Are Virtual AGMs good or bad for shareholders?

This year's round of annual general meetings (AGMs) has left some investors questioning whether companies' pandemic-era practices are fit for future use.

Holding AGMs online became a necessity during the Covid-19 pandemic. Since then, some companies have moved back to in-person meetings, others have opted for a hybrid version, and others have chosen a digital-first option, actively asking shareholders not to turn up in person.

Virtual and hybrid AGMs allow investors to take part without having to spend money and time to travel to a physical location, but they can also make it easier for the board to get out of answering difficult questions.

“Virtual AGMs, or attendance electronically at a hybrid, is not the same as being present physically,” said Jane Perry, a long-time private investor who has shares in ETFs, investment trusts and a handful of companies, and often attends AGMs. “Live questions are definitely preferable to those typed in by a shareholder and read out by a third party with no option for follow up.”

The role of platforms

Perry recently attended Haleon’s (HLN) first AGM after it demerged from former parent GSK (GSK), which was meant to be “a fully digitally-enabled meeting”, with shareholders asked not to turn up in person on the day. She said a group of about 20 shareholders did so anyway, unaware that they were not expected, and had to watch the AGM from a separate room. They were later able to talk with some members of the board in person.

Shareholder questions were read and answered by Haleon’s chair Dave Lewis. Answering one on the decision to hold a virtual AGM, he said: “The intention of holding a virtual meeting was to improve the access for all of our shareholders. We want to include as many shareholders as we can.” He pointed to the fact that more than 60 per cent of Haleon shares are held outside of the UK. Haleon declined to comment further. 

The event demonstrates how communication between companies and private shareholders with nominee accounts on platforms can be difficult and lead to misunderstandings. Not all platforms notify their customers when a company in which they hold shares is holding an AGM or a vote. Furthermore, in order to attend these meetings, shareholders need to obtain a letter of representation from the platform. 

Platforms have made some progress in facilitating shareholder participation. In November 2021, Interactive Investor made receiving shareholder notifications for UK listed securities the standard setting on its platform, rather than an opt-in feature, resulting in an increase in both votes cast and AGM attendance in 2022. Hargreaves Lansdown launched an online proxy voting service earlier this year.

But for the most part, platform investors who want to take part in AGMs need to be proactive, whether they attend in person or virtually.

Cliff Weight, spokesperson for investor campaigning organisation ShareSoc, said giving people both options by holding a hybrid AGM was likely to be the best option. But he added: “You should still have the ability to ask questions on the day. What we don’t want is the chair [effectively] saying, ‘you've got to type your question into a box, and then I get to choose the ones I want to answer’. You're never sure whether [they are] going to answer the difficult questions that [they] don’t like.”

Interactive Investor’s Jemma Jackson agreed. “Hybrid meetings are a great happy medium. Online AGMs widen accessibility and are powerful tools for shareholder democracy, but there’s little substitute for the ‘reality check’ from people in the room,” she said.

Modernising company law

Marks and Spencer (MKS) has been a vocal proponent of virtual AGMs. It held its first hybrid event before the pandemic in 2019 and has since moved to fully digital meetings. It also launched a campaign to “give all shareholders a voice by bringing company law into the 21st century”. 

The campaign is backed by various organisations in the sector including ShareSoc, and calls for better communication between companies and retail investors, both through platforms and by allowing emails to be used for all messages with shareholders. It is also campaigning for digital and hybrid AGMs to be recognised by law. A company that wants to move away from a purely physical AGM currently needs to go through the process of amending its articles of association. Even then, it must declare a place of meeting for its AGM and have two or more shareholders present at the physical event.

Amanda Glover, head of external communications at M&S, said the company has tried to make its virtual AGMs more engaging. Last year, shareholders had the option to submit questions in writing, send pre-recorded videos or ask live questions over the phone. Questions submitted in writing were posed to management by a presenter rather than a member of the board, to add a sense of scrutiny. 

Glover made the case for picking digital over hybrid. “With hybrid, you primarily focus on the audience in the room, which is often the smaller audience. So you ended up getting a fairly poor experience for the people that are watching remotely,” she said.

But making sure AGMs are easy to access for as many shareholders as possible is not just about the debate between virtual and in-person. For hybrid and in-person meetings, a company also needs to think about the time and place.  

Interactive Investor’s Jemma Jackson said: “The issue of location is an important one. iEnergizer (IBPO) has just announced a general meeting in Guernsey to discuss its likely delisting. In contrast, we’ve seen other companies that rotate their AGM each year – London, Manchester… [but] a 9am AGM is not going to be easy for everyone, and this is especially the case if coming from afar.”

“You’re never going to please everyone, which is why the hybrid system works,” she concluded.