Virtual AGMs: Shifting Tides in UK Corporate Governance
Cont temp: Virtual Annual General Meetings (AGMs) Gaining Momentum; Could Mark the Demise of Traditional Sandwich-Fueled Demonstrations?
The UK government is set to clarify by summer whether companies can hold online general meetings, with concerns rising that this could impinge on shareholders' ability to hold directors to account. The forthcoming audit and corporate governance bill aims to shed light on the legality of virtual AGMs, taking into account the interests of company members.
In a potential shift, large listed companies in the UK are examining the possibility of waiving the cost of in-person AGMs, a tradition that has long been a part of the corporate landscape. HSBC is among those who have pondered the idea of moving to an entirely online AGM.
A trend towards virtual AGMs can already be observed in other countries, such as North America and large countries like Australia and South Africa, where travel distances can pose obstacles for shareholders. Financial technology company Broadridge hosted 2,448 virtual-only AGMs in 2024, a significant increase from the 311 in 2019.
UK's first big company to host an entirely virtual AGM was Jimmy Choo in 2016. The Covid-19 pandemic accelerated the shift of companies utilizing digital means to facilitate shareholder-management dialogues during lockdowns. Many UK-listed companies have since adopted hybrid AGMs, which offer both in-person and online attendance options.
Only a small number of companies have chosen to go fully online, with the likes of Clarksons, Tui, Aston Martin, Haleon, and soon, Bakkavor Group, joining this list. The current legislation on shareholder meetings, dating back to 1948 and last updated in 2006, is ambiguous about whether AGMs can be fully virtual. The Companies Act refers to a "place of meeting," a term open to interpretation that potentially encompasses online platforms.
To clarify this uncertainty, the government intends to draft legislation before the Parliamentary summer recess. Companies would then need to modify their articles of association to allow for virtual-only AGMs, which shareholders would subsequently vote upon.
Investors and shareholder groups, like the Investment Association, worry about the impact of virtual-only AGMs on accountability and engagement. Such meetings could diminish opportunities for face-to-face interaction and spontaneous discussions, potentially making it more challenging for shareholders to assess board performance. The Investment Association encourages hybrid meetings over virtual-only events, emphasizing that AGMs are the only public platform where boards are held accountable to all shareholders.
One example of resistance to entirely digital AGMs can be seen in Marks and Spencer. Once renowned for its extravagant AGMs, the retail giant has ultimately opted for hybrid meetings following backlash from investors.
The UK Shareholders Association, which represents retail investors, supports the greater use of hybrid meetings, as they provide easier engagement for shareholders across geographical boundaries. However, the association warns against too many companies opting for virtual-only AGMs, fearing the potential for sleight-of-hand tactics during question and answer sessions, thereby minimizing challenging questions.
As the UK government delves deeper into the potential legislation changes, both opponents and proponents of virtual AGMs are keeping a watchful eye. A shift towards virtual-only AGMs could create a domino effect, leading other companies to follow suit. However, concerns about accountability and engagement linger in the background, placing an emphasis on finding a balance between convenience and oversight.
For more insights, refer to the overall summary on virtual AGMs in the UK.
- The trend towards virtual Annual General Meetings (AGMs) in the UK could potentially attract more technology-driven investments within the business sector, as companies seek to enhance their digital capabilities for stakeholder engagement.
- The forthcoming audit and corporate governance bill in the UK may result in increased investment in the finance sector, as it aims to address the ambiguity around the legality of virtual AGMs and paves the way for more explicit regulations.
- The shift towards virtual AGMs could see a rise in business opportunities related to financial technology (fintech), as these platforms may be crucial in facilitating completely online shareholder meetings and enhancing the continuity of communications between shareholders and companies.
