Monday 20 July 2020 3:45 pmApater Capital Talk

Physical? Hybrid? Virtual? Companies re-imagine AGMs for 2021 and beyond

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City A.M. contributor

Could the annual general meetings (AGMs) of 2021 and beyond look and feel very different? As companies start to consider the future format of corporate set-piece events, so the possibility arises these often sparsely attended gatherings could begin to evolve into significantly more enlightening and engaging occasions. 

This year’s AGM season largely coincided with lockdown, leaving companies – which are obliged to hold their meeting within six months of their financial year-end (so, typically before the end of June) – in panic. What to do, and where to meet as social-distancing put the kibosh on group gatherings? Even motorway service stations found favour as directors scrambled to fulfil their statutory obligation to meet in quorate (with sufficient people present to make official decisions – often just two people, but the number varies according to a company’s articles of association). Medical technology company Smith & Nephew held its AGM in a car-park on the outskirts of Hemel Hempstead. Unprecedented scenes for corporate governance.

Eyes opening to online possibilities

Companies had – and continue to have – their eyes on their own rulebooks and what government will permit. After Financial Reporting Council and Department for Business, Energy and Industrial Strategy guidance during the opening weeks of lockdown, the Corporate Insolvency and Governance Act 2020 came into force on 26 June, allowing legal flexibility on AGM formats during the pandemic (the act applied retrospectively from 26 March and will run until at least 30 September). Sadly the AGM horse had largely bolted, with many shareholders locked out the stable. 

“Back in April companies were just trying to ‘get through’ their AGMs – but they are being more creative now,” says Peter Swabey, policy and research director at the Chartered Governance Institute, which, along with organisations such as the Investor Relations (IR) Society, has been updating members on the legal situation and best practice.

One example of a big company thinking creatively is Marks & Spencer (M&S), which held a ‘virtual’ AGM on 3 July (last year the retailer held a physical event with live remote voting). But M&S is a relative outlier. UK Plc has significantly lagged USA Inc and other countries in its rate of adoption of virtual AGMs.
Nonetheless, jolted by the unprecedented restrictions of coronavirus, more eyes are opening to new possibilities, and companies are already thinking ahead to next year. Physical, hybrid, virtual: which route to take? Crucially, what do the company’s articles of association – many of which were written some decades ago – allow (and do they need to be updated)?

‘I don’t think it will go back to normal’

Technology, obviously, is a fundamental practical consideration if putting your faith in hybrid or indeed fully virtual meetings. Will the IT work? What platform should we use? What about cyber-security? Also, how will any shareholders who find technology challenging use it? Retail (non-professional) shareholders are often relatively elderly and more likely to struggle with the internet.
Reasons in favour of going digital include the elimination of transport costs for shareholders – a particularly important point for those located a long distance from the AGM venue (including overseas) – as well as environmental advantages. 

M&S used software from Lumi, a company that powered the UK’s first virtual AGM of a main market-listed company – luxury brand Jimmy Choo in 2016. Lumi, which facilitates physical, as well as hybrid and virtual AGMs, was involved with about 500 ‘big productions’ (of about 5,000 AGMs in total) last year, with just under 50 being virtual or hybrid. In 2020 so far it has produced about 1,200 virtual AGMs in 28 countries, mainly North America. 

“During March it was pandemonium – no-one knew what to do. There was often a desire to do it virtually but there was legal uncertainty,” says Lumi chief executive Richard Taylor. “I don’t think it will go back to normal after this – the consensus seems to be that hybrid meetings will become the default.”

“The pandemic accelerated a trend that was well underway,” Dorothy Flynn, president of Broadridge Corporate Issuer Solutions, tells City AM from the US. “The benefits of virtual shareholder meetings are compelling for shareholders, directors and management, and it’s no surprise that many companies say they’re here to stay.”

Start-up tech companies are also eyeing the possibilities of digital governance, including virtual AGMs. One such firm is Shaparency, whose platform launched this month in the UK, Hong Kong, Singapore and founder Ben Nowlan’s native Australia. Nowlan, who recently featured on City AM’s ‘The City View’ podcast, says the UK has “some work to do on all fronts” in respect of digital governance relative to many other countries. But he is optimistic that more boards will start to use digital tools to bring about greater shareholder engagement. 

AGMs ‘re-imagined for the era of stakeholder capitalism’

ShareAction believes that AGMs are ripe for revolution, with digital technology working alongside physical meetings to significantly widen AGM participation.

Simon Rawson, the campaign group’s director of corporate engagement, says the group was disappointed that many companies opted to hold their meetings behind closed doors – excluding shareholders – during lockdown, despite the possibility of holding virtual meetings. 

The group wrote to all FTSE 100 chairs in mid-April, and ‘many’ responded that they would be reviewing the format of their AGM in the year ahead, Rawson says.

ShareAction also sees expansive possibilities. “We think the AGM could be reimagined for the era of stakeholder capitalism,” says Rawson, who wants to see the occasions evolve from being “under-attended and under-valued” to becoming “really vibrant conversations”. The organisation is planning a research project that would work alongside companies to develop a ‘range of ideas’ for testing during the 2021 AGM season.

Lucy Fergusson, partner at law firm Linklaters LLP and who is a specialist in company law, cannot envisage an era of fully virtual AGMs. “Many shareholders will still want the live experience of physical meetings. And we would need changes to the law (after the temporary coronavirus rules expire) and foolproof technology to hold all meetings virtually. But figuring out how to do this would certainly be a good idea,” she tells City AM.
With corporate governance, investor relations – and technology – dynamics all at play, expect greater attention on AGM formats in the coming months as company directors plan for the post-lockdown future.

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