What's an AGM and why should I care?
What's an AGM and why should I care?
What's an Annual General Meeting and why you should care? It's the only time you can remind the Board that there are small shareholders whose interests they need to look after. We're about to head into the 2023 AGM season and it's worth understanding the concepts. Even if you're not interested, you might like to allocate your vote to the Australian Shareholders' Association who seek to protect the rights of small shareholders.
Many new investors are only interested in the ticker code and whether it is going up or down. However, if you look at it as an ongoing business which serves a purpose in our community, you can build wealth more easily over 10, 20, 30 years. That's the heart of the AGM.
Fiona Balzer is the Policy Manager at the Australian Shareholders' Association. She's joined me to talk about AGMs and Steve Mabb chatted about the role of the ASA in protecting the rights of small shareholders and telling the board what you think about their performance. Steve also joined me in this episode to talk about the upcoming AGM season and especially Fortescue, QANTAS, Cordan and JB-HiFi
ASX AGMs: A Quick Overview
Annual General Meetings are pivotal events for ASX-listed companies. They provide shareholders with a unique opportunity to engage with the company's management, voice their concerns, and influence key decisions. Here's a closer look at what typically happens at these gatherings:
1. Financial Reports: Companies present their financial reports, including income statements, balance sheets, and cash flow statements. Shareholders get a comprehensive view of the company's financial health.
2. Board Elections: Shareholders cast their votes to elect directors to the company's board. This process empowers shareholders to have a say in the leadership of the company.
3. Resolutions: Various resolutions are proposed and voted on, covering matters like dividend payments, executive compensation, and changes to the company's constitution.
4. Q&A Session: Shareholders can ask questions and seek clarifications from the company's management. This fosters transparency and accountability.
5. Proxy Voting: Shareholders who can't attend in person often vote by proxy, allowing someone else to vote on their behalf.
6. Dividend Declarations: If applicable, the company may declare dividends, specifying the amount to be paid to shareholders.
AGMs serve as a platform for shareholders to gain insights into the company's performance and future plans while ensuring their voices are heard.
Voting Against Remuneration Reports: The Power of "Say-on-Pay"
Now, let's focus on a specific aspect of AGMs that has gained considerable attention in recent years – voting against remuneration reports, also known as "say-on-pay" votes.
1. The Remuneration Report: This report outlines the compensation packages of a company's executives and directors. It includes details such as salaries, bonuses, stock options, and benefits, along with the company's remuneration policy.
2. The "Two Strikes" Rule: In Australia, if 25% or more of votes cast at an AGM oppose the remuneration report for two consecutive years, it triggers a "second strike."
3. Consequences of a Second Strike: A second strike can lead to a spill motion. Shareholders vote on whether to spill the board of directors and hold new elections for all board positions, although not all directors may be removed.
4. Transparency and Accountability: Voting against the remuneration report allows shareholders to express dissatisfaction with executive pay they deem excessive or not aligned with company performance. It's a tool for holding the board accountable.
Voting against a remuneration report is a potent means for shareholders to influence executive compensation and ensure it reflects company performance and shareholder interests. It fosters transparency and accountability within ASX-listed companies.
Each year the Australian Shareholders’ Association or ASA, monitors the performance of most of Australia’s ASX200 companies - protecting the rights of retail shareholders with a dedicated team of company monitors. These volunteer members meet with company chairs and directors, and attend AGMs to ask questions of importance to members and retail shareholders.
ASA has 110 volunteer monitors – who come from a wide range of backgrounds. Many have expertise and life experience that contributes to their analysis of company performance – whether governance, financial or operational.
The ASA also aggregates voting intentions, representing approximately 4 billion dollars of shareholder value with the ASA nominated as proxy.
Any advice in this blog post is general financial advice only and does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs before acting on the information. If you do choose to buy a financial product read the PDS and TMD and obtain appropriate financial advice tailored to your needs. Finpods Pty Ltd & Philip Muscatello are authorised representatives of MoneySherpa Pty Ltd which holds financial services licence 451289. Here's a link to our Financial Services Guide.