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The AGM is Badly Broken

07 Jun 2013

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Annual General Meeting  in session 

Kene Okafor


The title of this article is not original to me. It was the title of a commentary by John M. Green, a novelist, published early in May 2013 in Business Spectator, an Australian online periodical. I found the title and the subject it addressed very appealing, given its parallel in Nigeria, especially as we begin the 2013 rounds of company annual general meeting (AGM). The article was about how the AGM was fast losing its allure among Australian shareholders, as I believe is evident in Nigeria today.

According to Green, Australian shareholders increasingly make a rational decision to stay away from their companies’ AGMs because, among other reasons, “AGMs are crammed full of stuff they have already heard and they are mostly empty of what people want to know.” What more, Green says “the bulk of an AGM’s time is filled with a chairman and Chief Executive making quite formal and heavily scripted addresses  about the various agenda items”. Green should know. He is a leading company director in Australia, apart from his other interests as a commentator and novelist.

In the relationship between public companies and their shareholders, the Australian condition mirrors the Nigerian situation in many ways. In Nigeria, as with Australia, “the AGM is badly broken”. In fact, overall, the Nigerian condition is worse. Whereas an average shareholder in Australia has the privilege of choosing to attend an AGM or not, the same cannot be said of his Nigerian counterpart who in most cases is not even invited to their company AGM. If anything, most receive their AGM invitation long after the event has come and gone.

Some years ago, the failure to invite Nigerian shareholders to AGM was blamed on a decrepit postal system; but now that public companies have the option of using the services of private courier companies not much has changed. The truth is that in Nigeria, if public companies can hold their AGMs without inviting the generality of shareholders they will gladly do so. Nigerian company directors are averse to interacting with shareholders in so far as this comes with the duty of rendering an account of their stewardship, which is what the AGM is primarily about.

To ensure that only a small number of shareholders attended their AGMs, not a few public companies have taken their AGMs to far-flung, inaccessible, locations ... places they believed many shareholders would not want to visit if they were footing the bill. But, by providence, taking AGMs to Neverlands is no longer an option. Watchers of corporate behavior would have observed that many recent AGMs were held in Lagos, not in the Neverlands. Thanks to the security challenges in certain parts of the country. Company directors love their life too and would rather contend with “difficult” small shareholders than risk security challenges to their person. Suddenly, it is no longer right to argue that it is fair to hold AGMs in inaccessible places because shareholders also live in those places. If indeed shareholders reside in those hard-to-reach places, there would be no reason to query a company’s decision to hold its AGM anywhere. But we know that corporate escape to the Neverlands for AGM was never because shareholders also lived in those locations. How could public companies tell if their shareholders lived in any sufficient numbers in (and around) those places when they are not known to conduct an analysis of their share register? 

Because of the predilection of Nigerian public companies to take AGMs far away from shareholders, many AGMs have become glorified board meetings – the difference being in the presence of the Company Registrar, shareholder representatives in the Audit Committee, External Auditors, representatives of the regulatory agencies, and a handful of company-sponsored shareholders at the AGMs. I have been at an AGM where the directors met with less than ten shareholders of a company that has thousands of shareholders. Those shareholders in attendance were sponsored to the event by the company, which in return for its benevolence was rewarded with speedy approval of management’s proposals tabled at the meeting. On the face of it, this company has satisfied the statutory requirements of holding an AGM.

But have they extracted the bigger benefits of an AGM to the company?
AGM is a powerful and proven shareholder communication tool. In one report, an official of BP boasted that about 1,000 retail shareholders attend the company’s AGM. Yes, the same retail investor group that most Nigerian companies would like banished from their   share register. The lesson is that every shareholder category has its uses to the company. The challenge is in getting the various shareholder categories in the right mix.

BP and other knowledgeable overseas companies make conscious effort to have retail shareholders at their AGM because the event is also an opportunity to showcase the company and build the bond between it and shareholders. AGMs leverage the communication efforts of public companies and in many cases give directors shareholder feedback that enrich policy and strategy. Therefore, is it any surprise that public companies overseas are investing seriously in AGMs and leveraging on technology to drive them without being shooed by regulators?              

-       Okafor writes from Lagos

Tags: Business, Nigeria, Featured, AGM

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