"Understanding is a two-way street" – Improving dialogue with investors

From ABBA to the Spice Girls, through to Dolly Parton and even Taylor Swift… with protest via repurposed pop songs alive and kicking on the circuit, the annual general meeting (AGM) can feel like a performance in more ways than one. Similarly, the sheer volume of corporate reporting requirements placed on UK companies can result in the annual report reading more like a jumbled track list than a curated summary of the company's greatest hits.

But when the votes have been cast and the AGM is over, and the boxes of spare annual reports are stacked up for storage, two questions remain:  how much more do we really know about what our investors want from us? And how much more do they really know about our company? In short, how much meaningful engagement has there really been?

We consider ways to reinvigorate a company's annual set pieces – the annual report and the AGM – to enhance dialogue with investors.

The AGM

The AGM in 2024 still stands in the shadow of the Covid-19 pandemic, which marked a period of unprecedented upheaval in terms of meeting format. During this time many companies were forced to embrace technology – either by hosting fully hybrid meetings or by offering additional online connectivity via webcasts or online Q&As – with a view to maintaining some degree of normality and interaction between shareholders and the board as part of the meeting.

However, the signs are that offering the option to attend the AGM more easily, through electronic means, has not increased turnout or participation in meetings.  Whilst overall voter turnout appears to have been broadly stable amongst the FTSE 100 for the past five years and remains in line with pre-pandemic levels^[1], over time fewer companies are holding hybrid meetings (from 109 hybrids amongst the FTSE 350 in 2022 to 81 in 2023).^[2] Having laudably sought to increase participation and dialogue through offering investors the option of participating remotely as an alternative to physical attendance, many companies have found it hard to justify the additional time, effort and expense associated with a hybrid AGM format if only a handful of shareholders log in on the day. In-person attendance at AGMs has rarely reflected the size of the shareholder register, even for those companies which attract greater turnout than most.  The hiatus caused by the pandemic has done little to change this trend.

Does this signal the death knell of the hybrid meeting, and with it the opportunity for innovation in the interactions between the board and shareholders? Whilst there will always be some companies for whom hybrid meetings remain the most appropriate format, if present trends continue (and doubts remain as to the validity of virtual-only meetings), then physical-only meetings are likely to be the preferred approach for most companies to comply with their statutory obligation to hold an AGM. With that in mind, how can companies reinvigorate the AGM to broaden its appeal and improve it as a forum to engage in two-way dialogue with investors? And what other activities might companies undertake to improve dialogue?

• Planning and preparation lead to authentic answers to questions raised: Even quieter AGMs can see tricky Q&A sessions and the Chair can find themselves caught off guard with an unexpected query. Horizon scanning and preparation are therefore essential ingredients ahead of the meeting to ensure meaningful responses can be given to questions raised. In 2024 for example, a number of companies have received questions about moving their primary listing from London or about the conflict in Gaza and the extent of their involvement in, or financing of, national security and defence matters. Consider the extent to which any current affairs topic might touch on your company, its business or geographical scope – even if only tangentially – and prepare responses accordingly. Comments on social media channels may also offer an indication of topics shareholders are likely to raise.
   
• Order, Order!: Those seeking to highlight an issue at the AGM are turning to increasingly novel and headline grabbing actions in order to make their point. Whilst some of these antics can, with the benefit of hindsight, be considered amusing and fairly harmless, they do serve as a turn-off for many ordinary investors seeking to hear from the directors about the performance and operations of their company. Seeking to minimise disruption and disturbance, and reacting swiftly and appropriately should they arise, are therefore key in maintaining the AGM's status as a forum for dialogue (see Lessons from recent AGM disturbances call out box).
   
• Asked and answered: With the increasing use of online platforms to vote by proxy in advance, the Q&A session on the day rarely (if ever) serves to influence voting outcomes. Offering shareholders the opportunity to email questions and have them answered well in advance of the proxy voting deadline therefore remains a good engagement opportunity. While answering them individually provides a nice personal touch, consider whether questions might be anonymised or otherwise adapted to allow a general FAQ to be published on the website too. Some companies, which know they will receive a large number of questions on a particularly hot topic from their shareholders, should proactively do this in advance of their AGM so the Chair can provide responses on the day while also referring shareholders to a more detailed position statement.
   
• Expanding other events: While the AGM is typically the only opportunity for shareholders to vote during the year, it needn't be the only chance for shareholders to get to hear about the company from their directors or express their views. Together with the investor relations and communications teams, consider whether there are any events in the usual engagement calendar that could be expanded to cover more of the register or could be recorded and shared on the website for retail shareholders to watch and respond to by commenting online or by email.

The annual report

Companies are producing longer annual reports than ever before. However, lengthier publications don’t necessarily mean higher-quality, decision-useful information or reporting that invites discussion with investors. While the annual report will always serve a compliance function, approaching it less as a monologue and more as a springboard for dialogue could help companies to unlock opportunities for meaningful engagement with investors across the reporting cycle.

• If you don't ask, you'll never get: Feedback on annual reporting from external stakeholders tends to be anecdotal and received almost exclusively in a relatively short period post-publication – a few shareholder emails or a comment or two at the AGM (with comments on font size, colour scheme or the quality of paper on which the hard copy is printed are amongst the favourites that we've heard at AGMs). Very few companies proactively seek detailed or specific feedback from investors on the annual report and its utility in the context of their investment objectives. Asking for feedback needn't involve a multi-page questionnaire – coordinating with IR colleagues, consider taking advantage of the regular shareholder interactions scheduled in the IR engagement calendar to understand more about how investors are digesting and using the annual report. Even one or two targeted questions, aimed at understanding the areas of the report of greatest interest to major shareholders, could help with planning content and resourcing in the following year.
   
• Is it time for a makeover?: While a total overhaul of the annual report's layout can be an expensive and time-consuming task, the re-design of even a few pages or sub-sections can be undertaken gradually and have a strong impact on the overall accessibility of a report. Although this may seem simplistic, changing fonts and colours and making the most of graphics and photos are all small changes that bring narrative reporting to life and can act as conversation starters. Design agencies often work well with prompts, and the Financial Reporting Council's annual review of corporate governance reporting^[3] provides an excellent showcase of best practice, both in terms of substance and potential design approaches.  
   
• Go specific on the substance: Corporate reporting that describes specific actions taken during the year, and tracks the outcome of those actions, gives readers information that allows them to really consider what companies are doing on a day-to-day basis. This approach dovetails with the new Corporate Governance Code 2024, and in particular its new Principle C which requires governance reporting to focus on board decisions and their outcomes in the context of the company's strategy and objectives. The most effective way to integrate this kind of reporting style is typically through case studies or "hero stories" that provide investors with greater insight on the company's approach in practice. Connect with stakeholders across the business throughout the year (rather than only when drafting begins) to identify those board- and management-level activities that are likely to form the basis of next year's report to ensure actions and outcomes are being monitored and recorded. 
   
• Utilise other reports and resources: By its very nature, the annual report can only ever provide a yearly snapshot of a company's activities, performance and prospects. To enhance the sense of real-time reporting for investors, many companies regularly cross-refer to their website for additional information. When doing so, be sure to include specific hyperlinks so readers can find content quickly and consider hyperlinking to the landing page for the company's other periodic reporting, such as gender pay gap reports. Supplementing the annual report in this way can offer companies a chance to tell stories more dynamically and to update information throughout the year, which investors often embrace. Making additional content web-based – and therefore reducing pressure on the prime real estate of the annual report – has proved particularly popular in the ESG and sustainability-related reporting space.