March to June of every year is mostly the time publicly listed companies hold their annual shareholders’ meetings. This annual activity is the main, if not the only, time that the directors and the officers of these public companies talk to their shareholders.
As the chair of the Investor Relations Committee of the Shareholders’ Association of the Philippines (SharePHIL), the task of attending shareholders’ meetings is one of my main duties. SharePHIL has invested some money to buy shares of the index companies in the Philippine Stock Exchange and is thus a minority shareholder, like all the other small shareholders we seek to represent.
In most of the companies whose meetings I attended, the formats are very similar and the agenda almost uniform. In some, a script is strictly followed and even the meeting players are predetermined. Many items in the agenda are prescribed by the by-laws and the Securities Act. Hence, the determination of a quorum, the approval of the minutes of the previous meeting, the approval of the financial statements, the president’s report are standard items discussed in these meetings. So are the approval of the acts of management, the appointment of external auditors, and the discussion of the plans and programs for the future.
It is suggested that the annual shareholders’ meeting should be used by publicly listed companies as an effective tool to inform and educate their outside shareholders about their companies and, in the process, develop better investor relations. Minority shareholders know that the board holds enough proxies to carry out corporate acts without seeking the approval of the minority but it would be good governance it the majority was more transparent. It is beneficial for companies to be perceived as credible because they are fair and honest in their dealings with the small shareholders.
Here are more suggestions to increase the interaction between the companies and their other non-related shareholders. Annual reports should be sent to the shareholders a few weeks before the shareholders’ meeting. This will give them a chance to study the results of operations and allow them to come up with intelligent questions. Because the attending shareholders are usually unprepared to ask the right questions during the meeting, it is not infrequent that some of the questions asked are done for the sake of asking; some are completely irrelevant to the meeting and some are personal and absurd. The chair of the meeting sometimes finds it embarrassing to cut the shareholder and request him to stick to the issues at hand.
It is not fair to the shareholders to be asked to approve the acts of management for the previous year, without knowing what these acts are. But more often than not, this agenda item is breezed through without discussion. This is an item that requires a lot of discussion, as many of those acts need to be explained or justified for proper appreciation. It is suggested that the acts requiring approval should be specifically identified so that if any shareholder wants to get more information about any of them, then he can get the answers directly from the people who made them.
SharePHIL wants to do its share in enabling more investor-friendly and more interactive shareholders’ meetings. We are preparing a Shareholders’ Handbook that will make the investors and market participants aware of their rights as well as their obligations. We will also prepare for our attendance in shareholders’ meetings by studying the distributed company materials and crafting the right questions that will help enlighten the shareholders while, at the same time, motivating them to participate intelligently in the discussions.
SharePHIL wishes more people to invest their savings in the capital markets because we realize the importance of capital formation in fueling the economy’s growth. If these investors feel that they have rights, no matter how small their investment is, they will be encouraged to be more participative during these annual shareholders’ meetings. The board will also be more motivated to be open and more transparent because the board members also appreciate talking to an informed and curious audience.
This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a member of the board of trustees of SharePHIL, and president of Ligaya Management Corp. Feedback at [email protected] For previous articles, please visit www.map.org.ph.