The government has been told that moving to virtual-only AGMs would remove a “cornerstone” of UK governance.

A debate in the House of Lords this week saw peers express concern about the government’s direction for AGMs.

Former Conservative minister Baroness Virginia Bottomley said face-to-face AGMs mean boards must confront the “awkward squad” among shareholders and that online events offer the opportunity for company managers to “manipulate the agenda, ignore questions and avoid scrutiny”.

“From my point of view, it would be a great error to discontinue face-to-face meetings. We know it in politics, we know it in charity, and it is the same in business—even if only one person shows up to your board [AGM].”

There were also concerns with proposals that a company’s shareholders might make the decision whether in-person AGMs would go ahead.

Institutional bias

Lord Christopher Fox, a Liberal Democrat, argued that institutional shareholders would always have the casting vote.

“That is why individual shareholders should have their day at an AGM,” he said.

“When I organised AGMs for three FTSE companies that I worked for, the chairman and I worked very hard on preparing for the questions that the awkward squad would be coming up with at those AGMs.

“To remove the proximity of the shareholder from the chairman is to lose that important check.”

The government is currently looking at a set of governance reform proposals, including a move to streamline some corporate reporting requirements. They have also promised to put the Financial Reporting Council on a statutory footing.

During the Covid pandemic, companies moved to virtual AGMs but by 2022 these had fallen out of favour and companies had moved back to in-person events.

‘In extremis’

The International Corporate Governance Network (ICGN) has cautioned against virtual-only meetings, arguing they should only be used “in extremis”.

In May, Jen Sisson, chief executive of the ICGN, said in a statement: “The AGM is a key mechanism for corporate accountability. Fully virtual AGMs significantly limit the ability of shareholders, especially minority shareholders, to interact with boards and management, ask unmoderated questions and make statements from the floor.”

In 2023, Marks & Spencer made headlines when Archie Norman, the company chair, pushed for a fully virtual gathering. There was much opposition and the retailer eventually delivered a hybrid event with online streaming and shareholders also gathered in a room.

Baroness Liz Lloyd, a business and trade minister, told the Lords this week that the government was not intending to “mandate” virtual AGMs and there will be no obstacles to hybrid AGMs.

“Through this consultation, we are clarifying the legal grey area and providing certainty about the legitimacy of hybrid AGMs where certain shareholder safeguards are in place.”