Half of UK shareholders blocked from attending AGMs by red tape

by | Oct 11, 2022

Lumi, the global specialist in delivering compliant shareholder and member Annual General Meetings, is today publishing new research revealing that nearly half (48%) UK shareholders are being excluded from the annual general meetings (AGMs) of companies they invest in because of the complex share ownership system in the UK.  

While 92% of UK shareholders would be interested in attending an AGM, millions of UK shareholders are unable to do so simply because they purchased shares through a broker and therefore aren’t registered directly as a shareholder. Just a fifth of shareholders knew this was the case when they bought their shares.

In the UK when retail shareholders buy shares in companies through a broker, such as Hargreaves Lansdown or Interactive Investor, the individual shareholder’s name is not directly registered with the company they are investing in. This means that if retail shareholders want to attend or vote at a company AGM, they have to contact the broker to be appointed as a proxy. However, this process is extremely difficult to navigate and results in the vast majority being excluded.

Kerry Leighton-Bailey, Director of Shareholder Engagement at Lumi explains, “The process to attend and vote at an AGM as a retail shareholder is like breaking into Fort Knox. Even our CEO, who understands the system, has tried to attend meetings as a proxy but faced roadblock after roadblock. There is significant work needed to simplify the chains of complexity that stand between the underlying owner and the holding company. Until then, vast numbers of shareholders will continue to be cut out of attending meetings.” 

The most common way retail shareholders participate in AGMs is by submitting votes in advance by proxy through their broker, who votes on their behalf. However, this means retail shareholders are not party to any discussions of the key issues at the AGM and aren’t invited to investor relations (IR) events that take place across the year to give shareholders more information.

In fact, the Lumi study reveals over half (53%) of retail shareholders have never been invited to an IR event and 75% of those who have voted on resolutions at an AGM said they were not confident in their understanding of the topic (75%). The vast majority (85%) would value more information in advance of AGMs to gain a greater understanding in advance of the issues being discussed.

This desire for more dialogue is a sign of the changing relationship between issuers and shareholders. The most common reasons shareholders gave for wanting to attend an AGM are to ask questions of the board about how the company is run (43%), followed by making their voice heard on issues they are passionate about (42%). Just 29% would want to influence dividends, the fourth most common response on the list, showing financial gain is less important than influencing governance.

Leighton-Bailey continues, “The shareholder demographic is changing fast. The last few years has seen a rise in socially conscious and environmentally minded shareholders who want to bring about positive change at the organisations they invest in. While many organisations are now thinking about how they engage shareholders beyond their AGM by introducing more year-round IR events, these are only worthwhile if all shareholders can attend.” 

In addition to administrative barriers, shareholders are also being excluded by logistical considerations. Over a third (35%) of shareholders would like the option to attend in person or online depending on the location and timing, while a further 35% would want to keep in-person meetings. Yet a significant proportion (24%) would now want virtual-only events.

To make it easier for all shareholders to exercise their shareholder right to attend AGMs, Lumi is calling for a digitisation of the system in the UK to streamline the link between shareholders and issuers.

In support, Ellie McLaughlin, Campaigns Officer at ShareAction says: “It’s promising to see that shareholders are increasingly aware of the social and environmental impacts of their investments and want to use their influence to bring about changes on critical issues. However, although the AGM is a critical forum for shareholders, and those impacted by the activities of corporates, to engage with companies, the complexity of the system – both in the UK and even more so internationally – can make it incredibly difficult for key stakeholders to attend.  

It’s been positive to see some improvements to accessibility as a result of the pandemic, particularly with the rise of a ‘hybrid’ format that many companies have continued to use through 2022 AGM season. However, it’s been concerning to see a significant proportion revert back to in-person or online-only meetings. We attend around 100 AGMs each year, and in our experience, hybrid meetings provide both the ‘best of both worlds’ for accessibility and meaningful company engagement.” 

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