How to break down barriers to achieve shareholder democracy

Last year, we highlighted the challenges faced by retail shareholders in accessing AGMs, revealing that while 92% of investors desire to attend, many are unable to due to the complexity of the UK's share ownership system. 

This year, our focus shifted to understanding the roadblocks that issuers encounter when inviting retail investors to meetings. Despite significant improvements in 2023 to enhance shareholder democracy, companies still grapple with a web of red tape.  

The red tape stalemate 

The good news is we found that 44% of company secretaries at public or listed firms are keen on increasing retail shareholder presence at AGMs. This eagerness is even more pronounced in companies with over 500 attendees, with 60% expressing a desire for greater AGM participation. 

However, this desire for increased attendance is blocked by red tape. When shares are purchased through a broker, investors' names aren't directly registered with the companies they've invested in. This means investors and issuers find themselves at a stalemate, unable to directly interact. 

The consequences of this system  

The consequences of this outdated system loom large. In fact, one-third of company secretaries worry about potential backlash if retail shareholders aren't easily invited to AGMs, while another third fear that inadequate communication might drive retail shareholders to divest their shares. 

Shareholders are also left in the dark, with 39% of company secretaries admitting to insufficiently informing them before voting on resolutions. It’s no surprise then that 75% of retail shareholders feel uncertain about voting at AGMs.  

The way forward 

We’re advocating for industry collaboration involving issuers, registrars, and investment platforms to bolster shareholder democracy.  

Companies like BlackRock, eToro, and Hargreaves Lansdown have already made strides to boost shareholder democracy, through initiatives like proxy voting to improve access. But more can be done. 

While legislative changes take time, immediate steps can be taken to improve information sharing.  

Initiatives like the UK’s first pilot project, facilitated by Lumi and involving M&S and interactive investor, enabled nominee shareholders to attend AGMs for the first time. This successful initiative must become the standard for all meetings.  

It also demonstrates the power when stakeholders in the proxy chain collaborate. We're urging issuers, registrars, and investment platforms to come together and eliminate barriers for retail investors. 

Click here to download the full Issuer Roadblocks report, with insights from Lumi’s Chief Operating Officer, Pete Fowler, alongside Tim Sheehy, Director General the Chartered Governance Institute.