​Welcome to your February round-up, where we bring you key dates and the latest industry highlights from the world of registry along with a market update provided by Geor​geson.

This month we cover:

Industry Update:

  • AGM Guidance
  • Shareholder Priorities 
  • Board Evaluation
  • Audited Financial Information
  • The Financial Services (Disclosure and Provision of Information) (Jersey) Law 20
  • Global News
    • Virtual Board/Committee Meetings 
  • Memo on ESG Resolutions in Europe
  • Insight into AGMs held in 2020 in Australia 
  • International 
    • ESG might be an activists’ best friend
    • ESG Pincer Attack 
  • UK
    • Dividends set to remain depressed in 2021
    • Mandatory Climate Votes

Industry update

  • Over the last few weeks, we've seen some important guidance released by the GC100 on the subject of how AGMs may be held both in 2021 and in future years.

    There has been a growing conversation in the market as to whether the impact of the pandemic should be an opportunity to make some fundamental changes to the traditional nature of shareholder meetings. However, before we get to that point, we have to address the upcoming meeting season and one thing is clear, shareholders expect better opportunities for engagement in/around the meeting than had afforded them in 2020.

    There is a general view as we enter the 2021 season that Companies have had the benefit of more time to make contingency plans to facilitate shareholder engagement within the restrictions imposed by company law, their Articles of Association and the evolving situation in relation to social gatherings and restrictions on travel by members of the public. If physical meetings are not possible, companies need to consider carefully how they can demonstrate shareholders are not being disenfranchised, perhaps through the use of technology or non-traditional methods for shareholders to hold boards to account.   

    The GC100's report entitled 'Shareholder Meetings – Time for Change' appears to take several of the points raised by the FRC's October report (see the Registry Roundup article from October 2020) and a recent ShareAction report considering the future of meetings. The GC100 recognises the benefit of virtual and hybrid meetings and feel that companies should be provided with the ability to choose the format of a meeting that best suits the needs of its shareholders.

    The report sees that the pandemic is an opportunity for enhancing the existing shareholder meeting model which may now be considered antiquated, improving the ability of shareholders or stakeholders to hold the company to account and seek effective engagement with the board.

    The report makes a number of recommendations including calling on the government to provide legal certainty in relation to virtual and hybrid meetings by amending the Companies Act 2006. It also requested the FRC make changes to their guidance on the Corporate Governance Code to recognise the importance of shareholders having the ability to ask questions electronically prior to the AGM. They also recommend that if companies choose to hold an engagement event prior to the end of the proxy voting period, it would serve as a better way to allow shareholders to engage and make appropriate voting decisions.

    They have also produced a draft Code of Best Practice which will no doubt be reviewed as part of discussions taking place via market working groups on the subject over the coming months. The best practice code is split into three themes and focuses on practices where virtual meeting elements are being incorporated into a company's chosen meeting format.

    • Before the Meeting
      • Dedicated area for the company to keep shareholders updated on the latest information on the status of the meeting.
      • Clear instructions for the process of logging in, asking questions, and providing a voting instruction should be provided before the meeting, and where practical a reminder issued a few days prior to the meeting taking place.
      • Virtual-only meetings: where articles are to be amended to permit virtual meetings, clear explanatory notes should be provided to ensure shareholders understand the circumstances as to when such meetings will be held (the report provides some suggested working – page 19).

      • Shareholders to be provided with access codes through their preferred method of communication in advance of the meeting.

    • During the Meeting
      • Companies to promote engagement, dialogue and transparency just as if the meeting were held physically.
      • Companies to choose the most appropriate format to facilitate engagement and not as a means of managing attendance or restricting shareholders asking questions.
      • Meeting to be accessible in both video and audio-only format.

      • Shareholders to have same rights of participation in a virtual environment as they would by attending physically.

      • Shareholders have a right to speak and be heard via electronical facilities just as if they were attending physically. In addition to be able to ask questions through a telephone line or VoIP they should be able to ask questions electronically through a dedicated meeting application or send them to a dedicated email address.

      • If a question is asked live though telephone or VoIP the chair should ensure (as far as practical) that the question is audible and visible to all shareholders in attendance. Shareholders should also be able to see/hear questions submitted electronically via a dedicated meeting application or which have been submitted in advance regardless of whether the question is answered.

      • Grouping/moderation should be considered as appropriate.

      • Chair should exercise their right to manage the conduct of the meeting virtually as they would in a physical meeting environment.

    • After the Meeting
      • Shareholders allowed to follow up on any answer given to a question raised at the meeting.
      • Transcripts of the Q&A with all submitted questions should be available on the company's website after the meeting. Where a question isn't answered the transcript should contain an explanation as to why.
    Companies should make clear the basis on which questions have been grouped/moderated.

    To help you plan your 2021 shareholder meeting, we've a Virtual Shareholder Meeting Checklist. This combines best practice and real-life client experiences, including managing over 2,000 virtual shareholder meetings globally in 2020.

  • The Investment Association (IA) has released a document that looks at their listed company shareholder priorities for 2021

    The document focuses on four key areas and provides insights into the progress made by companies. It also sets out how the Institutional Voting Information Service (IVIS) will analyse such matters for companies with year-ends on or after 31 December 2020. 

    The four key areas are: 

    • Climate Change
      Companies in high risk sectors that do not address the four pillars of the Taskforce on Climate-Related Financial Disclosure (TCFD) recommendations will receive an amber top from IVIS. It will also highlight to investors of FTSE companies where they have included a statement in their annual report that considers the relevance of material climate-related matters. 

    • Audit Quality
      Quality and robust audits are essential for investors, but audit committee reports are not adequately demonstrating how the committee has challenged management judgements or clearly explain the quality of the audit. 

    • Stakeholder Engagement and Employee Voice
      Investors expect high quality disclosures which clearly outline the approach taken to engage and communicate with stakeholders during the pandemic. Such disclosures should also include how the board reflected stakeholder views in key decisions. 

    • Diversity
      IVIS will issue an amber top for any FTSE 350 that is not disclosing either their ethnic board diversity or an action plan to achieve the Parker Review targets. A red top will be issued for any FTSE 350 company that has not met the Hampton-Alexander targets (Small Cap companies will receive an amber top).

  • ​A final report on the effectiveness of independent board evaluations has been released by ICSA: The Chartered Governance Institute. The report identifies that there is space for a broader adoption of good practice in the way that external reviews are conducted and improving transparency regarding the process being followed.

    Accompanying the final report is a series of documents together with a summary of the responses to their consultation.

    • Principles of good practice for listed companies using external board reviewers
      The principles include guidance on the selection of board reviewer, scope and process of the review and the subsequent disclosure. The company should clearly state in their annual report that they have followed the principles and identify if the reviewer is a signatory of the code of practice.

    • Reporting on board performance reviews
      Each element of provision 23 of the UK Corporate Governance Code is discussed. Additionally, provision 21 that requires the annual report to include a statement about any links to the external evaluator has with the company or directors, is addressed.

    • Code of Practice
      The Code of Practice sets out principles together with guidance for providers of board evaluations for FTSE 350 companies. Signatories must commit to the code and are expected to apply the principles and describe how they have done so on their website. 

  • ​The measures introduced by the Financial Reporting Council and the Financial Conduct Authority during 2020 to provide some relief for companies in respects of their audited financial information have been extended. Listed companies will have an additional two months in which to publish the statements. The FCA will also refrain from suspending listed companies if they publish their statements late.

    This extension was announced in a joint statement at the end of January and accompanied a summary of the measures.

  • The Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (the "DPI law") came into force on 6 January 2021 and established a new, central register of beneficial owners and significant persons of certain types of entities.

    In addition, the new Jersey Register of Beneficial Owners and Significant Persons came into effect on 6 January 2021, which coincided with the date that myRegistry, the Jersey Financial Services Commission's (JFSC) new digital registry launch.

    The key changes:

    • Details of beneficial owners, significant persons and nominee arrangements of entities (including Directors and Managers) must be notified to the Commission and will be made public (subject to exceptions) from 1 October 2021;
    • Entities will need to appoint a locally resident 'Nominated Person' to act as the main interface between the JFSC and the entity by 6 April 2021; and
    Entities will need to file an annual confirmation statement to confirm the accuracy of the information on the register. This will replace the annual returns, with the first annual confirmation statement being required to be submitted by 30 June 2021.

    The DPI law imposes several civil and criminal offences, including fines, imprisonment, late-filing fees and strike-off provisions. In addition, where an offence is committed by an entity and it is proven to be with the consent of a significant person, the significant person will also be guilty of the same offence.

    A Nominated Person must be a JFSC regulated company secretary or registered office provider and, in their role as the Nominated Person, is to be the principal point of contact between the entity and the new digital registry, myRegistry.

    What you need to do:
    • Make arrangements to appoint a Nominated Person within three months of the DPI law coming into effect;
    • Ensure that any such appointment is notified to the JFSC within three months of the DPI law coming into effect; and
    Provide details of its beneficial owners, significant persons, and any nominee arrangements within three months of the DPI law coming into law.

    How we can help:

    With Computershare Company Secretarial Services (Jersey) Limited acting as your nominated person you will be supported by our dedicated team of governance professionals. This new requirement reiterates the important need for good statutory compliance and our team would be glad to discuss how we can work with you to meet all requirements. If you have any questions or would like to discuss us acting as your Nominated Person, please get in touch.

  • ​Virtual Board/Committee Meetings

    The US National Association of Corporate Directors and Partners (NACD) have conducted a recent survey on the impact the pandemic has had on corporate governance. The survey has identified that 65% of directors expect at least 20% of future board meetings to be virtual.

    The survey also found that it is anticipating that more committee meetings will remain virtual, with 76% of the respondents expecting at least 20% to be held virtually.

    The NACD observes that a previous sentiment that virtual board meetings were ineffective, has been overestimated as over 90% of respondents have said that they were able to govern effectively in the new environment.

Georgeson market update

Georgeson is a leading Corporate Governance advisory and Shareholder Engagement company, and part of the Computershare group

  • ​ESG-related activism is a growing trend that during 2020 led to a significant number of Environmental & Social (E&S) shareholder proposals being put forward at European AGMs. Leading examples include ShareAction’s proposal at the Barclays meeting and the agenda items requested by Follow This at the Royal Dutch Shell and Equinor meetings. In Spain, for the first time in Europe, two environmental resolutions initially proposed by The Children’s Investment Fund (TCI), introduced an annual advisory vote on climate plan at Aena and received more than 96% support following management buy-in.

    If you would like to receive a copy of the memo, please email daniele.vitale@georgeson.com.

  • ​Georgeson and Computershare published their Insight into AGMs held in 2020 in Australia.

    Events of 2020, including devastating bushfires and a global pandemic, have had reverberating effects on corporate Australia and this was reflected in the 2020 AGM season.

    Virtual shareholder meetings became the safest way to hold AGMs with Issuers taking advantage of the regulatory relief provided by the Treasurer. Despite the shift to online meetings, the loud voices of activists and shareholders were clearly heard across the season on a variety of environmental, social and governance (ESG) issues.

    Read the full publication here.

  • ​The Financial Times reports that ESG might prove the UK activists' best friend

    "Investors still questioning the value of ESG metrics should try reading the stock screens from the bottom up, because that's what the activists will be doing."

  • ​The Harvard Law School Forum on Corporate Governance published a piece on The ESG/TSR Activist "Pincer Attack"

    "Companies need to prepare for a new strategic threat: a two-front "pincer attack" from environmental, social and governance (ESG) activists, on the one side, and financial total shareholder return (TSR) activists, on the other. An ESG activist attack presents an opportunity for TSR activists to pile on, free-riding on the ESG arguments that many institutional investors support. This is a new twist on "wolf-pack" activism that provides new opportunities for activists to drive a wedge between a company and its key stakeholders. The risks of these pincer attacks are complicated by the proliferation of ESG metrics and inconsistent reporting expectations (despite current promising convergence and rationalization efforts) alongside evolving investor-side voting policies, all of which leave companies vulnerable to attack."


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