AGM preparation checklist - Guerdon Associates

As we enter AGM season, board chairs and directors will be anticipating the questions they are likely to receive from the floor. It is anticipated that 2025 will see a third year recording a high number of executive pay strikes. It would be safe to assume several institutional investors will be feisty again this season. So arm yourselves with a Q&A guide with the nastiest questions. Prepare for these, and even if not asked, directors will be well prepared for the others.

The following list of typical AGM questions that may arise could have been addressed in disclosures. Transparent disclosures supported by clear rationale will reduce the likelihood of these queries at the AGM.

Below is a checklist of common questions that arise during AGMs. Best be prepared.

CEO & Executive Pay

1. Overall Level of CEO Remuneration

- Why is the CEO’s remuneration at such a high level when the company’s performance in the last three years has not shown any significant improvement?
- Why has the CEO’s fixed pay increased by x% in the last year when EPS and other financial metrics have deteriorated?
- The CEO’s remuneration structure deviates from ‘common market practice’. What is the board’s justification for this deviation?
- What is the benchmarking group used to consider CEO market positioning? How do you justify the inclusion of much larger / US /high paying companies?
- Why was there a one-off grant of rights/options/SARs to the CEO?
- How does the CEO’s pay compare to average employee pay? Why not disclose this?
- There is a large disparity to direct reports’ pay. Does this suggest succession risk?

2. Short-Term Incentive (STI) Payments

- What has the CEO done to get the “bonus” you have paid?
- Why is the CEO’s STI weighted more than the LTI?
- Why did the CEO get an increased STI payment when dividends did not increase/were reduced/profit has remained flat/TSR declined?
- The pay structure permits STI payments for non-financial results when the financial performance has not been satisfactory. Why should shareholders support this?
- The non-financial STI measures appear to be what the CEO would be required to do for their day-to-day role. Why is an STI payment being made for what is expected of the role?
- The company has a history of making consecutive STI payments broadly of a consistent amount. Why is this called an STI when it appears to be like fixed pay?
- There is no deferral of the STI. How do you justify this?

3. STI Performance Measures

- The company did not disclose the STI performance hurdles last year for this year’s STI on the basis they were commercially sensitive. Why are they now not disclosed retrospectively?
- How did the Board determine the STI performance measures? What other measures were considered? Why were they rejected?
- Why does the CEO get x% of their STI entitlement simply for achieving budget? Is that not what their fixed pay is for?
- Safety performance has declined, yet annual incentives have gone up. Is the board valuing financial results over safety?

4. Long-Term Incentive (LTI) Design & Vesting

- Why has the LTI vested when the shareholder returns have compounded at less than the bank interest rate?
- Why is underlying/adjusted EPS used for the determination of the EPS growth for the LTI? Management have been responsible for the charges / costs / acquisitions excluded from adjusted EPS, so why are they excluded when calculating EPS growth?
- What is the Board’s rationale for using an EPS hurdle for the LTI rather than a measure of ROE or similar returns measure?
- The capital efficiency hurdle has not improved on prior, when investors expect incremental improvement. Why?
- The underlying earnings measures used for incentives exclude impairments. This suggests management can be rewarded even if they reduce the value of the business. Why this definition of the earnings measure?
- Why is the value of dividends accrued during the vesting period added to LTI that vest?
- You have introduced restricted stock to the LTI. What is the rationale for this?

5. New CEO Pay Structure

- How did the Board determine the pay structure for the new CEO?
- Why is the new CEO paid more than the former CEO?
- How was an appropriate level determined?
- How have you structured the buyout of prior benefits to consider performance?

6. Board Discretion and Incentive Adjustments

- Did the board exercise discretion when determining the STI? How? (Did they pause and consider the outcome beyond formulaic results?)
- It appears discretion was not exercised in relation to a material incident that impacted shareholder outcomes. Why not?
- It appears that discretion was applied in “moving the goal posts” during the year to make it easier for an incentive to be earned. How can this be justified?
- Value was lost for management action/inaction during a prior vesting period. Why have you not made an adjustment to pay on foot as a result?

7. Other Features

- Why is there not a minimum shareholding requirement (MSR) policy disclosed or in place for the executives?
- Why is the MSR less than x2 of fixed remuneration for the CEO?
- Why should shareholders support the remuneration report as a whole?

Board Remuneration

1. Director Fees and Increases

- Why is the Board seeking an increase in the director fee pool if there is no immediate need for it?
- How can you justify the significant increase in Board fees?
- Why have you added share rights on top of NED fees?

2. Minimum Shareholding Policies

- Why does the company not have a minimum shareholding policy for the directors of the Board?

Board Diversity, Gender Pay Equity, and ESG

1. Board Diversity Measures

- What action has the Board taken to improve the diversity on the Board?
- Does the company have plans or targets to improve the gender balance on the board?

2. Gender Pay Gap

- What is the average pay difference between male and female board members/executives/employees? Why?
- What is being done to rectify this?

3. ESG

- How does the company consider ESG? Why are targets not included in incentives?