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‘It’s like breaking into Fort Knox’: almost half of UK shareholders banned from attending AGMs due to complex shareholding system
- Demographics of the average UK shareholder has shifted
- Majority would like to attend the AGM of a company they have invested in
- But 48% is blocked due to complexity in the system
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Nearly half of UK shareholders are barred from attending the annual general meetings of companies they invest in, according to new research.
In recent years, attention has been focused on democratizing investment as the pandemic ushered in a new generation of DIY investors, but little has been done to give retail shareholders a voice.
The vast majority of UK shareholders would like to attend an AGM, but 48 percent are excluded because of a complex shareholding system, according to a study by Lumi, a company that facilitates shareholder meetings.
Everyday investors are barred from key votes in company AGMs due to the complex shareholding system in the UK
Kerry Leighton-Bailey, director of shareholder engagement at Lumi, said: “The process of attending and voting as a retail shareholder at an AGM 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.”
This even comes amid attempts to open up the process with “hybrid” events to encourage wider participation.
When common investors buy shares in companies through a broker, such as Hargreaves Lansdown or Interactive Investor, the individual shareholder’s name is not registered directly with the company in which they invest.
Instead, the platform gives investors the option to vote by proxy prior to the meeting.
“The problem with that, of course, is that you’re voting on resolutions for a meeting that hasn’t happened yet,” Leighton-Bailey told This Is Money. ‘The purpose of the AGM is, of course, to debate those resolutions and then cast your vote.
“The problem with that is that you’re voting on resolutions for a meeting that hasn’t happened yet.
“The purpose of the AGM is to debate those resolutions and you can vote accordingly.”
Only one-fifth of shareholders surveyed by Lumi were aware that they were not registered directly as shareholders, and the vast majority – 85 percent – say they would appreciate more information ahead of the AGMs to better understand get discussed before the issues are resolved.
“It hasn’t been communicated to you at all – the fact that you’re not a shareholder. You are not on the register and you cannot exercise your rights in the way that you probably think you can.
“So people choose to invest in something they’re passionate about… [and] I don’t think they realize at that moment that this is going to be difficult.’
The most common reasons shareholders gave for attending an AGM are to ask questions to the board of directors about how the company is run (43 percent), followed by making their voices heard on topics they are passionate about. are (42 percent).
Only 29 percent are interested in influencing dividends.
It seems that as the demographic shifts take place, shareholders now have motivations other than just wanting to increase their wealth and save for retirement.
For Gen Z shareholders and millennials, ESG issues and making their voices heard were the main focus, while it fell on the priority list for other age groups.
Leighton-Bailey says: “We’ve talked a lot about the changing nature of shareholders and especially retail shareholders.
“I don’t think anyone cared ten years ago, because people really only bought stocks for investment purposes to see returns.
“They didn’t buy them for the reasons that a lot more people are buying these days…and that’s because they want to make a difference or have their say.
“I think issuers are more aware that it’s not just a business meeting now. People care.’
In addition to the complex ownership system, shareholders are left out due to logistical considerations.
Ellie McLaughlin, ShareAction campaigner said: ‘It was positive to see some improvements in accessibility as a result of the pandemic, especially with the emergence of a ‘hybrid’ formula that many companies have continued through the 2022 AGM season. to use.
“However, it is worrying to see a significant proportion revert to face-to-face or online-only meetings.
“We attend approximately 100 AGMs each year, and in our experience, hybrid meetings provide both the ‘best of both worlds’ for accessibility and meaningful business engagement.