Boards: Learn to love AGMs

THE AGM is back with a vengeance. During the pandemic, most annual general meetings were held digitally, no doubt to the secret delight of many a chairman. So much easier to control the proceedings at a virtual gathering than having to deal in person with shareholders and their awkward questions.

Even pre-Covid, some companies seemed reluctant to encounter a real, live investor.

Gambling giant Entain liked to hold its meeting in Gibraltar, making it far less accessible for small UK shareholders; a disgraceful stance for a FTSE 100 company.

The AGM is a unique fixture in the corporate calendar and the current season has been full of fireworks.

Results announcements are usually dry affairs. But the annual meeting is often a mix of student demo and village fete. Woke young protesters mingle with elderly private shareholders and all can have their say.

At Barclays, activists barracked the chairman, and some glued their derrieres to the seats to make it harder to throw them out. There were pay rows at Ocado and GSK and drama at Just Eat, which announced the resignation of its chairman and a probe into an executive just before the meeting began.

Big shareholders try to engage with boards behind the scenes, so it’s quite rare for a large institutional investor to speak out.

When it does happen – as in 2018 when the then head of stewardship at Aberdeen Standard addressed the hall at the Persimmon meeting over former boss Jeff Fairburn’s bloated pay – it can have a potent effect. The great thing about AGMs is that any investor – or member, in the case of a mutual – has an equal right to be heard.

Ordinary savers such as John Higgins, a long-term member of mutual insurer LV, can mount a challenge against the board.

Mr Higgins has already garnered huge backing ahead of LV’s meeting this year for a vote of no confidence in the chief executive for his chaotic attempt to flog the insurer to private equity.

There is, of course, no excuse for violent or rude behaviour by shareholders.

Protest at an investor meeting is, however, usually a sign of a company that has failed to listen. Confronting directors at the AGM is the theatre of last resort.

It would pay boards to listen better. Investors – who look ahead in their assessment of risks to the world economy – frequently front-run concerns that have yet to permeate through to wider consciousness.

Protests about pollution, climate change and, going back, apartheid, are now part of the mainstream, but had an early airing in boycotts and action to influence corporates.

Many US firms see the positive power of AGMs to build their brand, and use the meetings as spectacular marketing events.

One of the most memorable I attended was for Starbucks in Seattle in 2016. Shareholders were treated to a rock concert – Alicia Keys gave a performance – and a political rally, with founder Howard Schultz inveighing against Trump-ist politics.

There is no British equivalent to Warren Buffett’s Berkshire Hathaway AGM in Nebraska – a weekend festival for investors, like Glastonbury with spreadsheets.

Here, boards seem to view AGMs as, at best, a bit of a nuisance, where even if there are no protests, they have to make small talk with pensioners over the buffet. In fact, AGMs are an opportunity for boards to gain valuable insights. At M&S, the meetings are famous for small investors supplying critiques of the underwear and fashion.

Private shareholders can pose penetrating questions that put City analysts to shame.

Boards should learn to love the AGM. There’s more to them than placards and curly-crusted sandwiches. They are a linchpin of shareholder democracy.