What is an AGM?
An AGM is an annual meeting at which the shareholders of the company get to interact with the Board of Directors and the management of the company. It is the forum where the shareholders can ask questions regarding the company and its performance. Prior to this meeting, an annual report containing information about the company’s performance and its strategy etc is sent to the shareholders. The AGM is conducted post the finalisation of the accounts of a company for the completed financial year. It has to be convened by September of the year, following the year to which the accounts relate.
Significance of AGMs:
Shareholders are the owners of the company. An AGM is a key forum through which they can hold the Board and the management accountable for their actions. Material resolutions such as financial results, approval of dividend, the appointment of Directors, approval of related party transactions etc are placed for approval of the shareholders. Information in the form of explanatory statements to resolutions and the annual report is presented to shareholders so that they can make informed decisions on the basis of credible information. Other items that could be discussed in AGMs include future plans of the company and any other issues raised by the shareholders.
Who are the attendees of AGMs?
The Chairperson of the Board presides over the meeting. His/her welcome address normally includes items such as an overview of the economy and the company and the company’s future plans. The AGM is attended by the board of directors, senior management personnel and the auditors. The law mandates the Chairperson of the Audit Committee and of the Stakeholders Relationship Committee to attend the meeting. While the law does not mandate the other Board members to attend this meeting, it is a good practice to do so, since they are appointed by the shareholders, and this is the only meeting in a year where they can be held accountable by the shareholders.
The shareholders, both institutional and retail, attend this meeting as members. Since the introduction of e-voting, some shareholders who have exercised their votes, choose not to attend the AGM.
The attendance of Board members at AGMs is not mandatory, except for the Chairpersons of the Audit Committee and Stakeholders Relationship Committee.
Board-level committees are an integral part of the corporate governance structure in any company, and a lot of matters are dealt with by such committees and not by the Board. The annual report carries only basic information, as required by law.
It, therefore, stands to reason that the Chairperson(s) of all the Board level committees should attend the AGM to respond to any question that the shareholders may have and to hear first hand the concerns and suggestions of shareholders.
For example, if the shareholders want to know how the risks, especially the Covid derived risks, confronting the company, have been addressed by the company, the Risk Management Committee (RMC) Chairperson should respond on behalf of the Board, rather than leave it to the MD/CEO. This would be reflective of the Board’s involvement.
The physical AGM is one of the major Covid-derived casualties in the corporate world. A virtual meeting is a poor substitute.