UK companies warm to hybrid AGMs, finds report by White & Case

While the majority of FTSE 350 companies have opted for a purely physical AGM this year, a sizable minority have selected a full hybrid meeting where both in-person and virtual attendees can take part in proceedings, according to new research.

In a review of AGM arrangements published since January, 56 companies went for a hybrid AGM, compared with 94 that chose a physical meeting with no virtual engagement. 

A further 34 companies decided on a physical meeting with a virtual element, such as an audio or video stream, but did not allow full participation by online attendees, says the report from law firm White & Case.

‘There’s been more of a shift toward legal hybrid meetings than I thought we would see, namely meetings with full shareholder legal participation,’ Lachlan Low, counsel in the global M&A and corporate practice at White & Case, tells IR Magazine.

‘I think companies have taken the view that, if they’ve arranged for an electronic platform to allow shareholders to join virtually, it [doesn’t make sense] to turn off the voting. They might as well go all in.’

‘Good news’

Low describes the move to more hybrid meetings as a ‘good news story’ for shareholder engagement but says it does depend on the type of meeting being put on. 

‘Some companies are having a hybrid meeting but the physical component is managed such that it is kept to a very small number of people,’ he explains. ‘You have to consider the approach taken on a company-by-company basis to assess whether the form of meeting, and the approach taken, is appropriate.’

Hybrid meetings have become easier for companies to hold as a result of guidance issued during the Covid-19 pandemic. In February 2021, the Chartered Governance Institute published advice for conducting AGMs, which said companies could hold hybrid meetings even if their articles of association did not expressly permit them. 

The composition of the shareholder base is an important factor in determining whether to run a hybrid meeting, notes Low. ‘Companies that have a large number of diverse, international shareholders have naturally gravitated towards hybrid,’ he says. Another factor is risk appetite: some issuers may want to include a virtual element but are worried about what could go wrong with a full hybrid approach, he adds.

There are different factors at play for companies that decide to stick with a purely physical meeting, notes Dominic Ross, a partner in the global M&A and corporate practice at White & Case.

‘This is perhaps driven by the fact that older, larger companies have historically held large, well-attended physical meetings and don’t need to provide a hybrid offering to encourage shareholder engagement, while smaller companies don’t want the perceived hassle and additional cost of running a hybrid meeting, particularly if they are used to few people turning up,’ he says. ‘However, from a shareholder engagement perspective, these are the companies that could actually benefit from providing a hybrid offering.’

Managing questions

The White & Case research also looks at how companies have dealt with questions during this year’s AGM season so far. Out of 186 companies in the sample, 141 took questions by email before the annual meeting, compared to 45 that did not. But just 27 decided to answer some of the questions before the event took place. 

Low says the main piece of AGM advice he would offer to companies is to be ‘very accessible upfront’ and solicit questions ahead of the event. ‘If there are difficult shareholder questions that come in, you have prior warning of them,’ he says. ‘You can actually answer them ahead of the AGM and they may not be tabled.’

Taking questions in advance was one of the suggestions offered by the UK’s Financial Reporting Council last month in a report on AGM ‘good practice’. In the guidance, the regulator urged companies to ‘seize the opportunity’ presented by technology to maximize engagement at the AGM, although it noted that there was no one-size-fits-all approach.

White & Case also highlights that ESG-focused resolutions are becoming more common at UK AGMs, with 16 proposed by late July. Climate-change resolutions focus on areas like transition plans and TCFD disclosure, says Low, adding: ‘Companies are getting on the front foot with this.'