‘Tis the season — the season where some of the largest public companies have their annual general meeting (AGM) and shareholders get to vote on important business decisions.
AGM/proxy season refers to the couple of months when the highest number of companies have their annual general meetings (sometimes called annual shareholder meetings). Companies tend to have these AGMs in the first half of their fiscal year, and since many companies end their fiscal years on December 31, a lot of AGMs happen between early April and late June, with a high concentration of AGMs occurring in May.
Of course, there are plenty of early birds and plenty of stragglers, so it’s good to get mentally prepared for proxy season ahead of time and know what to expect.
AGMs give companies the chance to report business progress or plans to shareholders and ask for their input on certain decisions in the form of shareholder voting. Companies often let shareholders attend these meetings in-person, over the phone, or online. But even if shareholders don’t attend the meetings, they’re allowed to vote “by proxy” by sending in their votes ahead of time.
Publicly traded companies are required to send out their proxy statements ahead of their AGM. This proxy statement includes useful information like when the shareholder meeting is taking place, who’s running for the board of directors, information about executive compensation packages, the board’s pick for an auditing firm, company performance, and what shareholder proposals will be voted on.
If you own a company’s stock and are eligible to vote, you should receive notice that the shareholder meeting is coming up and be given instructions for how to vote. Depending on your situation, you may receive these materials from the company hosting the meeting, a voting transfer agent, or the bank/broker you invest with. These materials are either delivered electronically, through email, or by mail.
Why should I vote?
We get it, these proxy materials are dense documents written in legalese, and therefore, are easy to ignore. But it may still be in your best interest to read through them and vote on ballot measures. It is your shareholder right, after all!
If you’re planning on investing in a company over the long term, these annual meetings can provide a temperature check of what that company is planning over the next year. It also gives you an avenue to communicate with the company on what you think the best path forward for the business is.
On top of board appointments, executive compensation, and so on, sometimes shareholders are asked to vote on things like dividends, the issuing of new shares, or stock splits. These things can potentially influence a company’s share price, which means you may want to pay attention as an investor.
In addition, companies also vote on shareholder proposals that deal with how a company impacts the world. For example, in 2022 Jack in the Box shareholders voted that the company should speed up its sustainable packaging efforts. Meanwhile, Lowe’s shareholders voted that the company should report its racial and gender pay gaps.
There’s a moral argument for why these things are important. Sustainable packaging is good for the planet and closing racial and gender pay gaps is good for social equity. But, there is also a business argument that shareholders bring up in these proposals. For the sustainable packaging vote, shareholders brought up that other fast food companies had made commitments to sustainable packaging, which could make Jack in the Box look bad during a time of record plastic pollution. For the pay gap vote, shareholders stated that “actively managing pay equity is associated with improved representation and diversity is linked to superior stock performance and return on equity.”
More votes like these will happen in 2023. For example, Disney shareholders will vote on disclosing political contributions on April 3, Kellogg Company shareholders will vote on pay equity on April 28, and Eli Lilly shareholders will vote on whether the company should disclose the effectiveness of its diversity, equity, and inclusion (DEI) efforts on May 1.
If you care about issues that affect the environment or your community, you may want to voice your opinions on these issues and participate in shareholder votes. But even if you don’t care about these issues so much, shareholder votes have the potential to impact the share price or overall business performance of a company you are invested in.
So be an engaged shareholder this proxy season. You’ll get to voice your opinions, and may help push the companies in your portfolio to be even better.
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The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member FINRA SIPC.
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Let's take a look back at some of the things that happened during last year's AGM season.