The Future of the AGM

COVID-19 threw Annual General Meetings (AGMs) across the UK and beyond into chaos, leading 2/3 of FTSE 100 companies to close their doors to their shareholders. Yet even before this crisis, AGMs have been ossified in style and content, frequently leading to unmet expectations for shareholders, stakeholders, and companies alike. However, the AGM is not beyond redemption: ShareAction convened a working group to develop a bold new vision for this centrepiece in the corporate calendar. This vision renews the purpose of the AGM, exploring the who, when and what of this pivotal meeting.

The world has changed, and so has investment, with the rise of Environmental Social and Governance (ESG), and the dawn of universal ownership theory, as investors and companies wake up to their material role in perpetuating and addressing the systemic challenges of our times. Yet the AGM has failed to adapt to the changing face of capitalism and shifts in societal values. In particular, we believe the AGM of today has lost its sense of purpose, and it is essential that this be redefined in order to address the role of the AGM in corporate governance, and to help companies gather insight and input from shareholders and stakeholders. The proposed new purpose of the AGM of the future is to provide a forum for stakeholders, companies and shareholders to engage in transparent, accountable communication, which crystallises how a company’s board is fulfilling its organisational purpose and meeting its section 172 requirements. This helps participants to find common values and a shared vision with which to take the company forward to tackle the challenges it faces. In a world of growing and interconnected risks, and rising engagement with a more relational approach, the AGM will help companies to address their greatest challenges through nuanced dialogue with shareholders and stakeholders.

Those who have attended AGMs in recent years will have heard shareholder questions about topics as laughably inane as the quality of the post-event lunch—or even the silence of no questions at all. The AGM of the future will see increased engagement from non-executive directors, especially those with responsibility for the environment, workforce, and the community. In turn, institutional investors—and indirect investors such as pension savers—will join their retail peers in attending AGMs.

With the growing severity and complexity of systemic threats (and opportunities), and the increased focus on the legal responsibilities of directors under section 172 of the UK Companies Act 2006, we envisage that companies and investors will increasingly listen to the views of the third key party at AGMs: stakeholders. As part of this, we build on the framework of stakeholder groups outlined in section 172, and call for a ‘right to register’ for stakeholder groups including workers, trade unions, suppliers, communities both directly and indirectly affected by corporate activity, customers, and users. With these voices present, AGMs will offer vibrant and meaningful dialogue for all attendees.

Having explored the 'why' and the 'who', we turn now to 'when': the annual calendar within which the future AGM will be placed. The current ‘rhythm’ of the AGM is a sudden moment of activity, a few short hours once per year. The AGM of the future, in contrast, will be situated as the culmination of a year-long period of transparent dialogue between companies, stakeholders and shareholders. It will also open the way to the next cycle and engage with the multi-year time periods of many key ESG issues.

We build on the UK Corporate Governance Code’s provision that ‘the chair should seek regular engagement with major shareholders outside existing general meetings to understand their views on governance and performance against the strategy’. We propose a series of meetings with stakeholders throughout the year, an online Q&A provided in advance of the AGM to address clarificatory questions and equip participants for a nuanced discussion at the AGM event and, critically, that the annual shareholder vote take place only after the minutes of the meeting are shared. This counters the rise of mass electronic proxy voting—which sees most votes cast in advance of the AGM and reduces the value of exchange at the AGM.

We turn finally to the day of the AGM itself. The attendees are new, the dialogue is ongoing—and there is a fresh agenda to match. Firstly, the company board present their annual report, including a report on section 172 obligations and engagements and an annual learning review which gives an update on progress on areas discussed at the previous AGM, providing cross-year continuity. Secondly, stakeholders, shareholders and company representatives engage in multilateral dialogue, with the option of presentations from all parties. The AGM closes with an anonymised poll, asking: ‘Has the board fulfilled its section 172 obligations in the past year?’. This is voted on by all attendees: it is not binding but is a signal to those in the room and those who follow the progress of the company of how the AGM participants feel the directors are fulfilling their responsibilities.

We developed these recommendations with the ambition to transform AGMs from staid, sparse and perfunctory events, into a genuinely helpful arena for companies, investors and stakeholders to address the challenges they collectively face. We urge our fellow investors, company representatives, stakeholders and policy-makers to grasp the nettle and rise to the challenge by taking steps to deliver our vision for the AGM of the future.

Our report was funded by the Joseph Rowntree Reform Trust.

Guy Jubb is the Co-Chair of the Future of the AGM Working Group, an honorary professor at the University of Edinburgh Business School, an independent non-executive of Mazars LLP, Vice Chair of the European Corporate Governance Institute, and Chair of the Institute of Chartered Accountants of Scotland’s Research Panel.

Lily Tomson is the Co-Chair of the Future of the AGM Working Group and the Head of Networks at ShareAction.

Michael Kind is the Coordinator at the Future of the AGM Working Group and Campaign Manager at ShareAction.