Consider this: Attending 80 annual general meetings in just two weeks. That’s the kind of organisational muddle that shareholders in listed companies are facing these days as Sri Lankan companies rush through their AGMs to keep in line with the rules on prescribed periods to hold these meetings.
It is physically impossible to attend several meetings at the same time particularly for those dedicated, independent shareholders who are keen to raise or seek clarification from the board of directors on issues relating to the accounts and operations o the companies.
The magnitude of this problem is such that on Friday, September 30 there are 25 AGMs listed to be held between 10 am and 3 pm while the previous day, Thursday, there are 13 scheduled meetings, according to the Colombo Stock Exchange (CSE) daily newsletter. Recently some stakeholders were grappling with ways of attending two important AGMs, both being held at the same time on the same day, to raise issues of concern in both companies. Ultimately they had to attend just one where issues were raised, and abandon the other, where no questions were asked by any of the other shareholders resulting resulting in the directors escaping without a ‘bruising’ encounter with these investors.
A stockmarket investor from Wellawatte, in a letter published in this newspaper, has also raised the issue of too many AGMs being held at the same time and on the same day and says he has raised this issue with the authorities over the past several years but there has been no resolution of the problem. He says, very correctly, that some companies deliberately schedule their meetings during this rush period to avoid unpleasant questions on their accounts from ‘pushy’ stakeholders.
On the other hand, very few ‘probing’ questions are raised and even if it happens, arrogant directors are prone to dismiss them as irrelevant or on some other grounds.
At one established bank for example the chairman is known to yell at shareholders when questions are raised but not at those with old school ties or the ‘Old Boys Network’. On such occasions his much-more-liked deputy has stepped and calmed the stormy waters and appealed for sanity.
Another tactic used by a few companies is to give shares to employees and bus them to the AGM which comes in handy if there is a crucial vote and issues are raised.
On the positive side there are a handful of companies practising governance and transparency in every sense of the word, not only on paper, and where questions or queries are welcomed from shareholders. But directors at these companies says in some instances small, independent shareholders want the meetings over in double-quick time to gobble the lovely spread of tea and short eats laid out for guests. “They hardly ask questions and rush to the food table no sooner the meeting is over,” one of the directors noted.
With the stock market growing by leaps and bounds in the post-war period and daily turnovers soaring compared to what it was many years ago, the Business Times has consistently urged shareholders to do their homework on many fronts when buying and selling shares. Of particular concern to the newspaper is that small-timers are not savvy enough to understand annual accounts and its technicalities, and also reading the prospectus of companies planning an IPOs. For example, many investors burnt their fingers investing in a particular IPO that was offered at a price double of what it was in a private placement. When it opened for trading, the share price fell below the IPO price but was still, much higher than the private placement price. In this case, many investors were unaware that there had been a private placement or didn’t make an effort to read the prospectus though it was available online or with brokers.
The need for small, independent shareholders or Independent Minority Shareholders (IMS), a term used by K.C. Vignarajah, a veteran investor and rights activist in the market, to be alert, cautious and uptodate on information flows on the market has been emphasised over and over again by this newspaper. The Securities and Exchange Commission (SEC) took this to heart when it ran a newspaper advertisement last week advising investors on a number of issues including reading the ‘prospectus’ of an IPO before making an investment decision.
“Before you get started you should know the basics of stock market investing and at all times you should obtain advice from registered stock brokers, but the final decision is yours,” the SEC said, adding that investors should take informed investment decisions based on the information available to them through the SEC and other sources.
Finally the Colombo Stock Exchange (CSE) should devise a proper schedule of AGMs to ensure minimum over-lapping and provide an opportunity to shareholders to attend these meetings at different times. Sri Lanka’s stockmarket will succeed only if companies are ethical, provide full transparency, accountability and governance which would then create a level playing for all investors, big or small. For that to happen, shareholders need to attend meetings and question the accounts when necessary, and this is possible only if AGMs are held at different times and days.