Annual matters such as AGMs, Staff Performance, Finances

by Monique Bachner

          This article stems from the 3rd web “Coffee Chat” organised by ILA, the Luxembourg Institute of Directors on 15 April 2020, and hosted Monique Bachner, ILA Board member and a governance professional involved in various Boards.

          Monique was joined this week by Luc Frieden and Carine Feipel. Luc is a partner in Luxembourg law firm Elvinger Hoss Prussen, as well as Chair of the Luxembourg Chamber of Commerce and of the Board of Banque International à Luxembourg (BIL).  Carine is Chair of ILA, a lawyer and a board member on several entities, including a bank, insurance companies, investment funds and other undertakings.  

          Annual matters such as AGMs, Staff Performance, Finances

          Communicating with stakeholders

          Communication is always important in any crisis, and in a crisis which so immediately involves people, even more.

          Reporting and the AGM

          In relation to up-coming AGMs, Luxembourg parliament has passed a law allowing for shareholders to vote in writing or for AGMs to take place by video-conference: the Grand-Ducal Regulation of 20 March 2002.   Even where an AGM is held exclusively by proxies being returned, shareholders will receive all documents in advance (for example on web portals) and they can still be sent by post, where required.  

          As Chair, including a letter to shareholders with further comments is a good idea.  Talking personally to the key shareholders may be appropriate in some circumstances, however this may depend of factors such as the number of shareholders ad shareholder equality must always be maintained. 

          The crisis legislation is of particular use to companies with larger numbers of shareholders who have historically held a physical AGM.  For others, the use of proxies by their shareholders – especially those with a large international shareholder base – will already have been common practice. 

          Staff Performance metrics 

          During this immediate crisis, job performance is not about achieving financial targets, but rather what staff have done in the crisis - “there while not being there”.  

          Liquidity – keeping an eye on dividends and bonuses

          Maintaining liquidity may require decisions that do not please all stakeholders – in particular where payments are discretionary.

          For systemic banks, the ECB and the European Banking Authority (EBA) have issued guidelines that no dividends should be paid until October 2020 at least.   

          The EBA had advised the same with regard to variable remuneration such as bonuses.  

          At a broader level, liquidity is often monitored daily.  This is the case for BIL with fortunately no alarming indicators to date - but continued close monitoring is important.  If significant changes were to occur in the future such as loan defaults or runs on cash, these could have an impact on liquidity.  

          Banks also need to ensure that the liquidity of the real economy is maintained.  The six systemic banks in Luxembourg have agreed a moratorium for outstanding SME debt.  This ensures short term survival of SMEs, together with government measures and options such as chômage partiel. 

          By Monique Bachner, ILA Board member and a governance professional involved in various Boards.