AGM season 2023: New challenges highlight the achievements of responsible investors

Key points:

• There has been a revolution in corporate annual shareholder meetings over recent years. Companies have been encouraged towards higher standards of reporting and behaviour by responsible investors
• The most recent AGM season has seen intriguing themes emerge around the appropriateness of pay deals, a divergence in ESG resolutions and concerns around the role of voting
• The scenario for annual meetings is now more complex, with competing interests at play, but we see this as a reflection of the strides made to put sustainability and good governance at the heart of corporate decision making

The landscape for corporate governance has seen a revolution over the past few decades. It used to be the case that annual general meetings (AGMs) were sleepy affairs where company resolutions were generally rubber-stamped by shareholders with little appetite to rock the boat. However, a series of governance crises at the beginning of this century and a concurrent evolution in regulation have encouraged asset managers and other institutions to deepen their expertise in the governance field – and driven corporates to improve their accountability to shareholders.

In many ways, it has been a triumph of responsible investment. Active, engaged investors have managed to spotlight the potential risks and opportunities linked to environmental, social and governance (ESG) themes and make them part of the mainstream debate around corporate performance. Now, rather than sleepy AGMs, we see active, complex and material consideration of investor concerns which we think serves to benefit all stakeholders over the short and long term.

Traditional governance topics continue to develop, including the steady evolution of ‘say-on-pay’ votes across various geographies. Most notable, though, has been the integration of shareholder expectations around ESG, reflected either through the multiplication of ESG-related proposals submitted by shareholders, or through the early development of ‘say-on-climate’ resolutions submitted by companies, often after pressure from their investors.

AGMs are now an unmissable opportunity for dialogue between shareholders, corporate leadership and, increasingly, civil society. In this paper, we discuss three major trends from the 2023 meeting season that highlight how ESG topics are increasingly entwined in the meeting process and how shareholder voting has become a concrete avenue to enact meaningful stewardship of assets.