Date
20 October 2017
While technology can facilitate increased shareholder participation, it should only be used to enhance the physical AGM, not displace it. Photo: Wikipedia
While technology can facilitate increased shareholder participation, it should only be used to enhance the physical AGM, not displace it. Photo: Wikipedia

Why we still need physical AGMs

As a global asset manager, we are an active, engaged steward of investors’ capital. The visibility of this work, and that of the investment industry as a whole, is increasingly in the public spotlight. Through a stewardship approach, it’s imperative that we seek to illustrate how we hold boards and companies to account on behalf of investors, beneficiaries such as pensioners and savers, in whose interests we ultimately act. There is much power in such visible stewardship to influence the companies in which we invest and to rebuild trust in the financial system so that it works more effectively for providers of capital and those who access that capital.

Visible, active stewardship

Stewardship encompasses various activities using the full range of ownership rights available to shareholders, as set out in the UK Stewardship Code. A key tenet of the escalation strategy of our engagement activities is to attend and speak at the annual general meeting (AGM) of an investee company, to raise our concerns in a public forum and state clearly in front of all board members. By doing this, other shareholders and the wider marketplace are also informed of our concerns on a range of governance issues related to succession planning, remuneration, accounting matters, independence of auditors, capital efficiency and company strategy.

This is an effective way to demonstrate visibly an investment manager’s stewardship work, to escalate any major corporate governance concerns and to gain insights into board dynamics that may not always be apparent in private engagement meetings. Such interactions need not be combative. We often seek to empower a board collectively to deal with the governance concerns that we set out before them in public, which we previously raised with them in private.

For example, as a long-term shareholder, Standard Life Investments have attended the AGM of WPP plc for three consecutive years to raise concerns around succession planning for the founder CEO. Our statement at the 2017 AGM sought to embolden further the chair and the board to address this material risk to our long-term investment in the company. This was in addition to private engagement and collaboration with other shareholders on this specific issue.

Why AGMs matter

The AGM is an important accountability mechanism for investee companies and their boards. It is the only time the entire board is publicly accountable to its members, both retail and institutional shareholders. It allows the board to gain insights into the views of shareholders and other stakeholders, such as employees, and to wider public opinion, in addition to the insights gained from results of resolutions voted on in the meeting.

We lose the physical AGM at our peril and are concerned by the practice developing in the US where the physical meeting is increasingly being replaced by a virtual alternative. While technology can facilitate increased shareholder participation, it should only be used to enhance the physical AGM, not displace it.

Overall, it’s important for investment managers to utilize the full range of ownership rights – through combining the shareholder right of attending and speaking at AGMs with other strategies such as private engagement or collaboration with other shareholders, we have the responsibility to act as an active, engaged steward of investors’ capital.

Deborah Gilshan is Governance and Stewardship Director at Aberdeen Standard Investments

– Contact us at [email protected]

RC

Governance and Stewardship Director, Aberdeen Standard Investments

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