For decades, influence over decision-making within large corporations was dominated by a select group of institutional investors. But a transformation is underway, with more retail investors than ever before trading for themselves.
This cohort, buoyed by the emergence of DIY investing apps, has steadily grown in number – and influence. The question is whether FTSE 100 companies are ready to welcome them.
A new breed of investor
A new kind of investor has appeared: the retail investor who wants to have a say on important issues such as executive pay, diversity and ESG. Research by Lumi shows that the reasoning behind retail investors choosing to attend AGMs is more complex than to simply influence dividends: 43 percent want to ask questions and 42 percent want to have their say on important matters.
Yet, despite their burgeoning influence, retail investors often find themselves relegated to the sidelines, denied access to pivotal meetings and conversations. This is because the UK’s intricate share ownership model is plagued with red tape, particularly for those retail investors transacting via intermediaries such as Hargreaves Lansdown and Interactive Investor.
Additionally, retail investors using intermediary platforms don’t have their names directly connected to the companies they invest in so, if they want to join a meeting or vote, they have to go through a middleman, which is complicated and excludes many.
A turning point for investor relations
But the tide could be turning for stakeholder communications and governance. Recently, the UK’s Digitization Taskforce announced a new system that helps companies know more about their investors. Interactive Investor, an online investment service, has asked FTSE 100 leaders to communicate better with investors all year. M&S’ Share your Voice campaign also wants to update the rules about shareholder rights and meetings, which have not changed much since 1985.
While the dismantling of barriers requires persistent effort, the trajectory is promising. The ‘board knows best’ mentality is slowly melting away, giving way to a more open outlook for a future that includes all shareholders.
For this momentum to continue we need cross-industry consensus from businesses, trading platforms, registrars and, ultimately, legislative support to dismantle the numerous obstacles faced every day by the shareholder.
Embracing hybrid technology
Winning over retail investors means involving them in the crème de la crème of the IR calendar: the AGM. To do this, companies must continue to offer modern and inclusive options to attend AGMs and vote on important issues.
This means making sure every person can access the meeting, and that means embracing hybrid technology. Many shareholders have been excluded from AGMs in the past by meeting location, the time of day they’re held or even accessibility issues. Once you take away the barriers to how people get there, AGMs open up to a wider demographic that wants to have its say at meetings
The good news is that Lumi data from this AGM season shows hybrid meetings are becoming the norm across the globe. We’ve already seen a 9 percent increase in the number of hybrid meetings being hosted worldwide, compared with last year.
Including your investors year-round
While the AGM stands as the most important meeting in a shareholder calendar, it’s vital to provide investors with multiple chances to voice their opinions throughout the year.
To do this, businesses must open up their IR calendar to more shareholders. These events create regular opportunities for shareholders to have a say on issues throughout the year and ensure that unresolved concerns aren’t left to build up throughout the year, only to overspill at the AGM.
It’s time for companies to realize how much retail investors can shape the future of British businesses. As things change, this partnership between investors and businesses will make things better for everyone.
Pete Fowler is chief operating officer at Lumi Global