Investors starting to flex their muscles at AGMs

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The Straits Times
May 21, 2012
CAI JIN
Investors starting to flex their muscles at AGMs


By Goh Eng Yeow

SHAREHOLDERS are in a feisty mood. Gone are the days when an annual general meeting (AGM) was a staid affair to be wrapped up in a couple of minutes, so the participants could hit the buffet.

Now an increasing number of investors are raising pertinent points on issues like directors' fees, the company's lacklustre stock price or its fund-raising activities.

In doing so, they are exerting their rights as shareholders. They are, after all, the ones taking the risks, investing in a company whose profitability will, hopefully, lead to a rising share price and a better dividend payout that will help them to grow their nest-eggs.

And if something goes wrong, they have a lot more to lose than the well-paid analysts who get invited regularly by the company to hear how its business is faring.

But as some observe, quoted equity is a peculiar form of ownership in a company. The investor has no direct control over the firm's assets and retains the right to walk away at the drop of a hat by selling his shares. Even the market encourages this perception. Everything about mainstream investing, such as monitoring your portfolio or tracking a share's price volatility, is geared towards treating shares as a financial wager rather than as an asset that offers ownership in something solid like a company business.

The emergence of high frequency traders in developed markets such as the United States also raises awkward questions about share ownership. Who, for instance, is the real owner of a parcel of shares that changes hands in less than the blink of an eye?

No doubt, some bosses still pay lip service to the small shareholders, describing them as the company's 'owners' at their AGMs.

But the manner in which some AGMs are organised, making the participants queue up for their lunchboxes after the meeting, gives the impression that they are needy supplicants who are there to enjoy the company's largesse.

Still, the vocal manner in which some retail investors are making themselves heard is an important reminder that the stock market serves a wider goal other than merely the buying and selling of shares.

True, attending AGMs to try to effect radical changes would seem to be as futile as Don Quixote tilting at windmills.

The key issue in the West has been to get the big institutional investors such as pension funds to play a more active role in the firms in which they own a big stake, and keep management on their toes.

This year, they have started to flex their muscles, turning up at shareholders' meetings to vote against the remuneration schemes of financial giants like Citigroup.

In Singapore, there is a different worry. Many listed firms are still run by the original owners and their families after they go public. That has long raised concerns that they may continue to run the firm like their private fiefs, to the detriment of minority shareholders' interests.

As such, keen interest is paid to the financial rewards given out to staff related to the board, top management and major shareholders.

When a listed firm cuts a deal involving its major shareholder there is always that nagging suspicion - rightly or wrongly - among small investors they may be getting the raw end of the transaction, regardless of the safeguards put in place in the Singapore Exchange's rules book to protect their interests.

That may explain why many small investors felt compelled to ask pointed questions on Genting Singapore's $2.3 billion fund-raising efforts when it had no acquisition targets in sight at its recent AGM, or DBS Bank's $9.1 billion proposed acquisition of Indonesia's Danamon Bank.

Another frustration is the meagre dividend payouts - or lack of them - at some listed firms. One unhappy Genting shareholder complained at the AGM about the proposed one-cent dividend, using a Hokkien expression to suggest that the firm must be thinking one cent is bigger than a bullock-cart wheel.

At property developer Hong Fok's AGM, unhappiness was aired over the lack of a dividend payout even though the firm reported a $40.4 million profit jump last year.

Perhaps the manner in which a firm engages its shareholders also determines how its AGM pans out.

At United Overseas Bank, for example, the AGM was wrapped up in 40 minutes with the board, led by long-time chairman Wee Cho Yaw, making the effort to mingle with investors at the buffet reception.

It is a big contrast from the battleground setting at some AGMs where the lines were drawn into a 'them versus us' setting and management beating a hasty retreat once the meeting ends.

Given the vocal manner in which small investors have been expressing their views at AGMs recently, shareholder activism is here to stay. In keeping management on their toes with their questions, they serve as a useful reminder that the stock market serves a wider role - that it is not simply a sophisticated version of the casino, where people make big financial wagers.

engyeow@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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