Policy and Campaigns – Progress Update 14 June 2021

ShareSoc News Item by Director Cliff Weight

In May and early June, we worked on:

1. Woodford Campaign: Leigh Day received their response from Clifford Chance to their LBA (Letter Before Action). It looks like the case will go to court but it could take 3 more years. Leigh Day remain the only claim with insurance and funding in place. Harcus Parker have funding but do not have ATE insurance. RGL have neither insurance nor funding (other than funding for an initial step). Leigh Day (whose claim ShareSoc have endorsed) now have c 10,000 claimants registered and are the leading claim.
2. Sirius Minerals Shareholder Group, Sirius Claim Group: We expect to shortly sign an agreement with a law firm who wish to take on the claim.
3. Voting Guidance and Shareholder engagement: We continue to test our new ideas with a pilot study of FTSE30 companies. This is a major exercise and reports have been published for:

4. Consultation responses. We submitted a responses to:
   1. BEIS: Mandatory Climate-change disclosures;

And we are preparing responses to

1. 2. BEIS audit review consultation
   3. FCA A new Consumer Duty
   4. FCA High risk and illiquid investments
   5. FCA Long Term Authorised Funds

7. SVS/ITI: we continue to provide a Support Group to help those who assets were with SVS which went into administration and were transferred to ITI.
8. FCA: Mark Northway wrote In March to the FCA Chair asking for a meeting to discuss various of our concerns. The Chair has now agreed to meet.
9. Bacanora Lithium: We have provided support to the Save Bacanora shareholder action group and ShareSoc Patron Lord Lee has tabled a PQ about the national interest of this takeover.
10. Law Commission Review of Intermediated Securities: We continue to await the next BEIS response to the Law Commission Review of Intermediated Securities, which inter alia is about nominee accounts and the disenfranchisement of individual investors.
11. AGMs: We believe that the AGM needs major reform. It has changed little since the mid-twentieth century. Many companies view the AGM as a statutory necessity – as something that has to be done; rather than an opportunity to engage with shareholders.

We believe the AGM process is broken. Most investors only play lip service to it and do not attend AGMs. Many companies view the AGM as purely administrative – as something that has to be done; rather than an opportunity to engage with shareholders.

The FRC is currently working with stakeholders to prepare a paper on the future of the AGM. We see the AGM as part of a wider process of engagement with stakeholders which includes, amongst other things, the publication of the annual and interim reports. We see the AGM as having two key components:

1. 1. 1. the formal business of the AGM – re-election of directors, adoption of the accounts etc. and voting on resolutions;
      2. the formal Q and A (plus informal interaction between stakeholders and directors) which enables stakeholders to hold directors to account and gather further information about the company and its prospects.

The AGM should demonstrably represent a good use of time for all shareholders. At present (most) analysts and fund managers do not attend AGMs. To encourage them to do so, companies should be encouraged to include the following either in the AGM or immediately before the formal proceedings of the AGM:

1. 1. 1. Business trading update
      2. Business strategy update, including e.g. business model, competitive advantages (and/or Moat), future capex requirements and funding plans.
      3. Governance update.
      4. Questions and Answers (whilst pre-AGM webinars are useful, it is important that Q&A occur at the AGM, because only at the AGM is there a formal requirement to minute what occurs, including Q&As).

We see the AGM as the outcome of an ongoing engagement process with shareholders, with voting (and in extremis shareholder resolutions) as a way of shareholders feeding back their dissent when the engagement process has failed. The AGM needs to be made attractive and a good use of time for all shareholders.

We believe the best model for future AGMs is a hybrid one where shareholders can attend either in person or remotely via the web. Many shareholders are unable to attend physical AGMs because of logistical constraints. Some companies even ‘play’ on this by scheduling their AGM at inconvenient times of day and in inconvenient locations.

The nominee system must be made to work so that individual investors can easily:

1. 1. 1. be made aware of AGMs
      2. vote the shares that they beneficially own via nominee.

The default position must be that investors will receive notification of publication of annual reports, notices of meeting and the opportunity to vote their shares, UNLESS they opt not to. Any such opt-out should have to be re-confirmed annually. In this way, all investors will be reminded (educated) that when they buy shares in a company, they also have ownership rights and responsibilities.