Mission: Archie Norman wants a new shareholder democracy
Archie Norman, the chairman of Marks & Spencer, wants to revolutionize popular capitalism. The last time this was attempted was during the Thatcher era privatizations of the 1980s. However, his goal is to create a shareholder democracy for the digital world of the 21st century.
He is launching a ‘Share Your Voice’ campaign this week to update company law, as he believes that small shareholders are at risk of being disenfranchised.
His proposals include improving companies’ ability to communicate directly with all of their small shareholders, something that is currently not happening due to outdated rules.
He also wants online annual general meetings (AGMs) to be recognized as valid, so that companies are no longer required to hold a traditional shindig where shareholders can poll bosses in person.
He believes that virtual meetings would encourage more private investors to participate.
And he’s critical of the unwieldy, old-fashioned paper annual reports that thud through investors’ mailboxes, suggesting that streamlined communication, blown over by email, would be more effective in many cases.
So what inspired him to take this path? ‘We are Marks & Spencer. We are the quintessential British company, so even people who don’t own our shares think they own us. We have over 30 million customers and a large private investor base. Why don’t we try to show people that they can invest in UK companies and that these companies will talk to them and work with them? In the 1980s, there were many more small shareholders. Then the government was the creator of popular capitalism and wanted to give people a share.’
However, over the intervening four decades, the proportion of stocks owned by individual savers has fallen inexorably. Most of UK plc is now owned by major city institutions and foreign investors. So it may seem quixotic to stand up for the small shareholder – but if anyone can do it, it’s Archie Norman.
One of the most respected figures in British business, 68-year-old Norman has made a career turning around struggling companies including Asda, ITV and now M&S, of which he has been chairman since 2017.
Educated at Charterhouse and Cambridge University, he spent eight years in politics, joining the Conservative Party and serving as Shadow Secretary of State for the Environment under William Hague. Married with a daughter, he lives in London and North Yorkshire.
His most radical proposal is to reform the rules for annual general meetings (AGMs). At the moment, a purely online meeting is not legitimate under company law.
Norman describes it as “madness” that meetings are still stuck in the past. “I remember going to my first annual general meeting of Asda. We had 800 people in the room and an overflow room, including Yorkshire farmers with their trousers tied with string, banging the table. ‘That will never happen again. We have stuck to an old system that no longer appeals to people.’ Before Covid, many of its shareholders loved to come to the annual meetings, not least to distribute food and wine.
They would scold the board about weak underpants, the quality of sweaters and the lack of elegant long-sleeved dresses, as well as questions about executive compensation and dividends.
Small investor power peaked at the 2004 annual meeting, when nearly 3,000 people rallied behind M&S’s board, turning down a £9.1bn offer from Sir Philip Green. The former Bhs and Topshop tycoon retired and the rest is history.
But, says Norman, nostalgia for the AGMs of yesteryear is misplaced.
Pre-pandemic, M&S held its meeting at Wembley stadium. Most shareholders, he says, “don’t want to cross the country” for a meeting and are put off by the “whole idea of this noisy thing” where they have to stand at a microphone in front of everyone to ask a question. . “That’s not modern life and that’s for boasters, isn’t it?”
Isn’t it valuable to be able to see the whites of the directors’ eyes? ‘I do not think so. I think physical presence is for the noisy. Some female CEOs are subject to misogynistic questions from small shareholders.” M&S has tripled attendance in three years since it began hosting digital meetings alongside physical meetings due to the pandemic.
At the most recent event, BBC radio and TV presenter Anita Anand chose the shareholder questions. Some 1,750 people tuned in with another 2,500 views after that. “This year I want 5,000,” says Norman. A virtual meeting is preferable, he says, because anyone can participate, including shareholders who live abroad. Why not take a hybrid and keep everyone happy? He says that would run the risk of “only filming the town hall meeting.”
As for the annual reports, he says they are much ‘too long’. ‘At Asda annual reports were about 80 pages and we thought that was too long at the time. M&S’s annual report now has more than 200 pages.’ While it contains important information, there’s also a lot of “guff,” he says.
“I’ve never met anyone who read everything, except maybe our audit partner. It’s not about telling shareholders how the company is doing, it’s about ticking a bunch of governance boxes.”
He believes shareholders would benefit from shorter but more meaningful online communications. “We should try to make it interesting, but we’ve regulated the annual reports so that they’re so voluminous that they don’t matter anymore. We sent out 10,000 copies of the latest annual report, this thing that no one reads. It added 40-50 pages this year because of the new sustainability reporting. It’s absurd.’
Key role: The BBC’s Anita Anand hosted the latest M&S AGM
Eliminating the old-fashioned meeting and annual report would save M&S around £1 million a year, which Norman says could be used more productively.
Private shareholders have always been very important to M&S. Over the past five years, their investment performance has been disappointing. Christmas trade was strong and market share in clothing and home rose to a seven-year high. The company is to create 3,400 jobs as part of plans to revamp its stores. It is closing stores in unprofitable locations and investing in more lucrative locations.
The stock has recently rallied and is up 30 percent this year, so investors will be hoping that Norman’s turnaround plan finally pays off.
Oddly enough, he’s not sure how many private shareholders he has on his register, due to the popularity of “nominee accounts,” where individuals’ shares are pooled with those of other depositors and held by a stockbroker. He says that ‘we don’t know’ how many individual shareholders M&S has ‘because so many are held through nominees’. He adds: ‘The number of direct shareholders decreases every year.’
Nominee accounts are cheap and convenient. But, says Norman, nominee holders are “third-class citizens” because companies can’t automatically communicate directly with them under current laws.
Within 30 years, he claims, M&S will not be able to speak to any of its individual shareholders unless the rules are changed.
Norman also wants a push to encourage employee ownership with tax incentives. ‘We have 65,000 current employees and many more former employees. It would be nice if we could make them all shareholders.’
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