Investors seek greater clarity from boards amid coronavirus outbreak
Investors are calling for greater clarity from boards as the coronavirus crisis wreaks havoc on the markets and upends financial guidance and AGMs.
Investors are expecting more communication, whether through public disclosures or direct contact with management, to weather the storm over the next few months.
Some investors have highlighted the lack of communication coming from companies during the coronavirus, according to shareholder advisory firm Squarewell Partners who spoke to 20 institutional investors last month.
“The request for clarity should not be confused with a request for detail – there is an understanding that these are fluid times,” the firm added.
Dividend cuts needed to retain cash
The coronavirus crisis and oil price war are having a profound impact on the cash position of companies. According to Squarewell data, as of 26 March more than a third of US and European Fortune 100 companies have communicated to the market the impact of Covid-19.
Investors have reportedly been broadly sympathetic to the swathe of coronavirus-induced dividend cuts announced in the past few weeks.
“Investors largely agree that there may be the need to retain capital within the business. Recent events will lay bare which investors have a long-term or short-term view of the company,” said Squarewell Partners.
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This week UK banks temporarily suspended all dividend payments under pressure from the Prudential Regulation Authority (PRA). Barclays chair Nigel Higgins said it was a difficult decision, not least for shareholders, but the move is “right and prudent”.
Some investors have noted that this year may be one where companies need to “defend paying dividends as opposed to not paying them,” due to the coronavirus outbreak, said Squarewell.
‘Business as usual’ for investors
Restrictions imposed by governments have forced companies to change their AGM formats or postpone meetings until the summer.
Investors have said they will not be impacted in the upcoming AGM season and it is “business as usual” from an operational perspective.
However, companies will face logistical, legal and economic challenges and investors say they will rely on the company’s judgment in the face of these issues.
Concerns have been raised over virtual AGMs and investors have said they will monitor how shareholders rights are upheld, especially their right to ask questions.
Additionally, there are worries about the limited number of platforms allowing for virtual meetings, as well as their effectiveness and capacity.
There is some disagreement over the timing of AGMs, with some investors welcoming postponement to spread the concentration of meetings at portfolio companies. While others worry that this may lead to a concentration of meetings scheduled for the summer.