Navigating contentious annual general meetingsAnnual General Meetings (AGMs) can be challenging as the shareholders of a company get to voice their concerns on how the business is being run.

To mitigate these challenges, it is important for boards to plan ahead and prepare for the potential issues that shareholders may raise. This means being aware of the current business environment when putting forward proposals and being ready to justify decisions taken and the proposals being put forward to shareholders.

In this article, we take a look at some of the key contentious issues likely to be on the minds of boards and shareholders during AGM Season 2022 and suggest strategies to prepare.

Director's remuneration

Directors' remuneration can often be an area of contention and a flashpoint with shareholders. In recent years, remuneration proposals have led to some high-profile clashes between boards and shareholders in the UK, US and also in Ireland. 2021 saw the highest number of notifiable shareholder revolts on pay for five years and investors seem intent on maintaining that pressure in 2022.

A notable trend in recent months has been shareholder rebellions against companies that availed of governmental financial support during the Covid-19 pandemic. In January, more than half of WH Smith's investors refused to back payment of a £550,000 bonus to the retailer’s chief executive after it benefited from tens of millions of pounds in pandemic relief.

Companies should also be prepared for challenges to remuneration proposals where workers have lost jobs or taken pay cuts, particularly if these haven't been reinstated. In Ireland, companies that availed of schemes such as the Employment Wage Subsidy Scheme need to be careful in how they proceed.

Issues relating to executive remuneration are not limited to companies which received state support during the pandemic. We have already seen several large UK companies weathering revolts against payment plans that were also criticised by proxy adviser firms Glass Lewis and Institutional Shareholder Services (ISS) for, among other things, a level of detail below industry best practice and a lack of adequate justification.

Future, the UK’s biggest magazine publisher, is quite a dramatic example of how relations between shareholders and the board can sour. In February of this year, over 55% of Future's investors failed to support its annual pay report – including a controversial bonus scheme in which its chief executive could be awarded £40m. The level of executive pay at Future has been contentious for a number of years and shareholder advisers have been reported as saying that the company had not responded sufficiently to concerns ahead of the AGM for them to back the pay policy this year.

Companies also need to consider what targets the executive directors were set and whether they met these targets, or whether the targets were reduced or waived. In 2021, 70% of Morrison's shareholders voted against the pay report where the company had used its discretion to award bonuses despite missing profit targets. Similarly, in the case of Informa, when the company decided to replace its incentive plan with less onerous performance targets, the pay report was rejected by nearly two thirds of voting shareholders. The vote in each case was advisory (and therefore not binding on the company), but clearly indicates the disquiet of the shareholders.

The rise of shareholder revolts can be explained by a change in expectations among investors. They are seeking better explanations of how executive remuneration and any chosen performance metric are aligned with the company's purpose, values and strategy. Investors want more substance and precise data, and expect more information and justification from companies as to why incentives and arrangements are structured in a particular way. If peers are being used as comparators, this also should be specific and clearly disclosed.

Questions that may be asked of companies include:

  • What benchmark was used?
  • What government supports were claimed during the Covid-19 pandemic and were they repaid?
  • Did workers lose jobs or take pay cuts and have these been reinstated?
  • Have the interests of all stakeholders been taken into account in making the proposal
  • What targets did the company set for its executive directors and did they meet targets or were the targets reduced or waived?
  • Have climate targets been set and are they achievable?

Even where a company has the voting numbers (based on the proxies to be voted on by the chairperson), a company should never underestimate the reputational damage and long term consequences of having unhappy shareholders publicly voice and demonstrate their dissatisfaction. 

The rising number of shareholders voting against directors' remuneration plans in 2021 is a trend likely to be seen in Ireland in 2022, as executive pay at some of the top listed companies has increased to almost double pre-Covid levels.

Re-election of directors

Dissatisfaction with company performance and director remuneration proposals can have a knock-on effect on the ability of a director to get re-elected. Remuneration committee decisions are coming under increasing scrutiny.  A recent example is that of JD Sports, where the independent shareholders were unsuccessful in blocking the remuneration report, but then blocked the re-appointment of the chairperson of the remuneration committee.


The primary concern of most investors will inevitably be getting a fair return on their investment. Dividends, therefore, are a common source of friction between shareholders and boards. When deciding on a dividend policy, boards should be aware of possible concerns that investors may have.

For instance, if a company has had a successful year, individual shareholders will likely push for more generous than normal dividends given the steep rise in living costs. If a company has done well, but is proposing a conservative dividend, the board will need to be able to justify its decision, especially if there is a proposal to provide substantial benefits to directors. Justifications may include compliance with company law rules or general business concerns, such as protecting the company's reputation.

The reputational risks posed by overly generous dividends can be seen in repeated comments made in the media and by politicians, criticising companies who availed of the Wage Subsidy Scheme and then declared dividends. Failure to consider these could mean significant harm to a company's reputation, which could in turn lead to backlash from shareholders.

Climate pledges

2021 was a big year for ESG pledges and climate ambitions, but these will need to be actioned in 2022. Legislative reform will continue to accelerate over the next five years (as seen in increased expansion of the Taxonomy Regulation and new proposals for directives on corporate sustainability due diligence and sustainability reporting requirements).

The latest Director Sentiment Monitor, produced by the Institute of Directors in Ireland, found that 83% of business leaders believe there is an onus on business organisations to "lead from the front" with regard to implementing more ambitious environmentally friendly practices and Net Zero targets.

While some progress is being made, issues for boards remain with activist shareholders pointing to a disparity between emissions targets – which typically have long deadlines – and the shortening tenure of corporate directors. Activists argue that this disparity reduces the incentive for boards to prioritise meeting climate targets. Linking some element of executive pay to climate goals is one option to appease shareholders unhappy with progress in this area.

In 2021, large corporations, such as ExxonMobil, Chevron and BP faced shareholder demands for tougher climate policies. At Exxon, three of its board members were replaced with "climate-competent" board members. An example of a company's proactivity being rewarded is that of General Electric, where 98% of shareholders voted to support a management-backed proposal requiring the company to report on progress against the CA100+ Net Zero Company Benchmark.


The 'S' of ESG is coming into prominence, with the war in Ukraine highlighting the importance of social responsibility for companies. Given the humanitarian disaster unfolding from the war, boards will need to be able to show that they have responded. Measures to help those still in Ukraine, as well as those taking refuge in Ireland, will be expected.

Beyond direct assistance to help those in need, secondary issues arising from the war will also need to be discussed. Depending on the business in question, challenges such as abiding by sanctions, recouping stranded assets and divesting from Russian companies may all be on the table.

The war should also act as a catalyst for boards to look at other areas of their business. Other unsavoury regimes and their ties to western companies have been brought into focus by Russia's actions, and boards therefore must be able to justify any business connections, which may be seen as socially irresponsible.

Board Composition

The make-up of a company's board – specifically diversity – will inevitably be a point of discussion in AGMs. Directors must be able to justify and defend the make-up of their boards and be ready to present succession plans to address any diversity issues.

Conversations around diversity will focus on two areas:

Ethnic diversity

Trends from the UK offer a useful guide of what boards should aim for regarding ethnic diversity. The Parker Review in the UK recommends that there should be at least one director of colour on each FTSE 100 board by 2021 and on each FTSE 250 board by 2024.

The Parker Review also urges companies to:

  • develop candidates of colour for the pipeline of board capable candidates and plan for succession
  • enhance transparency and disclosure on the board's ethnic diversity

Gender diversity

While the number of women occupying directorship positions has increased year-on-year, the percentage of female directors who hold executive roles remains low. In its latest annual report, Balance for Better Business (BfBB), a business-led review group established by the Irish government, found that 30% of people on ISEQ 20 boards were women, up from 18% four years ago.

However, BfBB reports that progress is slower at executive level, where only 1 in 5 leaders in companies listed on Euronext Dublin are women. Likewise, there are still too many all-male environments, with 34.2% of listed companies having an all-male leadership team.

BfBB makes three recommendations to address gender inequality:

  1. Plan to set targets and achieve them via an action plan.
  2. Build a gender-balanced succession plan.
  3. Report on the diversity in your workforce to encourage accountability.

Company boards lacking in gender and ethnic diversity make themselves vulnerable to clashes with shareholders. This can be seen in Glass Lewis's recommendation to vote against the re-election of a chair if they oversee an all-male board. Likewise, both ISS and Glass Lewis generally recommend voting against the (re-)appointment of the chair of the nomination committee where a FTSE 100 company does not have at least one director from an ethnic minority background. Shareholders may raise questions as to what the company is doing to increase diversity and become more reflective of society as a whole.

Article supplied by Desmond Cooke and A&L Goodbody