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Social distancing rules and virtual AGMs raise accountability challenges

24 Apr 2020

As UK-listed companies are approaching peak AGM season, the government-imposed ban on large gatherings due to Covid-19 raises the question of how shareholders can ensure corporate accountability.

Institutional asset owners had big plans for the 2020 AGM season. As pressure on investors to disclose their engagement practices is growing, many pension funds had already announced planned interventions.

Barclays, for example, is one of the companies expecting to face growing shareholder pressure. The banking giant has scheduled its AGM for 7 May in Glasgow. An investor consortium including Brunel Pension Partnership, LGPS Central and the public sector pension funds of Falkirk and Merseyside had already announced a resolution asking Barclays to phase out lending to heavy fossil fuel emitters and align their lending practices with the Paris Agreement.

Other firms in institutional investors’ spotlights include oil giant Shell, which was expected to hold its AGM on 19 May in The Hague with a presentation for UK shareholders two days later in London. Last year it faced a climate resolution that was tabled by, among others, Aegon,  NNIP and LGIM, with the latter two acting on behalf of several Dutch and British pension funds.

BP has also come under pressure by climate activists and was due to hold its AGM on 27 May. However, given the current government restrictions, the AGMs are unlikely to take place in their usual format.

The new restrictions put companies in a difficult position. According to the 2006 Companies Act, UK-listed firms are required to hold an AGM within six months of their financial year end.

In response to these challenges, London Stock Exchange has opted to hold its AGM on the 21st of April as a virtual meeting.

It also suggested that proxy or electronic voting and the use of virtual AGMs could offer an alternative for other listed companies. “London Stock Exchange is engaging with stakeholders on behalf of the issuers listed on its market as to whether the authorities should consider time limited exceptions for companies to have flexibility in how they conduct their AGMs during this period,” a spokesperson for the exchange said.

But campaigners warn that while such a move might be justified as a temporary measure, it imposes constraints on the ability of shareholders to intervene. ShareAction, a responsible investment pressure group, warned in a letter to Alok Sharma, secretary of state for business, energy and industrial strategy, that the ability to meet in person and exchange ideas should remain a vital part of shareholder meetings.

The campaign group urged Sharma to clarify how standards of transparency could be maintained, preventing, for example, a cherry picking of shareholder questions submitted by email.

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