2024 Proxy Season Review: United Kingdom

The following analysis covers the 2024 AGM proxy season across all FTSE 100 issuers considering the index composition up to September 2024 with an annual meeting date between 1 January and 31 July 2024.*
*UK 2024 data provided by Diligent

Average Vote Turnout

Although slightly up on 2023, the average 2024 turnout retained its level of approximately 74% for the fourth year in a row.

Physical/Hybrid

As of April 2024, 60% of FTSE 350 companies who issued their AGM notices had opted for an entirely physical meeting without any form of electronic engagement. Hybrid meetings were the next most common form (22%). Fully virtual meetings were rare, with only 1 company choosing to adopt such, as they did in 2023. White & Case noted “a new trend” for ‘digitally-enabled AGMs’ held under ‘studio conditions’, where meetings are held at a physical place, but shareholders are strongly ‘advised to’ attend remotely.

In early July this year, the Financial Conduct Authority (FCA) announced an overhaul of the process for companies wanting to list on the London Stock Exchange, calling them “the biggest changes to the regime in over three decades”. Listing rules will change from 29 July 2024, aiming to attract more companies amid declining IPOs. Key changes include:

• Simplified listing process
• Single ‘commercial’ category replacing ‘premium’ and ‘standard’ listings
• Reduced shareholder voting requirements

Whilst these reforms align the UK market more closely with our European and US counterparts, aiming to address the 40% decline in UK-listed companies since 2008, in the context of this review, the removal of shareholder votes for significant company transactions is concerning.

The Companies Act 2006 mandates directors to act in the best interests of all members, and voting rights are crucial for this. Without investor input, directors cannot fully understand members’ interests. Voting rights allow investors to hold management accountable and prevent unchecked powers, reducing the risk of corporate scandals.

Average turnout

Board Elections

There has been a steady increase in the number of Board election proposals, perhaps indicative of enlarging boards adopting broader skillsets to cover increasing oversight requirements. 2024 also saw a higher rate of approval for director elections.

Director Election Resolution Numbers

Director Election Approval Rates

Remuneration Items

In the UK, issuers articulate their remuneration structure and disclosure via two elements that are voted at the AGM: i) the Remuneration Policy, a forward-looking strategic document that sets the main features of the compensation system of the board for a three-year period (unless updates within a three year period are otherwise sought); and ii) the Remuneration Report, an annual document that discloses all the details surrounding the amounts paid to the board in the year under review. Resolutions proposing Policy are binding, while the Report is subject to an advisory vote. Key trends in 2024 comprise evolving approaches to Environmental, Social and Governance (ESG) metrics, increases in incentive opportunities, and new long-term incentive (LTI) plan designs.

Average Support Level for Rem Report

Proxy Adviser Evolution on Rem Report

The Remuneration Policy

The increase to the existing Performance Share Plan and the introduction of a Restricted Share Plan are not supported. The CEO’s total potential variable remuneration can exceed 150% of base salary for the STI. Buy-out awards are possible, with the Remuneration Committee aiming to structure them similarly to forfeited awards. Awards under the RSP are not subject to performance conditions.

Average Support Level for Rem Report

Proxy Adviser Evolution on Rem Report

Issue of Equity without Pre-emptive Rights

Authorities to issue shares with pre-emptive rights require a simple majority (ordinary resolutions), while those without pre-emptive rights need 75% approval (special resolutions). Institutional investors and proxy advisors often refer to the Pre-emption Group’s Statement of Principles, updated in November 2022, which allows non-pre-emptive issuances up to 20% of share capital, with 10% reserved for acquisitions or capital investments. This additional 10% should be in a separate resolution, leading companies to propose two resolutions at AGMs:

• Authorise Issue of Equity without Pre-emptive Rights
• Authorise Issue of Equity without Pre-emptive Rights for Acquisitions or Capital Investments

Of 160 such proposals reviewed, all passed with an average approval rate of 94.49%.**UK 2024 data provided by ISS

Concluding Remarks

For the FTSE 100, the season looks to have been a stabilising one, and free from the notion of any major retail-shareholder spring. Support levels for the critical areas of Director Elections and Remuneration showed an increase.

In 2024, contested share issuance authorities in the UK rose to 16.0%, driven by companies following Pre-Emption Group guidance allowing share issuances without pre-emptive rights up to 20% of issued share capital. Despite compliance with the Group’s principles, some institutional investors have opposed these authorities in the last couple of seasons.

However, the FCA review to propose the removal of shareholder votes for significant company transactions is concerning. Any General Meetings should be pivotal touchpoints for companies to effectively engage with their shareholders on significant matters, especially financially impactful transactions. Disenfranchising the vote on such matters looks like a backward step in the world of shareholder rights. The changes to listing rules are very much aimed at satisfying companies rather than shareholders. The reality is that listing will become easier for companies but with diminished shareholder rights.