The Q&A session is one of the main reasons shareholders attend the annual general meeting.
IT IS JUST AS IMPORTANT to prepare for the question and answer session at the annual general meeting, as it is to rehearse the main presentations.
The question and answer session is one of the few opportunities that a company’s board gets to shine in the media and public gaze. The Q&A is at the heart of an annual general meeting and can be the single reason that shareholders attend. Attendees want to see the board dynamics and get a feel for how competent the directors are at dealing with questions. Handling the question and answer session well reinforces the keynote presentations and provides the shareholders with confidence in the board’s abilities.
The importance of the question and answer session is reflected in the requirements of the Companies Act and guidance from BIS and ICSA advises: ‘attempt to answer all questions at the meeting.’ With this in mind, the Q&A session is largely treated with respect but frequently the advice and preparation for the chairman and board overlooks key details or has unintended consequences.
The multifaceted role of the chairman of a listed company is well defined: to be the leader, a challenger and a builder of consensus of the board, as well as being responsible for its composition. At the AGM, in the spotlight and the heat of the moment, chairmen frequently default exclusively to the ‘leader of the board’ role. This focus can manifest itself during the meeting by the chairman dominating the Q&A session, often working in tandem with the CEO and sometimes to the exclusion of the other directors on the board.
This can lead inadvertently into an adversarial situation with shareholders. When a chairman aligns themselves too closely with the CEO, they can blur the division of responsibilities between them and undermine the chairman’s role as champion of shareholder communication and facilitator of the Q&A. This situation leaves the other board directors with little to do or contribute. In these situations the unique opportunity to observe the strength and dynamic of the board has been lost and the role of the board is undermined and underutilised.
Fairness and balance
Often chairmen and their advisers worry that the Q&A is going to be a hazardous obstacle course with hidden ambushes. This position tends to make them defensive and combative which influences turn of phrase, tone of voice and body language. It is an understandable but unfortunate predisposition. The broad, non-technical questions typical of a retail shareholder can seem trivial or irrelevant to a chairman and CEO who are steeped in the detail of running the business. These situations require patience and humility. Some questions are intended to make the person asking look clever or are deliberately provocative. The chairman’s role is to be impartial, polite and neutral, while asserting control of the meeting. They must also decide how much time to devote to each Q&A, which is crucial in defusing difficult situations; reacting to a provocation may seem to give credence to the point being raised. No matter the intent, answering all the questions with the same approach and professionalism provides the sense of ‘fairness’ and balance that shareholders want to see from their chairman and board.
The AGM Q&A is an opportunity for the chairman to broaden the shareholder’s understanding of the organisation’s values and vision, reinforce the keynote presentations, showcase the board’s wisdom and breadth, and air shareholders concerns. Facilitating a successful Q&A − managing the discussion, promoting the company’s position and considering shareholder’s points of view − is the chairman’s role.
Keeping the majority of shareholders ‘on side’ is critical to retaining control of the meeting. The vast majority of them do not want a disrupted, angry meeting. This attitude can be used to stop hecklers, remove repetitious questioners and defuse shareholders with single issue complaints. Pointing out the diversions will deprive other shareholders of the opportunity to ask questions. This is why a successful answer will include the whole audience and not only address the individual that asked the question. Occasionally asking ‘does that answer the question?’ shows respect and acknowledges the support and concern for the questioner’s point of view that the chairman shares. Pausing before responding or fielding the question to a colleague adds thinking time − shareholders will appreciate that the question was carefully considered and the answer is not an ‘off the shelf’ response. Advising shareholders who will answer the next question and whether the chairman is going to add comment before or after the answer creates a sense of order and control.
Multi-layered questions should be split; repeating or rephrasing the question provides more time to think of the answer. It may be appropriate for different members of the board to answer the separate components of the question, but again it is important to be clear who is going to answer which parts of the question. It is acceptable not to know the answer to a question as long as the shareholder is advised who will know the answer and when it will be answered. Humour is an important tool to deflate tension and gain support, as is referencing the keynote presentation messages in the answers to ensure there is continuity between the answers and the presentations.
The chairman should be able to recognise the potential discomfort of the shareholder asking the question. Public speaking with microphones and spotlights can be unsettling so the chairman should put them at ease to facilitate the Q&A. It is possible to allow marshals to read the question on behalf of the shareholder, which can help reduce the shareholder’s stress and their likelihood of coming back with a follow up question. Clarity about when the Q&A session will finish is vital, so that it does not come as a surprise when it is stopped. Shareholders should be advised at least three questions in advance, giving them the opportunity to object if they feel not all questions have been aired.
Spontaneous or pre-registered
Preparing for unknown questions is difficult. Most companies compile documents to support the chairman and board with information on expected questions to make answering them easier. Many companies go a step further and ask their shareholders what they want to ask before the AGM. Pre-registering questions creates a list of issues on shareholders’ minds and an indication of the number of questions that will be asked and therefore the likely duration of the meeting. This provides time for the board and their advisors to collaborate on answers and plan who is going to respond to the questions before the meeting starts. Although this process removes a large part of the unknown, it does not provide advance warning of questions that arise spontaneously, or capture the questions from those shareholders intent on the element of surprise.
Pre-registration provides a queuing system that takes priority over spontaneous questions and ‘rewards’ those that have thought about their question in advance. The individual will know their question will be answered and that they are in the Q&A queue so they can be better prepared when it is their turn to address the chairman. The order of questions can be led by the chairman calling for them by name with roving microphones, or marshals can lead questioners up to fixed microphone points according to a pre-ordered list.
Shareholders see pre-registration as a fair and logical way of dealing with the order of questions. The alternative is for the chairman to invite questions, usually by a show of hands and roving microphones. This may feel more ‘natural’ but it puts pressure on the chairman to manage the process fairly and answer or field the questions themselves. The companies that choose not to use pre-registration sense it may feel ‘over produced’ and lack spontaneity but that is not necessarily what the shareholders value about the Q&A. The choice is about the style and dynamic of the meeting and board, not the authenticity of the session.
Preparing for a favourable outcome
Preparations start with the chairman providing guidance on how they intend to chair the meeting. This is influenced by how much of the question answering the chairman will undertake personally, share with their CEO or field to the other directors. In recent years, the trend to share more of the questions with the CEO and board has increased, with more attention focused on the composition of the board and their roles. Once this has been established, the most appropriate sourcing of questions, whether they are pre-registered or impromptu, and the best way to handle them, whether through fixed point or roving microphones, is usually self-evident.
Planning the ‘logistics’ of the meeting to support a favourable Q&A outcome is also important. The venue, accessibility, meeting start time, room design, seating layout and catering all affect the shareholders’ mood and frequently provoke the first question if they are not felt to be right. The AGM is a key day in the company’s calendar; it is important to get the most benefit out of it and that is typically judged on the outcome of the Q&A.
Ben Hillson is founding partner at Aspect Ltd
If you would like more information on Aspect’s AGM service and how we can help turn your stakeholders into advocates, contact us today on email@example.com or telephone +44 (0)20 8282 7575.