AGM Alert 2020 guide published

We have published our AGM Alert 2020 guide for company secretaries and GCs of UK premium-listed companies preparing for their 2020 AGM and this year’s annual report.

Investors and their advisory bodies have identified the following issues of focus for 2020:

  • long-term business sustainability and risks, particularly those which are climate-related
  • appropriate levels of pay and pension rates for both executives and the wider workforce
  • director accountability and effectiveness
  • stakeholder engagement
  • audit quality and auditor independence and effectiveness
  • impacts of Brexit

In addition, the UK Corporate Governance Code 2018 is now fully in effect. Companies must make sure they address the new recommendations and report on their governance and stakeholders for the first time. New Section 172 statements will also need to be published.

See below for a summary of key points in the AGM Alert 2020. To access the full guide, please visit our Linklaters Knowledge Portal.

Please note: The Knowledge Portal is an online subscription service, available exclusively to our clients.

  • The FRC has reminded companies that, in line with a new UK Corporate Governance Code recommendation, they should explain in their AGM circulars how directors proposed for election contribute to the company’s long-term sustainable success. Resolutions for the election of directors continue to attract a significant proportion of investor dissent votes, although in 2019 this affected fewer companies than in 2018 and only a handful of directors were not elected.
  • From last year, companies experiencing a vote of 20% or more against a board-recommended resolution have been expected to comply with new UK Corporate Governance Code and Investment Association recommendations for engaging with investors. This year, they must follow up by reporting on the action they have taken in the annual report and in the 2020 AGM circular (if relevant to the business proposed). All companies should also make sure that, if they experience significant dissent in 2020, they are ready to issue a statement with their AGM results.
  • The investor guidance on seeking and using share capital authorities has not changed. Companies should, as always, consider what authorities they need and explain their reasons.
  • No amendments to articles of association are required this year. Some companies have been making updates to facilitate the administration of meetings, payments and the register of members, as well as to increase director fee limits.
Engagement and reporting
  • Listed groups must include their first statutory and UK Corporate Governance Code disclosures on stakeholder and workforce engagement in reports on the 2019 financial year. A key element is the new Section 172 statement which must explain how directors have had regard to stakeholders and other issues when promoting the success of the company.
  • The FRC and investors are increasingly encouraging companies to consider and report on ESG factors and, in particular, the effects of climate change on their business.
  • The FRC has reminded companies to move away from a “tick-box” compliance approach to reporting on the UK Corporate Governance Code. Companies should focus on disclosing their company’s purpose, culture and workforce engagement and give more information about their governance in practice.
  • The FRC has stressed that companies should improve their viability reporting and assess their prospects over a longer period.
Directors’ remuneration and pay disclosures
  • Many companies are expected to put a new remuneration policy to the vote in 2020, following the three-year approval cycle which started in 2014. Policies should include the new disclosures on the impact of share price appreciation which became mandatory last year.
  • Investors will also continue to push for pension contribution rates for directors to be aligned to those for the rest of the workforce.
  • New reporting requirements apply to the annual reports on pay put before AGMs in 2020. Companies which did not pre-comply last year must publish their CEO:UK-employees pay ratio for the first time in 2020.