Major institutional investors have criticised the government’s plans to allow online-only shareholder meetings and cut back on remuneration scrutiny.
The Department for Business, Innovation, Science and Trade published a consultation this week proposing changes to corporate reporting rules designed to “modernise” current regulations.
However, a proposal to allow “virtual AGMs” has been criticised by investor groups. Caroline Escott, co-founder and chair of the Governance for Growth Investor Campaign (GGIC), expressed disappointment over the move, and also questioned a decision to remove shareholder advisory votes on remuneration reports.
“[The] consultation on modernising corporate reporting is an important step towards a system that delivers meaningful information, not more information,” Escott said. “This must be accomplished, however, while preserving the vital governance mechanisms that maintain trust between companies and their shareholders and ultimately help to attract long-term capital to the UK.”
Attending shareholder meetings in person was “a vital shareholder right”, she added, as it allows for views to be shared and discussed and “ultimately supports long-term value creation and a more resilient UK economy”.
“Conversely, virtual-only AGMs undermine this process, enabling some companies to filter or ignore shareholder perspectives,” Escott said.
“There is overwhelming evidence that online-only meetings are used by companies to shut down scrutiny and dodge difficult questions in a way that is not possible with shareholders sitting in the same room.”
Luke Hildyard, head of UK policy at campaign group ShareAction, argued that allowing online-only AGMs “would be a massive backwards step for corporate accountability and good business decision-making in the UK”.
“The real-world impacts of big business are felt by us all – in the air we breathe, the food we eat and the unfolding climate emergency,” Hildyard said. “The AGM is the one time that boards of major corporations can be publicly questioned on issues ranging from their company’s financial performance to its social and environmental impact.
“There is overwhelming evidence that online-only meetings are used by companies to shut down scrutiny and dodge difficult questions in a way that is not possible with shareholders sitting in the same room.
“This might make life a bit easier for business leaders in the short term, but in the long run weaker scrutiny is only going to lead to worse decision-making and ultimately worse outcomes for the UK economy and all of us.”
On the plan to remove shareholder votes on remuneration reports, Escott said the move would restrict investors’ ability to “ensure company executives’ pay is effectively aligned with long-term value creation”.
However, Escott also said the GGIC supported measures aimed at “streamlining reporting and enabling further digitisation”, as well as cyber risk reporting proposals.
“Good governance is a help, not a hindrance, to the UK economy,” she said. “To that end, we look forward to working with government to ensure the review delivers a balanced, modern framework that improves efficiency without weakening the standards that everyday savers rely on for their outcomes in retirement.”
