By Peter Fowler, COO at Lumi
For many years, share holding was the preserve of a particular demographic in society. However, in recent years, this has changed. The emergence of DIY trading apps has democratised the shareholding process and shifted the needle on representation. Today, retail investors using these apps to hold shares in their favoured companies are a growing breed.
While individually, retail investors may only have a small stake in an organisation, together they can be a powerful voting bloc. This AGM season, companies can’t ignore these diverse voices as they move from a rumble to a roar on contentious issues such as ESG and executive pay.
A varied and vocal shareholder mix
Gone are the days where investors were a homogenous group, and the assumptions that their interests in companies were the same. Two thirds of women (67%) now invest in shares outside of their retirement accounts, and nearly one in three young, black shareholders say they’ve begun investing since 2020. Meanwhile 37% of Gen Z now invest in stocks – more than ever before.
DIY platforms paving the way for a younger generation to enter the investment landscape is also translating into shareholder meetings. Four in five (80%) Gen-Z shareholders say they have already voted in an AGM, and another 9% say that they have an interest in doing so. Whether it pertains to sustainability, executive pay, or other ESG considerations, this is an engaged demographic and making an impact on wider society is a key priority for them.
Embracing the new era of AGMs
With this new diversity, companies are exploring more innovative ways to engage shareholders.
Last year, hybrid AGMs made up 40% of all meetings worldwide, and this year the majority of UK meetings are expected to be hybrid. Post-pandemic, there may have been a temptation for businesses to return to in-person meetings, but the flexibility offered by the hybrid format has been crucial in keeping investors engaged.
Many shareholders, regardless of age, have been excluded from AGMs in the past by logistics – meetings hosted in major cities during the day. Once you take away the barriers posed by physical attendance, however, AGMs are open to a wider demographic and become far more welcoming.
We are now seeing issuers make hybrid meetings even more inclusive through technology that allows virtual attendees to participate in debate via a virtual microphone or with video , levelling the playing field between them and in-person attendees. As well as enabling virtual contributors to be seen as well as heard, they allow AGM participants to categorise their contribution on submission, meaning they know they will be called upon to speak.
This technology allows shareholders to pose questions directly to the board, creating an interactive and inclusive environment, enabling real-time responses and encouraging a more informed and engaged investor community.
Winning over the retail investor
Engaging retail investors not only means businesses can hear from the diverse voices of their stakeholders, but it also means they can capture the rumble of a potential revolt.
That means companies should avoid treating the AGM as the only moment to engage shareholders. If not, they risk investors being less engaged, as well as the possibility that they will not understand shareholders’ voting intentions when the day comes, opening the floor to potential opposition. Instead, it’s important to maintain open dialogue with investors throughout the year. In fact, shareholders are demanding it: 85% say they want to see more advance information from the companies they invest in on the issues being discussed at the AGM.
One way this could be done is through frequent investor relations meetings throughout the year that all can attend. This provides shareholders with opportunities to voice their concerns and share information on relevant matters, enabling boards to gauge shareholder sentiment prior to the main AGM, as well as to provide more information to their investors.
Another option could be to follow the example of businesses in Sweden, which host pre-AGM Q&As allowing shareholders to raise their queries with the board ahead of the event. This gives investors an extra outlet to get things off their chests, increases transparency, and ensures hot-button issues cannot fall off the agenda.
Annual meetings serve as a judgment day for many businesses, so it’s crucial to remove the barriers between retail shareholders and the companies in which they are invested. By embracing new AGM formats, prioritising engagement, and addressing systemic challenges, companies can cater to this new breed of investor and ensure that every shareholder has a voice in shaping their future.
