Those with stakes in firms must put leaders to task on performance.
Why are shareholders less inclined to opposing resolutions? Why are they less hands-on with their boards? When will investors begin demanding for change instead of voting with their feet?
It is surprising this rarely happens when there are too many issues to be unhappy about — dividend cuts, lower profits, short-term incentives, diluting share placements and so on.
Will 2019 be the year shareholders flex their muscle? That remains to be seen. But as the annual general meeting season gears up, here are few issues shareholders can start thinking about.
One, they need to keep tabs on directors coming up for re-election whose CVs are marred by stints at failed or problematic companies.
Investors need to judge directors using metrics such as total shareholder return (TSR) generated over their tenure. Board members with poor record of TSR’s should be voted out.
Besides, shareholders need to push boards to present well thought-out proposals in their shareholder notices with granular information and disclosures. They must be open to modify the proposals based on investor feedback. They must engage with investor at general meetings and investor calls.
Two, owners need to ensure compensation plans are properly done. And this year is crucial considering 13 listed companies saw their chief executives leave office last year meaning there will be equity grants under new contracts coming up.
Shareholders may also need to verify how termination payments for departed executives are structured during the Q & A session.
More importantly, remuneration packages need to be aligned to company performance. This topic has become a controversial one lately with the investing public angry over the rise of boardroom riches irrespective of company poor performance. Perhaps, its time shareholders get rights to vote on pay.
Three, a shareholders’ association is overdue.
Sad that every stakeholder is well represented (Fund Managers Association, Kenya Association of Stockbrokers and Investment Banks, Capital Markets Authority, Nairobi Securities Exchange, Bond Traders Association) except the do-it-yourself shareholder. This outfit is, therefore, to represent retail shareholders on matters that directly affect them.
More importantly, the association is to help advice on voting recommendations on upcoming annual general meetings. They can also push for proxy contests.
In addition, education can also be part of their wider agenda—most retail investors are neither familiar with good corporate governance and strategy issues nor environmental and social standards matters. A helping hand will go a long way.
In all, the shareholding public needs to know corporate dissidence is not a crime. They need to start expressing their frustrations; unhappy with slow pace of reform, call for a “no” vote.
Unhappy with board gender balance, call for “no” vote. Unhappy with misaligned executive pay, call for a “no” vote.
This way, shareholders can begin holding companies to account. The push for shareholder activism is a needed ingredient in our markets.
Hope this year they heed the call and take an active stance. Hope 2019 will be the year of the “shareholder spring”.
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Note: The results are not exact but very close to the actual.
