Long live the new-look AGM

Socialdistancing, and the limits on indoor gatherings, have seen AGMs reduced to a statutory gathering of just two investors, often shareholding directors. For those with less arcane articles of association they are conducted entirely online.

For some this is great news. I’ve attended plenty of AGMs held in expensive offices of city law firms, or function rooms in regional hotels, where the board and advisers have outnumbered external shareholders. I’ve also witnessed plenty where the only shareholders in the room are the board directors themselves.

Naturally these affairs are done and dusted within a matter of minutes. It’s a cost, a faff, requires directors to travel (some from abroad) and generally it’s all a bit of a waste of time. It’s a nod to shareholder democracy but no-one really turns up for the AGMs of smaller AIM listed companies so it’s a burden that won’t be missed.

However, for many shareholders this is the only opportunity they get to meet the management of the companies they’ve invested their hard earned cash into. A rare chance to look into the whites of their eyes and ask them any tricky questions.

The sad reality is that this is often the only chance for such direct interaction and even then not many smaller retail shareholders take the opportunity.

The vast majority of retail shareholders, around 60 per cent, don’t actually own the shares they think they own, because they are held through a nominee account. These accounts, provided by stockbrokers and share dealing platforms are part of an electronic shareholding system that places an intermediary between investors and companies and forfeits important shareholder rights.

An investor may well be the beneficial owner of shares held in nominee accounts but they are not the registered owner and whilst, in theory, they should have the right to attend meetings, more often than not these rights are not automatically passed on by the administrators. If they do produce the ‘letters of representation’ needed to attend an AGM it is done for a fee. This system prevents directors hearing the collective voice of smaller shareholders and impacts effective shareholder communication, potentially creating a disenfranchised, voiceless and absentee class of investor.

One unexpected result of the pandemic has been that many companies, recognising that investors cannot attend AGMs in person, have put in place interactive virtual meetings.

In these instances shareholders still need to vote by proxy in advance and shareholders using nominee accounts need to contact their administrators to make their voting intentions known. However, the fact that voting is all completed in advance of the meeting means companies are more relaxed about allowing non-members to attend, hear a presentation or ask questions. There is far less strict enforcement of the need for holders, via a nominee account, to brandish their letter of representation to gain access.

As a comms firm, we have looked at many ways for better engagement with private investors during the pandemic. Solutions such as ZOOM and Microsoft Teams work well, but Investor Meet Company, a bespoke online shareholder platform, stands out. This platform is not just a channel where formal AGM business can be conducted but an opportunity for shareholders to hear the presentation delivered to major investors, listen to it again if they missed it and view details of the full Q&A answer session – all without having to jump on a train to some far distant AGM in London or corporate HQ.

This new online engagement doesn’t cater for a generation of investors who welcomed a free sandwich, cup of tea and a chance to get out of the house – but it’s far and away a better way for shareholders to maintain an open dialogue with the companies they invest in.

The AGM is dead. Long live the AGM.