumped into action so that a resolution wouldn’t happen again next year. When Stephen Mayne asked Rupert Murdoch difficult questions about the unfair ownership structure of News.com and Rupert turned off his mic, the media had a field day.

(AV) The company will publish the results of votes after the meeting, if the result wasn’t clear during the meeting. IF the CEO or Chair said that they didn’t have an answer to questions during the meeting, they'll often make some commitment to follow up with an answer at a later date.

The SIX team will be following AGM results closely for all our campaign targets, and will share the outcomes with our community of shareholder activists – so stay tuned!