ShareAction has called on the UK Government to protect shareholder democracy during virtual annual general meetings (AGMs) in response to the Covid-19 pandemic.

The campaigning organisation has written to Alok Sharma, the Secretary of State for Business, Energy and Industrial Strategy, to say that these measures, while an eminently sensible precaution to take in these times, should be a temporary solution.

The AGM is an essential forum to shine a light on company decision-making and ensure that those who provide the company’s capital are able to hold the executive board to account.

However virtual AGMs risk excluding participants who might be unfamiliar with the required technology, such as older retail shareholders.

In preparation, ShareAction will offer shareholders and activists trainings on digital AGMs to support them to hold companies accountable both online and offline.

The letter states that BEIS should take steps to ensure the process for asking questions and voting at digital AGMs continues to be easy and accessible to all shareholders.

ShareAction asks BEIS to issue clear guidance on how questions are raised and answered at digital AGMs, to ensure that AGMs maintain their usual standards of transparency. For example, if attendees can only submit questions in advance and cannot ‘raise their hand’ and ask them in real time, this could allow companies to cherry pick which questions they answer. Clearly this could inhibit the extent to which shareholders can hold company boards to account, hampering their ability to act as long-term stewards of their assets.

ShareAction states some emerging examples of worrying practice at UK plc:

  • Rio Tinto has proposed changes to its Articles of Association (rules that guide a company’s operations and purpose) to state that an AGM may be held in a physical location and/or ‘by electronic facility’. This means that they are enabling electronic participation without clarifying whether this is in place of physical participation. Worryingly, by changing its Articles of Association, the company opens the door to future AGMs being held online.
  • Lloyds has said that attending its AGM in its physical location is unlikely to be possible, and that shareholders can email questions to a dedicated inbox. ShareAction is concerned that any questions sent to that inbox will get a template reply, rather than being aired at the AGM where public accountability is ensured.
  • Bunzl has opted for an in-person AGM at their offices with social distancing measures implemented. This seems highly problematic since the Government has asked people to avoid large gatherings. It is unlikely that shareholders will attend at the current time. Therefore, companies such as Bunzl may evade any accountability at all.

Digital AGMs should also be open to all shareholders to attend regardless of the size of their holdings. Shareholders should still be permitted to nominate proxies to attend in their place and those holding shares through a nominee account should be allowed access to the AGM.

Rachel Haworth, UK Policy Manager at ShareAction, says: “Virtual AGMs are of course a sensible solution to limiting the spread of Covid-19. However, companies should not be able to move their annual meetings online indefinitely. Not only could this exclude the older generation from attending, but it could hamper the democratic process and conveniently offer boards a way to evade trickier questions.”

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