An Annual General Meeting, also known by the initials AGM or simply as Annual Meeting, in business is a gathering of a company’s interested shareholders. At the AGM, which is mandatory, the company’s directors present an annual report, which informs the stockholders (shareholders) about the company’s profits or losses, how well or badly it has performed, the reasons for its performance, and what its strategy is.
During the AGM, the Directors will be expected to answer questions from shareholders.
Mandatory in this context means the AGMs are required either by law or by the constitution, charter or by-laws governing the company or organization.
Dr. Norbert Reithofer, Chairman of the Board of Management of carmaker BMW AG, making a statement at the company’s 95th Annual General Meeting on 13th May 2015. (Image: press.bmwgroup.com)
Shareholders vote at an Annual General Meeting
If there are any issues to discuss or present, shareholders with voting rights will vote. Issues may cover the appointment of a new person to the Board of Directors, the removal of a director, dividend payments, the selection of auditors, and executive compensation – how much the top directors should be paid.
AGMs are not limited just to companies. The Board of Governors of a school or university may have an AGM, or a large charity, student’s union or association.
The President or Chairman presides over or chairs the meeting and may give an overall status of the organization. The minutes – what people said – are prepared by the Secretary. The Secretary may also be asked to read important papers.
The treasurer, financial director, or chief accountant may present a financial report. Other board members are usually expected to give their reports.
Some AGMs are quite small affairs with no more than four or five people.
Public companies in the United States
Every US state requires public companies incorporated within it to hold an AGM of shareholders to vote for the members of the Board of Directors and transact other business that requires stockholder approval.
Advanced notice of the AGM must be given in writing and – depending on which state – is subject to a minimum notice period.
The SEC (Securities and Exchange Commission) voted in 2007 that all public companies should make their AGM materials available online.
AGMs in the United Kingdom
As from 1st October 2007, it became optional in the United Kingdom for any private company to hold an AGM, unless specified in its articles of association.
In the UK, a public company – one whose shares can be bought and sold in the stock market – must hold an AGM within six months beginning with the day following its accounting reference date (section 336(1), Companies Act 2006). The accounting reference date is the date on which a company’s financial year ends.
The Companies Act 2006 does not specify what issues must be discussed or what business needs to be transacted during an AGM.
Ever since the global financial crisis, when governments bailed out banks to the tune of trillions of dollars, shareholders at AGMs have been rebelling in growing numbers against executive remuneration, especially top directors who receive huge bonuses while their companies still make losses and thousands of workers are laid off.
Who can attend an AGM?
An AGM is attended by the members of that company or organization. In a private company limited by shares its members are its owners. In a public company limited by shares the members are also its owners. For companies limited by shares, its members are known as shareholders.
However, the members of a charity, voluntary organization or public company limited by guarantee may not necessarily be its owners.
Proxy: sometimes it might not be possible or practical for a shareholder to attend an AGM, possibly because of the time and distance involved. Shareholders may vote by proxy – a substitute. If you authorize somebody of your choosing to vote on your behalf, that person is voting by proxy.
AGM vs. EGM
The term AGM should not be confused with EGM – Extraordinary General Meeting – which is held by shareholders of a company, employees of an official body, or members of an organization, at an irregular time.
An EGM is held when an issue arises that requires input of the entire membership and is too urgent or serious to wait until the next annual general meeting.
When an EGM is called, shareholders and/or members must be told of its purpose so that they may be in a position to talk about the issue and exercise intelligent judgment.
According to the Cambridge Dictionary, an Annual General Meeting is:
“A meeting that happens once every year in which a company or other organization discusses the past year’s activities and elects new officers.”
AGMs can be very boring and dull events. A small company’s AGM may be held at its lawyer’s Board room and is attended by just a handful of people, with the majority of the voting taking place by proxy.
The AGMs of larger businesses, however, can sometimes be quite colorful and entertaining – even violent. Mike Volker at Simon Frazer University in Canada gives some real-life examples.
MacMillan Bloedel Limited, a Canadian forestry company headquartered in Vancouver, British Columbia, often has uninvited participants making noises about issues regarding the environment.
At one of MacMillan Bloedel’s AGMs, a protestor shouted:
“We will light the world on fire the moment you try to blast a road into those valleys. It will be ugly. I promise you that!”
You may now wonder whether the AGMs of ‘public companies’ are open to the public. The answer is ‘No’. AGMs are for members only, which in the case of a company are its shareholders.
However, members of the general public and certain pressure groups will try to crash AGMs – sometimes successfully. Self-professed corporate watchdogs will attend AGMs – they claim to be serving the public interest.
People’s criticisms of how an AGM was organized and set up are often similar to those one hears during a wedding reception. Complaints about the food served are common. At a Canadian Tire AGM, one stockholder complained that the bagels he was given were stale. Stephen Bachand, the company CEO, responded: “Why don’t we hold the meeting at a deli?”
A fight broke out among Daimler shareholders at its AGM this year in Germany, which was a pity because the German luxury carmaker was declaring its highest dividend ever. A dispute rapidly turned ugly and the company had to call the police.
Daimler served about 12,500 sausages to its 5,500 shareholders at the meeting for lunch, together with bread rolls, wraps, potato soup and potato salad.
A man repeatedly went to the buffer and started wrapping up several sausages to take home with him. A female shareholder was not impressed and told him off. The altercation turned into a vicious shouting match and the police were called.
Buffet lunches are a common sight at German AGMs, which tend to go on for a very long time – sometimes continuing well into the night. Daimler’s last AGM was the shortest anybody could remember – it lasted from 10am to 4.15pm.
Video – What is an Annual General Meeting (AGM)?
In this video, Debi Peverill talks about AGMs, specifically for non-profits.