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How to make the most of the AGM at a complex time

In an uncertain landscape, an AGM is as crucial for calming investors’ nerves as for inspiring confidence in the long-term strategy.

In brief

  • The AGM is a crucial opportunity for boards to reassure stakeholders of plans to navigate uncertainty in the business environment.
  • Business leaders must be prepared to address sustainability reporting gaps at the AGM as stakeholders focus more on sustainability performance.
  • The AGM should also highlight how proactive board renewal efforts have led to better decision-making.

As the AGM season approaches, the uncertainty that looks set to define the business environment in 2023 will likely cloud this yearly gathering of a company’s shareholders. While last year’s AGMs were marked by energy and enthusiasm as companies eagerly laid out their plans to bounce back from the pandemic, we can expect a more tempered sentiment this time. After all, companies have been grappling with a host of challenges, including significant inflation, high interest rates, compressed margins and geopolitical tensions — and these risks are not expected to diminish anytime soon.

Naturally, stakeholders are concerned with a myriad of issues from short-term dividends to longer-term profitability and sustainability. Boards must, therefore, use the AGM as a forum to calm nerves and reassure stakeholders of plans to navigate the uncertainty ahead. For companies that have emerged stronger from the pandemic, it will be useful to discuss how the skills built during the crisis are serving the leadership team well in responding to ongoing challenges.

What proactive strategies is the management adopting to pivot, position or realign the business and operations to address opportunities and risks in the new reality? Clarity and certainty in communications are vital. Boards that can outline a robust plan to navigate the tricky waters ahead will be well placed to secure stakeholders’ confidence at the upcoming AGM.

Boards should use the AGM to calm nerves and reassure stakeholders of plans to
navigate the uncertainty ahead. These include the management’s proactive
strategies to pivot, position or realign the business and operations to address
opportunities and risks.

What’s your ESG story?

Boards should not limit themselves to talking about tackling short-term uncertainties. Stakeholders would want to hear more about the company’s long-term value-creation proposition and how the board defines the organization’s vision and future.

In particular, it would be interesting to watch for the sustainability reports of listed issuers at the upcoming AGMs. All SGX-listed entities are mandated to provide climate reporting on a “comply or explain” basis for financial years starting on or after 1 January 2022. Companies that have progressed in their decarbonization journeys could use the AGM to demonstrate their commitments and achievements.

Such companies may even see their investment profile rise as the market calibrates their position in environmental, social and governance (ESG) performance. This is especially valuable for smaller companies that are punching above their weight in ESG efforts — yet may otherwise have few other forums to showcase their successes. 

How EY can Help

Companies that are lagging behind should and must do better. Over the years, investors’ scrutiny of ESG performance has been rising and will only continue to increase. A significant disconnect seemingly exists between the expectations of companies and those of their investors regarding corporate and sustainability reporting. The latest EY Global Corporate Reporting and Institutional Investor Survey found that investors are critical of the way Asia-Pacific businesses are disclosing information about their sustainability activities. Seventy-five percent believe that organizations in the region are “highly selective” about the information they provide. Furthermore, 74% of Asia-Pacific investors said companies should invest in improvements relating to ESG matters — even if it affects their short-term profits — but only 58% of regional business leaders feel the same.

 

This misalignment means that questions on companies’ sustainability reporting gaps are to be expected at the upcoming AGMs. Being prepared to share the sustainability roadmap on what the organization is doing now, next and beyond to advance in this long-term journey is key. 

Refreshing the board

As with developments on the ESG front, shifts are taking place in Singapore boardrooms as boards renew their composition. An observation is that more women are taking up directorships. Boards that have stepped up on driving board diversity and inclusion should take the opportunity to demonstrate such a culture in the organization, how the tone at the top reflects that emphasis from rhetoric to action and how this has translated to better decision-making. 

Board renewal also provides a great opportunity for the board to broaden its experience and expertise to deal with pressing issues. For example, appointing directors with strong digital knowledge would be invaluable in steering the company’s digital transformation journey. We also see many new-economy companies taking on young directors to embed future-state thinking and varied perspectives in their boardroom strategy, particularly with dramatic shifts in consumer behaviors and workforce dispositions.

Essentially, boards that are proactive in renewing their composition in terms of skills, experience, outlook and culture bring their combined insights to bear on making complex business decisions. Such proactive board renewal efforts, if taken, should certainly be highlighted at the AGM.

Spirit and substance of engagement

It appears that hybrid AGMs are here to stay, if legislative amendments to give companies the option to conduct general meetings electronically (after the temporary orders are revoked) come to pass. Allowing hybrid AGMs demonstrates that the board is flexible in meeting shareholders’ preferences, whether they value face-to-face interactions or the convenience of virtual sessions. It would also allow overseas investors and stakeholders to access the AGM, thereby expanding the audience profile. Being flexible and versatile is the way forward as investor profiles have evolved. Therefore, companies should seek to refresh their narrative to strike a chord with younger and mobile investors.

Regardless of the AGM’s format, it is ultimately the spirit of engagement and substance that counts. As explained, stakeholders will be looking to the board and management for assurance on how they would weather the economic headwinds. They will also desire to hear more, including how the company is charting its sustainability course and strengthening its leadership team to meet tomorrow’s challenges. Clearly, companies have a real and present opportunity to deliver an impactful message to build confidence and trust — so don’t waste an AGM.

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    Summary

    Boards should use the AGM to reassure stakeholders of plans to navigate uncertainty in the business environment and tell them more about the company’s long-term value-creation proposition. They could also highlight the company's environmental, social and governance achievements as well as how proactive board renewal efforts have translated to better decision-making.

    About this article

    Photographic portrait of Christopher Wong
    Christopher Wong
    Head of Assurance, Ernst & Young LLP
    Assurance leader and strong believer that digital audit is the way forward in serving clients and creating more meaningful work for audit professionals.
    Related topics
    Board governance and oversight
    Assurance
    Financial accounting advisory services
    Long term value
    Nonfinancial reporting

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