Embrace virtual AGMs to end shareholder apathy

Companies whose shares are listed on the Nairobi Securities Exchange are required by law to hold a general meeting of all shareholders, at least once annually. Such meetings are also popularly referred to as annual general meetings (AGM).

AGMs are intended to be platforms where shareholders can vote for their preferred directors, who in turn provide leadership and strategic direction within the listed companies.

Shareholders also get an opportunity to listen to the board of directors’ presentation about a company’s financial performance and ask questions related to its financial prospects and strategic direction.

It is also at the AGMs where shareholders can vote for or against important issues such as top management pay, and renewal or termination of the tenure of directors and company auditors.

These are important matters that have a strong significance on the competitiveness and survival of a company.

Since listed companies are primarily controlled by non-owner managers and directors, AGMs are thus an indispensable corporate governance tool for shareholders to hold the former to account and engender transparency.

Globally, shareholders have a legal right to effective and unhindered participation in their investee companies’ AGMs.

Notably, however, the ongoing coronavirus disease pandemic has forced many companies to delay or postpone their AGMs due to restrictions imposed by governments on the movements of people to prevent its spread.

Even where movement restrictions have been lifted, many companies continue to face predicaments where social distancing requirements mean that traditional AGM venues might be unsafe for large shareholder gatherings.

This therefore means that many shareholders are unintentionally denied an opportunity to exercise their legal right to have a say on important corporate governance issues.

Before the outbreak, attendance at the AGMs of many Kenyan listed companies was already poor owing to widespread shareholder apathy.

Research previously conducted by the author of this article showed that a large proportion of minority shareholders refrain from attending AGMs as costs incurred can be more than the dividends received from the company in the same year.

Shareholders located upcountry or other distant towns in Kenya, travelling to Nairobi to attend a two-hour AGM, have to foot their own bus fare, subsistence and accommodation expenses and other travel related costs.

For many minority shareholders, the costs involved in attending an AGM can exceed the immediate benefits derived from the company – particularly the dividends received in the same year.

This is problematic as it can engender a situation of aloofness among minority shareholders, further pushing them to the periphery of the corporate governance landscape. This can also leave managers and large shareholders, particularly controlling family owners, with considerable latitude to advance their own self-serving agenda.

To ensure that all shareholders have an equal opportunity to participate in AGMs and provide input in the strategic decision-making process, it is important for Kenyan companies to rethink their interactions with minority shareholders.

This can be initiated through embracing electronic voting and/or digital participation where shareholders can use their company membership numbers to gain access to the virtual AGMs.

This can also take place through a web-based platform, or Sim Toolkit (STK) and/or Unstructured Supplementary Service Data (USSD) applications, or a combination of such technologies.

Kenya is already a globally renown hub for technological innovations, especially due to the M-Pesa mobile money service that has enabled the country to achieve near-total financial inclusion for her citizens.

The global success story of M-pesa, which is partly powered by the STK and USSD technologies, is clear demonstration that if supported by the relevant authorities, Kenyan companies should be able to embed their corporate governance processes and practices into the country’s tech scene; for the furtherance of shareholders rights and to ensure a thriving corporate governance climate.

Kimani is a lecturer in accounting, and co-ordinator at the Centre for Accountability and Global Development, University of Essex, United Kingdom.