Risk & Economy » Diversity » Shareholders of UK-listed companies increasingly reject resolutions at AGMs

Shareholders of UK-listed companies increasingly reject resolutions at AGMs

Now 82% of FTSE 100 companies have enhanced rights to raise capital without first offering to all shareholders. Female non-executive representation on boards also continues to rise

Company resolutions rejected by shareholders in FTSE 350 companies at Annual General Meetings (AGMs) saw a notable uptick in 2023.

Rejections increased by a third to 23 last year, up from 17 rejections in 2022, reveals Annual Reporting and AGMs, a new study by Thomson Reuters Practical Law.

Of the AGM resolutions that failed in 2023, eight related to attempts to limit the pre-emption rights of shareholders – i.e., the right of existing shareholders to get first refusal on the issue of new shares. This right, which is seen as protecting shareholders against the dilution of their shareholdings, was relaxed during COVID-19 to make it easier for companies to raise funds.

Companies that want to disapply pre-emption rights of shareholders must put it to a shareholder vote.

The Thomson Reuters research found that whilst a number of these votes failed, 97% of the FTSE 100 now can issue up to 5% or 10% of their shares for any purpose without offering them to shareholders first, whilst 81% of FTSE 100 companies have received shareholder approval to issue up to an additional 5% or 10% of shares for an acquisition or a specified capital investment (as permitted under the 2022 rules).

Across the FTSE 350, three resolutions failed in relation to the directors’ authority to purchase the company’s own shares, two failed in relation to the annual remuneration report and two in relation to the directors’ authority to allot shares.

“A significant number of resolutions are being voted against by shareholders each year, revealing a heightened tendency for shareholders to make their voices heard on key business decisions,” Amanda Cantwell, senior editor, Thomson Reuters Practical Law says.

“Across the FTSE 350, companies are encouraged to devote close attention to their shareholder sentiment and proactively address their concerns to prevent any disunity that could threaten the business’s strategic growth.”

The Thomson Reuters research also shows that pay outcomes for directors persist as a key focus for investors. Across the FTSE 100 and FTSE 250, although all resolutions to approve the remuneration reports and policies passed in 2023, 21 companies received a substantial vote against their remuneration report while eight companies received a substantial vote against their remuneration policy.

“The debate over boardroom pay – which has long been one of the more contentious issues for UK PLC – has taken a new turn this year with more lobbying to close the pay gap with US directors. It will be interesting to see how shareholders respond to that in the year ahead,” says Cantwell.

“Companies must continue to balance incentivising executive performance with the expectations of shareholders and employees. We can expect this heightened level of scrutiny on directors’ remuneration to continue particularly amid today’s cost-of-living crisis.”

Female executives on the rise

The number of non-executive directors (NEDs) as a share of overall FTSE 100 boards has remained relatively steady over the last few years (78% in 2023, 77% in 2022, and 77% in 2021). This figure excludes chairs who are NEDs.

Last year, the boards of four companies were comprised entirely of NEDs. Executive directors made up only 19% (202) of board places in 2023 versus 22% (227) in 2020.

More notably, female representation on FTSE 100 boards is steadily increasing. Women now hold 440 directorships, representing 42% of all director positions. This is an increase from 40% in 2022 and 39% in 2021. Each FTSE 100 board now has two or more women on their boards.

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