'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'

It is surprising that in an age of Zoom, smartphones and remote working, the corporate annual general meeting (AGM) still exists. A hundred years ago, a meeting that gathered everyone together in a faded ballroom in a big, old-fashioned London hotel was the only effective way to communicate directly with shareholders. In the takeover battles of the 1970s and 1980s, it was even the scene of high drama, as the fate of a conglomerate was battled out in a public debate between warring factions.

But the world has changed. Companies can communicate instantly with all their shareholders, meetings can be held online, and votes can be tallied electronically. It hardly seems necessary to gather people all in one place, provide them with tea and biscuits, and sit through lots of dull presentations and re-elect the board.

A growing number of major companies have already shifted their AGMs online. Pharmaceuticals giant AstraZeneca, toothpaste maker Haleon and building society Nationwide have already switched to electronic meetings, and it emerged recently that HSBC may well join them.

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Beware the consequences

In some ways, it is hard to blame them. The meetings provide the perfect opportunity for Just Stop Oil, or some other group of extremists, to stage a high-profile protest. Even if better surveillance or policing can deal with the protestors, the most likely outcome is still that some retired accountant from Eastbourne uses it as an opportunity to make a long speech questioning an arcane footnote in the accounts. It is hard to see the AGM as a good use of anyone’s time.

However, online meetings are poor substitutes. It is far too easy for them to be controlled by the corporate PR machine. The questions can be chosen in advance, and only a set amount of time is allocated for each one, with no opportunity for follow-ups. Anyone wanting to subject the board to some tough questioning will have no way of summoning support from the rest of the room. And anyone who is in the least bit troublesome can easily be dealt with by simply switching off their microphone. A Zoom meeting is useful in its own way, but it is nothing like as significant as actually meeting someone in person. The chemistry is lost, and so is the opportunity to create a genuine two-way conversation.

It may well prove to be only a short step from shifting AGMs online to abolishing them. Attendance is already very sporadic, and it is likely to decline even further once it becomes just a soulless online event. Why not replace it with a “shareholders’ satisfaction questionnaire” or “feedback survey”; or, indeed, simply get rid of it altogether and put in place a system where the board is automatically re-elected every year unless enough shareholders write in to protest? The big, institutional shareholders can still be consulted in private briefings, and everyone else can just be ignored.

Scrutiny is still necessary

Yet corporate boards need to be held to account far more rigorously than they are. Few deliver the returns they should. Senior managers are often paid way too much and get sidetracked by fashionable causes that do nothing for profits. And they often embark on empire-building acquisitions, which may get the CEO on the cover of a few magazines, but destroy a lot of value for shareholders. If the AGM is to be abolished, firms need to come up with a new and rigorous form of scrutiny for shareholders. Otherwise, the managements of big, listed companies will become even more remote and self-interested than they already are.

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