How to prepare for a successful AGM in 2024

The Shareholder Rights Directive II (SRD II), which came into force in 2020, introduced new rules and requirements for companies and shareholders in the European Union (EU). SRD II aimed to promote shareholder engagement, transparency and long-term value creation.

This article will explain what SRD II means for shareholders and companies, how it affects the 2024 AGM season and how Euroclear InvestorInsight® can help you optimise your AGM preparation and participation.

SRD II is a revision of the Shareholder Rights Directive, introduced in 2007 to regulate the rights and responsibilities of shareholders in listed companies in the EU. SRD II aims to improve the functioning of the internal market by fostering more shareholder engagement and transparency in corporate governance.

SRD II has significant implications for both shareholders and companies, as it requires them to adopt a more active and responsible role in the corporate governance of listed companies.

For example, one of the benefits of SRD II is that it enables shareholders to have more say on the remuneration of directors and executives, which is often a contentious issue at AGMs. According to PwC’s 2022 Corporate Governance and Executive Pay Report*, the trend of linking ESG indicators to executive pay is increasing, although it remains a challenge to balance them with financial performance indicators. The report also shows that only 50% of the companies in the selected index have shareholder acceptance of 90% or more on their remuneration policy and/or report. This indicates that SRD II has enhanced the accountability and transparency of remuneration practices but also that there is room for improvement and dialogue between shareholders and companies.

However, some challenges remain, such as the lack of independent board members, the quality and reliability of extra-financial data and the need for more dialogue with auditors, especially after the implementation of the Corporate Sustainability Reporting Directive (CSRD) in 2024, which will require listed companies with over 500 employees to publish extra-financial reports in 2025.

However, one of the challenges of SRD II is that it imposes additional administrative and operational burdens on both shareholders and companies, as they must comply with the new rules and requirements. For instance, companies must collect and process shareholder identification data from intermediaries, which can be complex and costly. Shareholders must ensure that they receive and submit the relevant information and documents in a timely manner, which can be difficult and time-consuming.

The 2024 AGM season will be the fifth one under the SRD II framework, and it is expected to be influenced by several factors, such as rising geopolitical tensions, ongoing global economic uncertainty, digital transformation and the ESG agenda.

Some of the key topics that are likely to dominate the AGM agenda and attract the attention of shareholders and proxy advisors are the following.

• ESG - ESG factors have become increasingly important and influential in the corporate governance landscape as more and more shareholders and stakeholders demand that companies take into account the environmental, social and governance impacts of their activities. ESG factors can affect the reputation, performance and value of companies and their ability to attract and retain investors, customers, employees and partners. Therefore, companies must disclose more information on their ESG strategy and performance and how they align with the UN Sustainable Development Goals (SDGs), the Paris Agreement and other relevant frameworks. Shareholders have to assess the ESG performance of companies and how it affects their voting decisions and engagement activities.
  
  
• Digitalisation - Digitalisation is using digital technologies to transform business operations and processes and create new products and services. Digitalisation can offer significant opportunities for shareholders and companies, such as enhancing efficiency, innovation and customer satisfaction. However, digitalisation can pose substantial challenges like cybersecurity, data privacy and digital skills. Shareholders are more likely to vote on the digital strategy and governance of the company and to assess the digital capabilities and competencies of the board and management. Companies are more likely to report on their digital investments and achievements and to address digital risks and opportunities.
  
  
• Board diversity - Board diversity refers to the representation of different backgrounds, perspectives and experiences among the board members, such as gender, age, ethnicity, nationality and expertise. Board diversity can enhance the quality and effectiveness of the board’s decision-making and oversight and can reflect the diversity of the company’s stakeholders and markets. Shareholders are more likely to vote on the board composition and nomination process and to support the candidates who bring diversity to the board.
  
  
• Shareholder activism - Shareholder activism is the practice of shareholders using their voting rights and influence to pressure the company to change its strategy, governance, or performance. Shareholder activism can be motivated by various factors, such as dissatisfaction with the company’s performance, valuation, or direction or by the pursuit of a specific agenda or interest. Shareholders are more likely to vote in line with the activist shareholders or to abstain from voting, depending on the merits and credibility of the activists’ proposals and arguments.

Euroclear InvestorInsight is a unique solution that helps companies comply with SRD II and optimise their AGM preparation and participation. Using Euroclear InvestorInsight, you can easily obtain an accurate list of shareholders on a specific date. This web-based platform operates in three simple steps.

1. You submit a request for shareholder identification through the platform, specifying the date and scope of your analysis.
2. Euroclear processes your request and collects the relevant data from the intermediaries in its network using standardised formats and protocols.
3. Euroclear delivers the results to you through the platform in a clear and concise report that you can download, analyse and export.

Euroclear InvestorInsight can help you prepare for the 2024 AGM season by providing you with the following benefits.

• Timeliness - You can identify your shareholders up to a month before your AGM, giving you enough time to plan and execute your engagement activities.
• Completeness - You can identify 98% of your shareholding on average, covering both domestic and foreign investors, as well as institutional and retail shareholders.
• Accuracy - You can rely on the quality and reliability of the data provided by Euroclear, which is based on its proven experience and reputation in the post-trade industry.
• Granularity - You can get a detailed breakdown of your holdings by shareholder type, country, intermediary and voting rights holder, as well as the evolution of your shareholding over time.
• Investor outreach - You can collect 60% individual email addresses on average, which can facilitate your direct communication and dialogue with your shareholders.
• Actionability - You can focus on the most relevant and influential shareholders, such as activist investors or proxy advisors and engage with them on the resolutions that may raise potential issues or controversies.

If you are interested in using Euroclear InvestorInsight to optimise your AGM preparation, you can contact us to request a demo or a trial. We will happily show you how the platform works and how it can add value to your shareholder identification process.