Be prepared for both regulatory changes and new demands from investors

Planning of 2020 AGMs


It will soon be time for companies to start preparing for their 2020 AGMs. In the light of the implementation of the revised Shareholder Rights Directive (SRD II) and rapidly changing investor agendas we recommend companies to consider carefully how to handle the new reality – including more active ownership and increased focus on remuneration and sustainability.

In this article, VP Investor Services gives advice on how to prepare for the upcoming AGM season and what to be aware of – and we have asked Jens Munch Holst from MP Pension, Mikael Bak from the Danish Shareholders Association, and Klaus Søgaard from Gorrissen Federspiel to give some insight into their main focus areas.

Key trends in 2019

During the 2019 AGM season we observed a number of key trends:

  • A general demand for more transparency and accountability
  • More institutional investors were active at AGMs and they expressed their views and expectations more explicitly than before
  • Investors’ agendas are changing – with increasing focus on ESG issues. Climate change risk and sustainability were the most frequently raised ESG issues
  • An increased number of shareholder votes against remuneration policies and reports
  • More institutional investors engaged with companies before the AGM, and the interaction between companies and their shareholders has changed significantly in the wake of institutional investors’ implementation of responsible investment policies
  • Proxy advisers’ guidelines have become more far-reaching and stringent

“We expect these trends to become stronger in the years to come and we foresee that investors will demand more transparency in every respect, so that companies will need to adapt their AGM set-up accordingly. In addition, it is an aspect of AGM planning to consider how to use the AGM – should it just be a “formal” event in compliance with regulatory demands, or should the AGM also be seen as an opportunity for the company to proactively inform shareholders of relevant issues, position the company and build valuable shareholder relations,” says Flemming Merring, Head of Issuer Services at VP.

What to consider and prepare for

For companies to be prepared in the best possible way for their coming AGM, we have identified a number of issues that should be taken into account:

Preparation for the new rules on remuneration policy and reporting

  • The SDR II requirements concerning remuneration policy and reporting will apply to AGMs convened in fiscal years beginning on 10 June 2019 or later. For listed companies with the calendar year as the fiscal year, this means that they will have to vote on their remuneration policy at the annual general meeting in 2020, and that their remuneration report must be presented at the following ordinary general meeting in 2021.
  • Be aware that the remuneration policy and reporting are the shareholders’ instrument to gain insight into and control of the management’s remuneration and also the companies’ primary channel for communication concerning management remuneration and the underlying rationale. Companies can thus use the remuneration policy and report to set the scene for the debate on the company's remuneration and the underlying considerations.

  • The remuneration policy is a binding framework for management remuneration and should therefore encompass a number of broader criteria, enabling the board to navigate flexibly within the remuneration framework. Be aware that the use of specific share instruments for management remuneration is attracting more and more attention and should therefore be considered carefully when the remuneration policy is prepared.

  • Proxy advisers relatively often vote against Danish companies’ remuneration proposals. Take proxy adviser guidelines into account and consider entering into dialogue with the proxy advisers when preparing the remuneration policy.
  • Until Section 139b of the Danish Companies Act enters into force (i.e. until the 2021 AGM season for companies with the calendar year as their fiscal year), the remuneration report can be included as an integral element of the annual report. Nevertheless, companies should consider aligning the content of the remuneration report with the requirements of Section 139b of the Companies Act before it enters into force – to avoid separate publication of the remuneration report.

Other SRD II-related issues

  • The specific Danish framework for identification of shareholders, reporting on voting results to shareholders and other communication from issuers to shareholders, is awaiting guidelines from the Danish Business Authority. The new regulation will be implemented in September 2020.
  • Unfortunately, the regulatory changes in connection with the implementation of SRD II will not pave the way for increased efficiency of the cross-border proxy voting process, due to the lack of powers of attorney.

Coverage of and reporting on ESG-related issues

  • Investor demands for sustainable company behaviour and for companies to meet their social contract obligations have become more widespread during recent years and investors’ approach and attitudes have changed significantly within a short period of time.
  • The intensified focus puts pressure on companies to incorporate ESG, including sustainable issues, in their strategy and business model – and to communicate their thoughts and actions taken to key stakeholders. Companies should thus consider how to report on their approach to ESG-related issues and how to report on progress. Furthermore, they should be prepared to answer ever more detailed questions related to these issues, such as questions concerning climate risk, environmental footprint, sustainability, diversity and tax issues.

Engagement with key investors

  • As described above, institutional investors are taking a more active role in managing their investments and in recent years institutional investors and companies have increased their engagement related to business strategy and structural governance matters. Engaging with institutional investors allows the company to elaborate on board proposals and screen the sentiment towards key items to be considered at the AGM – and to know whether the institutional investors intend to follow the advice of proxy advisers.

Engagement with proxy advisers

  • On preparing the notice convening the AGM, companies should be aware of proxy advisers’ guidelines on relevant issues and engage with the proxy advisers when deemed necessary. Engaging with proxy advisers allows the company to ascertain whether proxy advisers will recommend that shareholders vote against items at the AGM – and to adjust the board’s proposals in line with recommendations, and/or to substantiate board proposals. Companies should be aware that the “window for engagement” is typically quite narrow and varies among different proxy advisers.

Use of new technologies

  • Companies should consider how to make optimum use of electronic platforms, including further digitalisation of the AGM production chain and the AGM, in order to support active ownership – and to improve efficiency and make savings.
  • During the 2020 AGM season we do not expect any major changes in the use of new technologies – most companies are expected to await the full implementation of the SRD II-related regulation before they take further steps to digitalise their AGM, including transition to the virtual or partly electronic AGM.
  • The implementation of SRD II will not entail any new demands regarding physical voting – companies can still use the traditional “show of hands” method.

Review of shareholder register

  • Companies should consider monitoring and analysing the shareholder register in advance of the AGM. This may help to determine whether any of the company’s shareholders are known for particular views or actions, and to detect signs of possible collective action. Accordingly, the review will give the company an opportunity to engage with relevant shareholders or shareholder groups and to seek to handle upcoming issues or opposition.

Below three key AGM stakeholders present their main focus areas for the upcoming 2020 AGM season.

Mikael Bak, CEO of the Danish Shareholders Association

“At the Danish Shareholders Association, our key issue is to strengthen shareholder democracy – this is the prerequisite for a well-functioning capital market and for strengthening the private shareholder culture. Annually, we attend around 60 AGMs and at these AGMs we aim to advance issues that we deem vital for long-term value creation and thereby for share price development. For the 2020 AGM season, our key focus areas will be:

  • Remuneration policy and reporting. It is important to us that management remuneration is understandable and transparent, that it does not escalate out of control, and that well-defined long-term incentives are in place.
  • Equal access to company information. We want companies to facilitate that both small and large shareholders have the same access to company data and information.
  • Cybersecurity. We seek insight into how far companies are exposed to cybercrime and how they protect themselves from cyberattacks.
  • Diversity. We want companies to work actively for a larger proportion of women at management levels, while still focusing on competences.
  • Outlook. Have the companies considered the effect of, for example, threats of trade wars, Brexit and long-term mega-trends, and how do they adjust the company, including its strategy and business model, to these challenges and future demands?
  • Sustainability and CSR issues. We focus on the content of companies’ ESG reporting, ethical issues and the effectiveness of whistleblower schemes.

To put it briefly, it is very important to us that companies do not violate the “social contract” and that they serve the interests of society. We want to promote “en GOD investering” (a good investment) – G for “gennemsigtighed” (transparency), O for ”ordentlighed” (orderliness) and D for “dygtighed” (competence)“ .


Jens Munch Holst, CEO at MP Pension

”For many years, MP Pension has focused on responsible investment, and as a responsible investor we take ownership of our investments. Active ownership means that we, as investors, aim to influence companies to act more responsibly – and through our ownership, we interact with the companies we invest in, and we vote at their general meetings. We also actively voice our opinion at many AGMs in Denmark.
During the 2020 AGM season, we will focus on three main issues:

  • Climate. For some time, climate and climate change have been important issues for us. We focus especially on emissions – and we expect companies to deliver results within this area and to increase their transparency. We are aware that reporting on climate issues might be challenging, especially for small and middle-sized companies, and we therefore recommend companies to consider using different types of tools and frameworks, for example the framework launched by Nasdaq earlier this year. No matter how far companies have come with their climate initiatives, we require openness and transparency – and a meaningful way of reporting progress.
  • Diversity. We still have a strong focus on diversity, both at the top management level and the levels below. We recommend companies to take a broader view of diversity and to consider – and report on – how they can improve the recruitment base, with the aim of strengthening diversity. In our view, it is very important to develop a company culture that supports diversity at all levels of the company.
  • Remuneration. During the 2020 AGM season, remuneration will be very much in focus, as the new SRD II regulation regarding remuneration policy and reporting will have entered into force. We expect companies to present remuneration policies that describe the underlying considerations and rationale in a transparent and understandable way. Furthermore, before presenting the remuneration policy we expect companies to be aware that Danish companies have a different social contract compared to many other countries – this is not about the “jantelov”, but a request for a reasonable remuneration model that investors can buy into. If companies do not understand this balancing act, we will continue to vote against the remuneration policy and to repeat our criticism – while also praising sustainable remuneration models.

In addition to the aforementioned issues, we will naturally raise company-specific business issues, such as the effects of and preparations for Brexit and potential trade wars.


Klaus Søgaard, partner and lawyer at Gorrissen Federspiel

”According to SRD II, all listed companies will have to present and vote on their remuneration policy at the 2020 AGM, and thereafter at least every four years. From the 2021 AGM, they must present a remuneration report every year. This means that companies should consider changing their standard agenda and the sequence in which the agenda items should be addressed. Going forward, remuneration will be handled both as part of the approval of the annual report (approval of the remuneration of the board for the previous year and the remuneration for the current year according to good corporate governance practice), the voting on the remuneration policy (at least every fourth year, beginning in 2020) and on the advisory vote on the remuneration report (regarding remuneration of the management for the previous year) as from 2021.

The Danish Business Authority is preparing guidelines on the content of the remuneration policy and the remuneration report, but in addition to these guidelines and the wording of SRD II, companies should be aware of the guidelines from key proxy advisers – and check whether they require more details to be included in the remuneration policy than the minimum regulatory requirements to vote for the remuneration policy. The foreign ownership of Danish listed companies totals approximately 53 per cent of the share capital, so that the voting by proxy advisers will be decisive at a number of AGMs. According to the existing guidelines, the proxy adviser ISS is relatively demanding, compared to the minimum regulatory requirements, while Glass Lewis’ guidelines allow for more flexibility for the boards. The issue is whether the remuneration policy must contain details such as KPIs, or whether it is sufficient that the remuneration report (after the event) describes in detail how the remuneration was decided on and paid.

Apart from remuneration issues, when planning their 2020 AGM companies should also be aware of the content of the accounting regulations, the new accountants act, proxy advisers’ stricter guidelines regarding the authority to increase the share capital and overboarding.”

For more information, please contact:

Flemming Merring

Senior Product Manager, Issuance Products

+45 4358 8968
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We want to provide our customers with efficient, reliable and excellent investor services and at the same time, we take pride in finding solutions supporting legal and technical issues related to Issuance.

- Flemming Merring , Senior Product Manager, Issuance Products