Are AGMs fit for purpose?

Are AGMs fit for purpose? Recent comments from the CEO of America’s largest bank suggest that the forum needs more attention. 

AGMs are crucial in corporate governance. They let shareholders speak to leaders, and they’re a legal necessity.

But these days, in specific companies, criticism is surfacing that AGMs are becoming a nuisance. 

Let’s dive into the details:

The short answer is activist pressure at recent high-profile AGMs. 

Following a shareholder proposal over detraisitioning treatment at Disney’s AGM, which  – like many similar shareholder proposals over topical issues – ultimately had no impact on the company’s strategy, JPMorgan Chase CEO Jamie Dimon took issue. 

According to Fortune, He claimed that AGMs were falling victim to “spiralling frivolousness”, dominated by lobbyists, activists and interest groups, with little impact on the company’s strategic direction. 

There’s no right or wrong for a statement like that; it’s only a measure of whether other corporate leaders agree. 

Leaders in some companies could easily agree with Dimon, especially where AGMs are debate epicentres. In other companies, where AGMs are quieter to the point of formality, leaders may not worry.

The facts are that a lot is constantly possible with an AGM but may not come to fruition every time:

• They could be a hotbed for debate
• They could become a forum for topics that we consider politically charged (anything from geopolitics to religion to social issues to climate change)
• They could feature many shareholder proposals with no chance of success, but shareholders propose anyway to make a point, win support, or express anger.
• They could seem like a waste of time to corporate leaders because of all this. 

None of this is a given. It is far more likely in bigger, global companies – household names that consumers feel are so big that their impact stretches far beyond their mission statement. In these scenarios, stakeholders generally want the company to take a stance on every political issue, and shareholder proposals at AGMs are part of that.

It may mean some companies’ AGMs are not fit for purpose. It depends on the goals of the people who attend. 

But that brings us to a crucial fact: you can’t just get rid of AGMs. 

They’re a cornerstone of business. They often are the one chance many small shareholders have to speak to the company’s leaders, and by law, that chance must always be available. 

If you’re thinking of changing things about your company’s AGM – it may be possible, but it depends on your articles of association. This is usually where you’ll find AGM rules like voting procedures and scheduling. Beyond that, you may have wiggle room.

• Just take it. Accept that AGM day will be active, full of differing opinions and multiple proposals that go nowhere, making you feel like the whole thing is a distraction. If you go in with this prepared mindset, you might find it easier to register the elements of impactful processes beneath the noise. 
• Get proactive about issues. You may be better prepared if you anticipate the problems that shareholders are likely to raise and discuss them at the executive and board levels. In the process, you could gain critical insights that shape your understanding of shareholder opinions and frame a more robust conversation. It won’t always work, but it’s worth a try.
• Change the AGM format. Always consider your articles of association when you do this. Assuming they allow it, you can change things like length, video vs. in-person, and the time balance between corporate leaders and shareholders. Be warned, it may look like you’re simply trying to create barriers to debate, which shareholders might not respond well to.

If you’re an executive or on the board of a global company, you may well face this kind of noise at AGM time. It reflects how politically charged modern society is. Often, your business can’t help important issues enter the corporate debate. 

However, think of it as an invitation to develop your skillset in relationship management and emerging trends. These are hugely important for good corporate leaders; a busy AGM could be the time to flex those muscles.

Many companies have seen their AGMs dominated by activist noise in recent years. While this issue can be addressed in some ways, the bottom line is that the AGM, as a concept, is here to stay.