Shareholder Democracy in Retreat: The 2026 Proxy Season – Part I

As Easter disappears from the rear-view mirror, governance teams across the Western Hemisphere will be turning their attention to the 2026 proxy voting season. Each season in the UK, Europe and more than ever in the US, brings to the fore conflicts with shareholders and activist investors. In the UK, there has been early warning signs in a few areas where shareholders should be concerned that hard-won corporate governance principles, locked-in over time, are being rolled back putting shareholder democracy at risk.

Modern UK corporate governance stems from the early 1990s and followed some spectacular business failures that, it was contested, might have been avoided with better shareholder oversight. Maxwell Communications and BCCI (Bank of Credit and Commerce International) were just two that led Sir Adrian Cadbury to recommend a radical overhaul of how listed businesses are managed and overseen. This established the principle of separating the roles of Chair and CEO, establishing non-executive directors as a strong independent presence, the setting up of the Audit and Remuneration Committees, and fundamentally, creating the concept of ‘comply or explain’ that made UK Governance a ‘principles’ rather than ‘rules’-based system. Subsequent reviews (Greenbury, Hampel, Smith) provided additional focus on the detail surrounding remuneration and audit to name but two. The broad governance architecture has served business and shareholders well. It is not the job of shareholders to micro-manage what is clearly the prerogative of management, but strong corporate governance principles set the boundaries by which executives are expected to act. Some of that architecture is now under threat from repurposing or demolition.

One area where this came under early pressure is the designation of the Chair as being an independent non-executive who leads the Board. Cadbury mandated that ideally Chairs should be non-executive, but this was re-designated in recent times as neither executive nor non-executive, leaving something of a hiatus in role and designation. As well as adding some confusion the change led to significant increases in the Chair’s fee, as he or she appeared to take on a ‘bigger’ role.  

The FRC (Financial Reporting Council) which has responsibility for overseeing effective governance has responded to government by rolling back some well-established principles in order, in theory, to make business nimbler and more competitive. In one such area shareholder rights are being seriously eroded. Unilever’s unpopular decision to hive off its food business in a $66bn deal will not be put to a shareholder vote. Under the old rules, any transactions deemed ‘material’ had to seek shareholder approval from the providers of capital and ultimate owners. Controversially, the FRC has said this need no longer apply, and Unilever will close a deal that appears rushed, of poor logic and of poor value with no shareholder debate or approval. It would appear that the deal has been pressed on management by activist investors with no more than 1% equity stake; and yet the majority will have no say.

One further area of concern is the degree to which companies might reject shareholder resolutions. Although relatively rare in the UK, BP has caused something of a storm by rejecting a shareholder resolution that appeared to meet all qualifying requirements. BP argued the resolution from climate-group ‘Follow This’ was not legally valid and would ‘be ineffective’ if passed. Again, this would appear rather sweepingly to remove the right of investors to hear the arguments and decide for themselves. BP is also proposing a resolution which would ‘retire’ two previous climate related resolutions passed at previous AGMs, so the Board appears to be adopting a more taciturn and less investor-friendly profile towards an important – if annoying – pillar of UK governance.

Finally, whilst institutional investors have good access to management, the AGM remains the only forum for small shareholders to hear from management and hold them to account. The government has signalled it is open to ‘virtual only’ AGMs, which would be cheaper, but also erode face-to-face accountability. As a result of COVID, the FRC had already relaxed Code requirements to hold only in-person meetings. The odd-couple of in-person plus virtual access has become fairly common. Moving to online only is a very different and detrimental proposal. Research suggests that in 2025 83% of FTSE350 companies met in person, with 13% hybrid¹. Only a small minority pursued an online only model (Clarkson, Bakkavor before its acquisition by Greencore, and controversially M&S). The latter incurred the wrath of its army of small shareholders when it proffered a virtual only AGM in 2023. If this proposal goes ahead, and company law is amended to allow virtual only meetings, it seems likely more will choose that option, thereby eroding a fundamental pillar of governance accountability.

In a bid to be more competitive and make London more attractive for IPOs, there is danger that many of the hard-won standards that have made the UK a beacon of rigorous governance will be lost; the result will be the poorer for everyone and will potentially make managements even bolder in striking deals that require no scrutiny other than by a supine Board, and which turn out to be value destructive.

In the meantime, happy voting!

Notes

¹ Research conducted by White & Case quoted in Investors Chronicle 27 March 2026