What’s the point of AGMs?
AGMs should be a proper opportunity to engage with investors, instead they have become a pointless compliance exercise. Time to look again, says Emma Burdett
So another “AGM season” passes us by with nothing achieved other than a mountain of regulatory work wasting valuable corporate resources. In an ever changing world the conformity of the AGM format over the years is in many ways astonishing. Time has stood still in AGM land, and yet in every other aspect of business life, progress has been immense. How has such a potentially important route to engaging with retail (and indeed all) shareholders been allowed to dwindle into such a useless format that adds little value to anybody and yet still seems to be a ridiculous burden of regulation and work for companies (Investor Relations and Company Secretary) to coordinate.
How can we be at a place where the biggest discussion among the Board ahead of the AGM may be a competition as to who gets the most votes against them and a sweepstake on the length of the AGM – with no one going above five minutes? It’s not just the ludicrous waste of time, money and energy in going ahead with a futile event, but the vast missed opportunity AGM’s have become.
The AGM should allow investors to have a vote on important issues and to provide a proper engagement opportunity. And what do we have in reality – a convoluted voting process that gives retail shareholders no effective say and is largely controlled by a handful of proxy agencies adopting, out of necessity, a tick box approach. And no effective route for questions or holding boards to account other than (following covid) an ability in some cases for individual investors to email in a question which may or may not get answered. And in any case with questions often requested well ahead of the event, let’s be honest it’s probably not the Chair or the CEO writing the answer.
Going digital?
After a flurry of interest during Covid, the Financial Reporting Council seems to have lost interest with no recent updates. The Investment Authority has limited follow through on voting against resolutions and the current format allows companies to give often largely inconsequential explanations. The ‘digitisation taskforce’ has, after considerable time, released its final report at this year’s Mansion House Speech, with the government confirming plans to end the issuance of papers shares, but not until 2027 – and the voting process remains way behind even this. How can it be in the digital world we live in now that individual investors cannot register their own vote themselves? Is the pointlessness of AGM’s in fact indicative of a legislative/regulatory regime in the UK which unnecessarily hinders companies and consumes resource?
The average cost of an AGM now for a UK listed company is estimated to range from £40,000 to £250,000 depending on the company size and if physical or hybrid – and this almost definitely underestimates the internal cost of hours of work spent fulfilling all the regulatory requirements around the AGM. Georgeson estimates the total annual AGM attendance in 2024* in the UK at an astonishingly low 4539 people with a diminishing proportion of this being actual shareholders falling from 33.2 per cent in 2022 to 20.9 per cent in 2024 – so last year just over 900 individuals. And with 100 of these reported to have been at the M&S AGM, the dismal reality is that most AGM’s attract a small handful of actual external shareholders at best. Thus far, although shareholders have indicated a major obstacle is the distance and cost in getting to an AGM, the reality is that the proportion engaging online where a hybrid option is available does not reflect a substantially increased level of interest.
The principle of holding the Board accountable, and of shareholders casting their votes on important resolutions remains undeniable, but is the process of doing that now ripe for change. With digital and technological advances in recent years allowing listed companies to engage with all their shareholders (including individuals) more regularly and efficiently, have AGMs become superfluous? And given all the voting takes place well ahead of the AGM and remotely, is the actual meeting really required? Or conversely, does the absence of any physical meeting potentially allow a Board to remain invisible and not face the reality of the issues their shareholders are focused on?
It’s time for a proper and thorough discussion of how to improve the current AGM format. Are there overseas models which work more effectively? Are there already ideas out there that are proving more effective? Are current providers and regulators already working on models for change? Companies and shareholders are a part of this important process and should be pushing for action. It will take a lot more than a simple shift to a hybrid option to fully grasp the opportunity to make the AGM a properly inclusive, constructive and cost effective event for all parties.
Emma Burdett is senior advisor, IR & Capital Markets at H/Advisors Maitland