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Chairman of the Board at Marks & Spencer plc (M&S) and longstanding UK businessman, Archie Norman recently launched a campaign to revolutionise shareholder democracy and reform the . Norman – backed by M&S, Quoted Companies Alliance, UK Shareholders Association, ShareSoc, and Shareholder Services Equiniti – aims to increase shareholder engagement by cementing rights to hybrid and virtual meetings in the CA 2006. Market Tracker Analyst, Laura Roberts considers whether the campaign may finally force annual general meetings (AGMs) into the 21^st Century and discusses the matter with key players Archie Norman, James Ashton, Mark Northway and Steve Banfield.

Share Your Voice campaign

The Share Your Voice campaign, the brainchild of Archie Norman and supported by a number of UK shareholder and corporate organisations, is attempting to reform the CA 2006 to account for virtual and hybrid meetings. The campaign was officially launched by a petition to the UK government and parliament on 5 April 2023. The petition was released alongside an to the Business Secretary, Kemi Badenoch, which states:

‘Almost half of individual shareholders cannot directly engage with the company they invest in as they invest via nominee platforms, and the rest are constrained by an outdated, paper-based system that would in any other facet of life be obsolete. This wholly unsatisfactory situation can be fixed through a handful of straightforward amendments to the UK Companies Act 2006 to reconnect shareholders to the companies they invest in.’

Norman said of the underlying mission of the campaign: 

‘We want to make it easier for everyone to have a stake and a say in UK plc. Digital reform will mean all investors -  no matter how they hold - will benefit from more democratic engagement, with more informed, regular communication, reduced time and travel requirements and fundamentally a more level playing field regardless of where they live, what they do, and level of confidence in public speaking. Companies will benefit from more engaged shareholders, cost efficiencies and a dismantling of unnecessary bureaucracy. In doing so, we will make UK public markets a more attractive place to invest and a more attractive place to list.’

Reforming the CA 2006

The campaign recommends the following reforms to the CA 2006:

• increased two-way dialogue between companies and shareholders
• a standardised technology solution across the sector
• digital communications as default
• removal of requirement of hard copies
• recognition of digital AGMs

As it stands, there is no formal guidance on how to hold a hybrid or a virtual AGM in the CA 2006 (see Practice Notes: and (a subscription to Lexis®PSL Corporate is required)). The main concern is whether a hybrid or virtual meeting satisfies . The provision states that the notice of AGM must reference the time, date and place of the meeting. Essentially, the legal uncertainty boils down to if the ‘±è±ô²¹³¦±ð’ of the meeting can include the virtual plain. However, it is generally accepted that it is safe to hold a hybrid meeting, in which the physical location is used to satisfy the ‘±è±ô²¹³¦±ð’ requirement of . The point remains that companies ought to be given clarity, rather than resorting to legislative loopholes.

Norman highlights in the open letter to the Business Secretary, that the CA 2006 remains bewilderingly committed to outdated paper-based forms of communication and shareholder democracy. In fact, many of the ‘ of the Act remain unchanged since despite the 2006 amendments. It is impossible to deny we live in a digital age, and yet, AGM provisions in the CA 2006 seems to be a stubborn hangover of the analogue world.

The trend towards hybrid and virtual meetings

Our recent Market Tracker trend report, , found that 42% of FTSE 350 companies adopted a hybrid format for their AGM in 2022. Broken down by index, 63% of FTSE 100 companies and 31% of the FTSE 250 opted for a hybrid AGM. FTSE 100 companies were therefore more than twice as likely to adopt a hybrid format for their AGM than FTSE 250 companies. Physical meetings were the preferred option for the vast majority of the 2022 AGM season. Only 2% of FTSE 350 companies held an entirely virtual meeting.  During the 2022 AGM season, 14% of FTSE 350 companies made amendments to the articles of association. 52% of these amendments were related to the calling and holding of general meetings.

While the trend for online AGMs has waned along with the pandemic, there is undoubtedly a thirst for shareholders to at least have the option to attend virtually. A return to physical meetings was trending last year and many Boards expressed a preference for face-to-face AGMs, but the power of technology continues to dominate much of the discourse. Hybrid and virtual meetings have proved themselves to be far more than a pandemic necessity. At the time of publication, 30% of companies that have released their AGM notice since 1 January 2023 expect to hold a hybrid meeting and 2% are expected to be entirely virtual.   

James Ashton, Chief Executive of the Quoted Companies Alliance, comments on the impact of this trend:

‘It is astonishing that despite the UK’s laser focus on good governance, listed companies still don’t know who many of their shareholders are and can only discover them at great expense. We need to mandate the host of high-tech, high-profit intermediaries operating in this space to bring companies together with their owners, not keep them apart. This issue is often reduced to voting rights, but it is far broader. And with the London market losing one public company a week, it is imperative to modernise investor relations so corporate costs can be driven down and retail investors better engaged.’

Shareholder engagement and technology

The link between increased shareholder democracy and technology is clear—more accessibility equates to more investor engagement. Shareholders ought not to be obliged to travel into central London on a weekday morning. Digital options are key to engagement. M&S that in 2022, 1,700 individual shareholders participated in the virtual meeting, compared to 561 investors at its last physical AGM in 2019.

Hybrid and virtual AGMs are significantly more environmentally friendly, cost effective and equitable. In addition, the risk of disruption from activist groups is significantly lowered. However, concerns remain that entirely virtual AGMs may stifle meaningful conversations between the Board and shareholders. Digital Q&A platforms allow the Board to vet and closely monitor questions, comments and feedback. Individual investors can also be easily – and conveniently - silenced through the mute button.

Despite this, the Share Your Voice campaign reflects many of the ideas in the Financial Reporting Council’s (FRC’s) report ‘’ published in July 2022. The report states that: ‘Companies should seek to maximise the participation and engagement of all types of shareholders on the register and, where appropriate, take advantage of the use of technology to increase participation and engagement.’ Modernising and reforming the CA 2006 is a necessary step in seeing increased shareholder engagement across FTSE 350 companies.

Speaking to Market Tracker on the importance of the Share Your Voice campaign, Mark Northway, Director at ShareSoc, said:

‘The AGM is a critical component in the corporate stewardship process. It is the mechanism through which the checks and balances that hold a board of directors to account operate. The emergence of nominee companies, together with flaws in part 9 of the Companies Act 2006, have resulted in corporate communication and shareholder rights becoming effectively optional at the whim of platforms and brokerage firms. Given the advances in technology and in electronic communication there is no excuse for this situation to be allowed to continue.

It is very heartening to see Archie Norman, supported by M&S, breaking corporate silence on this matter and championing the rights on companies and shareholders to communicate seamlessly. It is also very good that the more enlightened platforms, such as interactive investor, are now taking steps to provide both direct and proxy voting services to their retail clients. There’s a long, long way to go to bring shareholder rights, engagement and stewardship to where they should be, but Sir Douglas Flint’s Digitisation Taskforce, underpinned by Mark Austin’s excellent , is the right vehicle to do it.’

Steve Banfield, Industry Director at Equiniti, also spoke to Market Tracker on what the Share Your Voice campaign means for the future of the AGM. He remarked:

‘Digitalisation of the share registration industry is long overdue and is a change that EQ strongly supports. Despite the constraints of the current Company’s Act, we pride ourselves on delivering a digital and automated service to our issuer clients and their shareholders, as appropriate.

The publication of the and the formation of the provides the opportunity to shape, drive and implement legislative change that will serve to further the digitalisation of our industry and provide an opportunity to legislate to allow for electronic corporate communication and ongoing interaction between issuers and investors, including where appropriate, at shareholder meetings.

The future of shareholder meetings remains a hot topic with a few companies choosing a digital only meeting, ensuring they keep within the confines of the Company’s Act as currently drafted. Simple amends to this Act would enable companies to choose how they wish to hold their meetings, further enabling choice. The M&S Shareholder Voice campaign aligns with our view of how the industry could be developed for the better and maximise the benefit to companies and shareholders.’

The petition ‘Give all shareholders a voice by bringing Company Law into the 21^st °ä±ð²Ô³Ù³Ü°ù²â’ can be found . At 10,000 signatures, the government will respond to the petition and at 100,000 signatures the petition will be considered for debate in Parliament. The petition will close on 5 October 2023.