By Simon Rawson, Director of Corporate Engagement, ShareAction and Michael Kind, Campaign Manager – Saver Networks, ShareAction
As the disruption of the Covid-19 crisis continues to rage, we often hear the term ‘new-normal’.
Life has changed. From the way we work, to the way we travel, shop and purchase goods, there is a growing sense that going back not possible.
In some cases, it is also not desirable. We need to build back better.
One area where this is clear is the company AGM.
Coronavirus social distancing measures meant that, this year, AGMs could not happen in person.
With government legislation coming into force to allow interim flexibility of AGM formats until September 2020, companies instead faced a choice: to go behind closed doors or move online.
The virtual AGM has been a common occurrence in the US for years. Yet companies in the UK – as well as across Europe – have still stuck to a traditional, in-person format.
That all changed in 2020.
AGM technology provider, Lumi helped facilitate 50 virtual AGMs in 2019. This rose to 1,200 in 28 countries this year.
AGM season 2020: the good, the bad and the ugly
Yet, at a time when there are many urgent questions for corporate boards to answer, it was disappointing to see that two-thirds of FTSE 100 companies still opted to hold their 2020 AGMs ‘behind closed doors’.
Many – such as Barclays, BT and Ocado – made no provision for virtual participation from their shareholders.
This cannot happen again. Nor does it have to.
This year, many companies showed a willingness to be creative and flexible.
RBS and GSK for example, held a separate meeting following their ‘behind closed door’ AGMs for shareholders where questions were answered by the board. A step in the right direction, this still offered a level of transparency above a closed-door meeting, but still lacks the accountability of real time questioning during the AGM and crucially before voting on resolutions. Some shareholder questions were left unanswered.
Other companies took their online offerings a step further. Taylor Wimpey and Schroders for example hosted a dial-in AGM with live questions, while Marks & Spencer, Polymetal International and RSA Insurance all opted for a fully virtual AGM, allowing for remote participation from shareholders.
2021 and beyond: the future of the AGM
Companies need an open forum for their shareholders to interact, pose questions and receive answers in real time, and vote on resolutions after hearing from the chair or chief executive.
But the truth is that long before this crisis, the company AGM was in trouble.
Whilst AGMs of some listed firms attracted hundreds of small investors, many public companies, even in the FTSE100, held AGMs with less than a handful of attendees. Sometimes no questions were asked at all. And the value derived by boards themselves was not always clear.
This does not mean there is no benefit from in person AGMs. A recent move from Standard Life Aberdeen proposing a move to entirely virtual shareholder meetings, beyond 2020, was shot down by its investors, 37 per cent of whom opposed the proposal.
In many respects they were right to do so: there are downsides to virtual-only events. Simply moving a failing format online does nothing to improve it—and potentially diminishes the very real transparency and accountability, the opportunity for a real dialogue, created by in-person, or hybrid, forum.
But what if the disruption by coronavirus could be a catalyst to renew the company AGM? To redesign it for an era of stakeholder capitalism.
Inclusive AGMs – From shareholders to stakeholders
The Companies Act describes a company’s stakeholders to include employees, customers, suppliers, communities and those who champion protection of the environment, including the climate.
What if we could build an AGM that truly acted in the interests of these stakeholders? Of investors – large and small – and the communities most impacted by companies’ operations.
A reimagined AGM could be an opportunity to build legitimacy and connection with this wide group, something which is very much in the interests of the company’s long-term success.
They could create a space for thoughtful, vibrant discussion and tackling difficult issues, building on models such as citizens’ assemblies.
The responses we have received to our recent letter to the Chairs of FTSE100 companies, calling on them not to hide away during this AGM season, suggest many companies are considering updating their Articles to allow for virtual AGMs in the future.
If the humble AGM is one of the ways that the Covid-19 pandemic creates lasting change in our society, let’s make sure it’s one of the ways we build back better.