Digitisation to maximise shareholder engagement? (1)

2022 PLC Shareholder Meeting Trends

Despite widescale change in the approach to business meetings and a general embrace of new technology because of the limitations faced during the pandemic; it is still recognised that physical meetings offer a range of specific benefits. With a focus on listed company shareholder meetings: a review of FTSE 350 AGMs in 2022 showed that notwithstanding the flexible approach taken in recent years, in 2022 most companies returned to solely physical meetings (ie, without a virtual element). That said, a notable proportion did opt for a hybrid approach – seemingly offering the best of both options and utilising technologies adopted during the pandemic. 

Whilst the legal position surrounding the validity of virtual-only meetings remains unclear, leading British retailer M&S once again opted for a fully digital meeting in 2022 and subsequently reported significantly enhanced shareholder engagement for a third year running. M&S are confident their approach makes their AGMs more accessible, engaging and democratic and they intend to continue to take advantage of the flexibility previously introduced in their articles of association to host AGMs digitally.

When considering how to run shareholder meetings, the FRC recommends that companies should consider carefully which approach is right for them and their shareholder base and should explain the reason for their decision to hold the selected style of meeting in the notice convening the relevant general meeting. It is clear that no single approach will suit every company.

Where incorporating any virtual element into a meeting, the FRC recommends that companies provide online functionality for real-time questions to be submitted during the meeting (either orally or in writing / electronically), with such functionality being open to shareholders from the start of the meeting. 

FRC Guidance

In July 2022 the Financial Reporting Council (FRC) published its Good Practice Guidance for Company Meetings. Key takeaways from the Guidance are:

• engagement with shareholders should not just be an annual event, and
• companies should seize the opportunity to maximise shareholder engagement by embracing new technologies.

The Guidance outlined actions companies should consider taking in line with these recommendations, establishing seven key principles:

1. Information disseminated prior to a general meeting must offer clear instructions on how to attend the meeting and participate, in order to enable effective shareholder engagement.
2. Whether meetings are physical, hybrid or virtual, shareholders should, as far as practicable, be able to engage in the business of the meeting.
3. The board should provide an update at the AGM on matters raised by stakeholder groups that are considered by the board to materially affect the company’s strategy, performance, and culture.
4. Companies should seek the broadest access to and participation in general meetings by a diverse range of shareholders. Whether attending virtually or in person, shareholders should have the opportunity to raise questions pertinent to the meeting agenda.
5. Shareholders should be able to cast their vote in real-time, or submit a voting instruction in advance via the appointment of a proxy, depending on the format of a meeting. Appropriate technology should be used by companies to ensure that shareholders have the ability to appoint proxies and send instructions to proxies prior to the meeting.
6. Companies should be as transparent as possible with shareholders in relation to matters discussed and raised by shareholders at general meetings.
7. Effective and transparent shareholder engagement should not be limited to an annual event. Opportunities to update shareholders on company matters should be offered throughout the year, with an emphasis on ensuring all shareholders have access to similar information.

The Guidance also identifies specific actions that can be taken in order to achieve each of these principles, which are worth a read, particularly where there is a general concern around shareholder engagement levels.

Looking ahead

In light of the FRC Guidance, we expect that listed companies which have already incorporated hybrid elements into their AGM / general meeting approach will continue to do so, having put the infrastructure in place (eg, amendments to their articles of association and relevant technology). 

Whilst bigger listed companies, such as M&S may lead the way on a fully-digital approach, we expect that until legal clarity as to the validity of such meetings is established and the data around hybrid meetings shows a material impact on shareholder engagement (which it doesn’t at present), a committed move to full digitalisation, or even hybrid meetings is likely to be slow moving.