Who cares what individual investors think?

Balancing the scales between shareholder and broader stakeholder interests has become the heartbeat of modern business. Environmental, Social, and Governance (ESG) factors now weave through the fabric of investment decisions, with major investors tuning into these non-financial harmonies, leading to more Say on Climate resolutions and social impact inquiries at AGMs.

However, the voices of individual investors, often the climate and society-conscious Gen Zs and Millennials, remain faint. Bound by cost and bandwidth constraints, companies typically engage with institutional investors. But imagine the symphony that smart technology could orchestrate, promoting wider shareholder inclusivity. Proxy advisors guide companies in engaging with major shareholders, yet individual investors, if united, could form a powerful chorus. In the UK, approximately 20 million individuals hold shares, representing 13.5% of all public company shares—a potential force of nature. Not considering retail investors could be seen as defying the principles of diversity, equality, and inclusion, and engaging them could offer profound insights and foster brand loyalty.

The UK has seen increased participation through groups like The Engagement Appeal, whose mission is to gather 1 million individual signatures and ensure fair representation in AGM voting and corporate actions. The initiative also explores technologies to facilitate investor participation in corporate events, advocating for climate-friendly and cost-effective practices through consultations with key stakeholders to transform shareholder engagement.

We asked our European teams to give their insights on retail shareholders to understand the regional nuances. It seems that in some countries, the enabled technology, the mood, and the commercial drive are all aligned to bring about lasting change, making the voices of individual shareholders more resonant than ever.

What has been the historic approach to retail investors in your region, and how does it compare to today?

Italy

The annual shareholders’ meeting allows members to have their voice in voting on company decisions and activities. Since 2010, Italian legislation has encouraged individual investor participation through the Designated Representative and proxy vote solicitation, as outlined in the Testo Unico della Finanza (TUF). Despite traditionally low participation due to a lack of understanding and interest, proactive campaigns and new legislation have increased individual shareholder involvement.

Portugal

Retail investors have historically been passive in AGMs and corporate governance. Despite most issuers being controlled and the free float being a minority, minority shareholder involvement remains low. Recently, a few issuers have increased retail responsiveness by enabling virtual AGM attendance.

Spain

Retail investors have also been passive in the past, however more recently, issuers have attracted AGM participation through strategies like retail-specific roadshows, engagement campaigns, attendance premiums, loyalty programs, and virtual AGM attendance. These efforts have highlighted the importance of retail shareholder support in approving corporate decisions.

Germany / Switzerland

Cold calling is neither allowed in Switzerland nor in Germany, so there is zero chance to encourage retail AGM participation by directly approaching retail investors via phone calls. However, for registered shares, the company can at least attach a cover letter to the AGM invitation. As the typical response from retail investors is limited, the initiatives and willingness to spend a lot of time and money on such campaigns are also limited.

Have you seen any changes in your region toward securing more retail-owner views/engagement before or during the AGM?

Italy

Introducing representation and solicitation mechanisms increases individual shareholder participation, and shareholders who are contacted show more interest in AGM issues. Continuous information outreach can improve loyalty, protect against hostile market actions, and provide resources for growth or restructuring. Treating individual shareholders like institutional investors with transparent information and easy access to services enhances their sense of involvement. In Italy, companies can boost retail engagement through a number of initiatives, such as shareholder clubs, to demonstrate the importance of shareholder support for company growth.

Portugal

Yes, enabling AGM virtual attendance has made a demonstrable difference.

Spain

Retail-specific roadshows, AGM-solicitation engagement campaigns, AGM attendance premiums, loyalty programs for retail shareholders, and the improvement in virtual AGM accessibility. Some companies are seeing a significant shift in their shareholder structure, from an institutional majority shareholder base to a significant increase of retail holders. This has led issuers to be more mindful of retail's importance and inclined to take action to foster their participation at the AGM. Operationally, however, it is not straightforward to reach out to them. In the Spanish market, the ability to approach retail investors is limited by the information available in the Spanish shareholder register (no e-mail address, no phone number, etc.), hence the importance of campaigns that promote engagement with these investors.

Germany / Switzerland

We would even say the opposite! Companies have accepted that retail campaigns are not successful. In some M&A situations, we have seen companies spending a lot of money on media campaigns, but we still do not see it making a major difference. In previous years, custodians used powers of attorney from retail investors to exercise their voting rights, but now only two are left offering this service. Shareholder associations have also lost followers and members.

What do you think the trend around retail will mean in relation to the AGM that companies need to consider?

Italy

While more retail shareholders, especially generationally younger ones, are focusing on ESG issues and active participation, most still prefer traditional communication methods. Companies must balance classic approaches like targeted adverts, printed letters, and in-person events with modern strategies like virtual platforms to engage different audiences. Building shareholder loyalty requires continuous effort and resources, ensuring transparent, constant information flow both online and offline. Proactive and reactive communication, high-quality management, and dedicated channels are essential. These strategies empower shareholders, making them active participants in corporate decisions and positively influencing company choices.

Portugal

Given the current shareholder structure of most Portuguese issuers, changes in the AGM-retail shareholder relationship are unlikely. Without corporate restructuring, governance-related engagement will primarily involve institutional investors within the free float.

Spain

There will be an increasing need to engage with retail shareholders, mainly if more corporate restructurings occur and in case the AGM virtual attendance consolidates or grows as a predominant participation format.

Germany / Switzerland

There is a very limited number of votes coming from retail investors: the higher the retail fraction, the lower the participation in the AGM.