News – ESG
VIRTUAL AGMS RAISE CHALLENGES FOR SHAREHOLDERS TO HOLD COMPANIES TO ACCOUNT
As UK-listed companies are approaching peak AGM season, the government-imposed ban on large gatherings due to Cov- id-19 raises the question of how shareholders can ensure cor- porate accountability.
Institutional asset owners had big plans for the 2020 AGM season. As pressure on investors to disclose their engagement practices is growing, many pension funds had already announced planned interventions.
Barclays, for example, is one of the companies expecting to face growing shareholder pressure. The banking giant has scheduled its AGM for 7 May in Glasgow. An investor consor- tium including Brunel Pension Partnership, LGPS Central and the public sector pension funds of Falkirk and Merseyside had already announced a resolution asking Barclays to phase out lending to heavy fossil fuel emitters and align their lending practices with the Paris Agreement. Other firms in institutional investors’ spotlights include oil giant Shell, which was expected to hold its AGM on 19 May in The Hague with a presentation for UK shareholders two days later in London. Last year it faced a climate resolution that was tabled by, among others, Aegon, NNIP and LGIM, with the latter two acting on behalf of several Dutch and British pension
funds. BP has also come under pressure by climate activists and was due to hold its AGM on 27 May. However, given the current government restrictions, the AGMs are unlikely to take place in their usual format. The new restrictions put companies in a difficult position. According to the 2006 Companies Act, UK-listed firms are required to hold an AGM within six months of their financial year end. In response to these challenges, the London Stock Ex- change opted to hold its AGM on the 21st of April as a virtual meeting. “London Stock Exchange is engaging with stakeholders on behalf of the issuers listed on its market as to whether the authorities should consider time limited ex- ceptions for companies to have flexibility in how they con- duct their AGMs during this period,” a spokesperson for the exchange said. But campaigners warn that while such a move might be justi- fied as a temporary measure, it imposes constraints on the abil- ity of shareholders to intervene. ShareAction, a responsible investment pressure group, warned in a letter to Alok Sharma, secretary of state for business, ener- gy and industrial strategy, that the ability to meet in person and exchange ideas should remain a vital part of shareholder meetings. The campaign group urged Sharma to clarify how standards of transparency could be maintained, preventing, for example, a cherry picking of shareholder questions submitted by email.
MORE WOMEN, MORE MONEY
Companies with a greater mix of men and women sitting around its boardroom table increase their chances of being more profitable, a report claims. Sustainable investor RobecoSAM, the author of the report, found a link between companies with more than 20% of its di- rectors being female and higher returns. The chances of great- er profitability are improved if around a third of managers and almost half (44.7%) of employees are women. “Regression analysis illustrated a positive link between a higher percentage of women in management positions and firms’ profitability, returns and earnings volatility – all characteristics of a firm’s quality and the health of its operations,” the report said. Researchers examined the effect that recruitment had on more than 20,000 firms between 2013 and 2018. Yet despite RobecoSAM discovering that there has been an in- crease in the number of women in boardrooms during this pe- riod, there is work to do in other areas. There was only a “mini- mal” increase in the number of women in managerial positions at 26%, up from 24% in five years, while there was little change
in the proportion of women in the total workforce. The gap between the number of women in the boardroom and in management positions with those in the total workforce showed that rising corporate rank tallied with increasing gen- der imbalance, the report said. RobecoSAM’s findings echo those of MSCI’s Women on Boards report in December 2019, which found a discernible rise in the proportion of female directors in companies on the MSCI All-Country World index to 20%, up from 17.3% in 2017. But MSCI said progress is slow, with 98.7% of boards being dominated by men. At the current rate, gender parity among global directors would be reached by 2044. But the effects of workforce gender diversity on firms’ profita- bility remains a contested topic. Research by Harvard Business School in 2019 found that cultural acceptance of gender diver- sity determined how influential it was on company performance.
It examined more than 1,000 firms from 24 sectors in 35 coun- tries and found that gender diversity was a positive influence on companies only in countries in which gender diversity was normative.
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