What are AGMs?

Once a year, companies give shareholders a chance to have their say on company decisions. This happens at the Annual General Meeting (AGM).

Key company decisions, like re-electing each member of the Board and how executives’ pay is decided, are put to shareholders for a vote.

What’s on the menu?

Ahead of the AGM, shareholders will receive an official document from the company which details all the matters they can vote on. That’s called the proxy statement — a voting menu, if you will.

What do you propose, Mr Shareholder?

Shareholders can also submit issues to be put to a vote at the AGM. These are called shareholder proposals and often cover ESG (environmental, social, governance) matters that are important to shareholders.

For example, a question could be: ‘Should Company X publicly release its climate change targets?’

The shareholder(s) who submitted the request will summarise why they are In favour of the proposed change or action. The company’s Board will then respond, explaining why it is either In favour or Against that change.

All shareholders can vote In favour, Against, or Abstain relating to these proposals ahead of, or at the AGM.

To pass or not to pass?

When a vote is ‘passed’, it means that the majority of the company’s shareholders have voted in favour at the AGM. This usually means that 50% of shareholders supported the proposal, although sometimes the pass threshold can be much higher.

If a vote is ‘not passed’, it means that the proposal did not receive enough support from shareholders at the company’s general meeting. Regardless, companies may still choose to look into ‘not passed’ proposals if it raises important issues.

Are proposals ever withdrawn?

Proposals get withdrawn because companies decide to take action without waiting for shareholders to vote.

For example, in 2020, a group of HSBC shareholders got together to ask the bank to move away from financing fossil fuels (like coal, oil and gas). Rather than waiting for the proposal to be voted on at the AGM, HSBC committed to making big changes, like aligning its strategy with the Paris Climate Agreement (to limit global warming) and making a plan to stop financing coal by the end of 2021.

If HSBC doesn’t stick to its commitments, shareholders have said they will raise this proposal again in the next AGM. These are very significant climate commitments from HSBC, showing that the power of shareholder action extends beyond AGMs. Satisfied with these new commitments, shareholders withdrew their proposal.

So the next time your favourite company releases a new ad or product, why not check out their AGM? A company’s consumer-facing side is only half the story.