An unruly annual shareholder meeting is a fine thing. Small investors, who rarely have a voice during the rest of the year, get a chance to look the directors in the eye and deliver an unfiltered blast from the outside world.
The board of Barclays, during one of the bank’s many mega-bonus disgraces, endured two hours of fury at a packed Royal Festival Hall in 2014 in a classic of the genre. The directors deserved to hear it in person. At BSkyB in 2003, the body language between a prickly Rupert Murdoch, as chair, and an awkward James Murdoch, the fresh-faced new chief executive, was fascinating as the former was obliged to address the charge of nepotism.
Sometimes retail punters arrive with zingers. One remembers the aristocratic Sir Anthony Tennant, who later came a cropper at Christie’s auction house, being ambushed as chair of Guinness in the late 1990s with the line “better an empty house than a bad tenant”. Liquid freebie refreshments – standard in those days – may have assisted the cheering from the floor.
There is genuine drama when former bosses turn up to damn their successors. Sir Ken Morrison, at the age of 82, emerged from his farm in 2014 to tear into Morrisons’ then chief executive, Dalton Philips. “I have something like 1,000 bullocks and, having listened to your presentation, Dalton, you’ve got a lot more bullshit than me,” he said to applause from hundreds of private shareholders. The impact would have been lost over Zoom.
But here’s the sad fact: 99% of shareholder meetings aren’t like that. Even some FTSE 100 companies can struggle to raise a couple of dozen attenders. Resolutions are usually foregone conclusions because City institutions have voted their block stakes in advance. Meanwhile, dreary corporate affairs officials have done their best in recent years to lessen the jeopardy for directors by vetting questions in advance. As a means of effective communication between companies and shareholders, annual meetings are losing their purpose.
Thus Archie Norman, chair of Marks & Spencer and veteran of many other boards, makes a strong argument when he says it’s time to modernise shareholder relations, including encouraging the digital-only meetings that were permitted during the pandemic.
“Today’s law stipulates that a company must have two or more shareholders present and declare a ‘place’ of meeting, meaning a pair of men in a shed in the outer Hebrides is valid but over 200 investors convened via secure technology is not,” says a “share your voice” campaign launched by Norman, the Quoted Companies Alliance, the UK Shareholders’ Association, ShareSoc and others.
Even meetings in London are disenfranchising for those who need to take a day off to travel to the capital. M&S reports that three times as many individual shareholders engaged with its digital event last year versus the number who attended the 2019 physical meeting. Digital, for better or worse, is the way the world is moving. Legislation that was written in 1985, with a modest update in 2006, looks outdated.
The danger, of course, is that timid chairs armed with a mute button would turn digital-only meetings into snooze-fests. To guard against that possibility, it might be better to adapt Norman & co’s proposal: hybrid meetings should be compulsory if a certain number of shareholders (figure to be debated) request to attend in person. There would also have to be a requirement on companies to publish a reply to unaddressed questions within, say, 48 hours.
But the signatories are completely correct in a couple of their other points. The rise of the nominee accounts, as practised by the big investment platforms, has strangled the direct relationship companies used to have with small shareholders. You now have to have a “certified” account to receive information directly, which is mad. Convenience (to the platforms) of nominee arrangements is working against any sense of accountability to individuals.
“Companies don’t know who their investors are and investors are powerless and completely detached from the companies they are funding,” says the campaign. Quite. The platforms should be made to change their practices. If reform encouraged wider share ownership by individuals, it would probably be good for them collectively.
As for making digital the default means for communicating with shareholders, that is also reasonable. Most expensively produced annual reports go straight to the bin. Those investors who want a print version could still request one.
With the important proviso that physical annual meetings should still sometimes be mandatory (we don’t want to outlaw Cedric the Pig, star of Centrica’s annual meeting in 1996, and his successors), there are some good ideas here. The voice of the small shareholder still matters. If digital methods can help to generate a sense of buzz and engagement around annual meetings, the government should listen.
