As dull as an?... AGM

2013-12-22 10:00

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How SA companies can take a page out of Buffett’s book

Every year in May, more than 35?000 shareholders of Warren Buffett’s Berkshire Hathaway group descend on Omaha in Nebraska for its annual meeting.

It’s a fun, festive event, with stalls selling products from the group’s companies, panel discussions, Q&A sessions, a film about the group’s activities and then, of course, the official proceedings.

Anyone who feels like it can again compete to see if he can throw a rolled-up newspaper further than Buffett, and at one stage Buffett and Bill Gates could even be seen playing a game of table tennis.

In South Africa, the AGMs of most listed companies are, by comparison, rather dull affairs.

Despite the noble recommendations on transparency, openness and participation in the King III codes for corporate governance, it looks to an outsider that companies want to get through the regulatory requirement of an AGM as quickly as possible.

Though questions are welcomed theoretically, there is often a bit of a strained atmosphere if a shareholder asks even a slightly controversial or difficult question. That’s apart from the cold sweat directors break out into if they see shareholder activist Theo Botha walking through the door armed with his list of difficult questions.

Annual meetings are often completed without anyone asking a question at all. Of course, there are exceptions, such as Remgro or PSG. Here, shareholders come specifically to listen to the wisdom of Johann Rupert or Jannie Mouton.

Empowerment companies like Grand Parade Investments have a large group of loyal shareholders from the Cape Flats who attend the meeting diligently every year. But South African companies are clearly more uptight about their annual meetings.

Remgro has strict security at its AGM in the Erinvale Estate conference centre. Guests must pass through a metal detector to gain access, and press photographers are prohibited from taking pictures.

Remgro has the problem of a disgruntled FNB customer, Michael Harris, who turns up at AGMs to complain about his grievances with FNB, which have nothing to do with Remgro.

Then there are companies like JD Group and Astral Foods that at one stage did not even allow reporters to attend their AGMs.

In contrast, shareholders at Berkshire Hathaway queue up to ask questions. There is a system whereby shareholders can submit their questions in advance to three specially selected financial journalists, and these three then select the 10 best questions and put them to Buffett and his friend and co-chairman, Charlie Munger, on the day of the meeting.

On this day, there are also 11 microphones in the auditorium, and lots are drawn to see which shareholders have the privilege of asking their questions.

Berkshire Hathaway sets aside an incredible five hours for question time at its AGM.

Perhaps the time has come for South African directors to loosen up a bit. They should take themselves less seriously and have a decent party at their AGMs.

Can a company ban the media?

Riyesh Daya, a partner at law firm Webber Wentzel and a corporate governance expert, says it is in the interest of publicly listed companies to have an image of transparency and openness, and they should welcome the media to their AGMs.

But a company would be completely within its rights to bar the media. The AGM is, after all, meant for shareholders who have the right to vote.

But there is nothing in the Companies Act prohibiting the media or other third parties from attending the AGMs of public companies and in the interests of the public, they are free to ask for permission to attend them.

Daya says an AGM is just a platform on which the board and management of a listed company have the opportunity for stakeholder interaction.

The Companies Act states that a public company must hold a structured AGM at least once a year within 15 months of the previous one. Shareholders must be given adequate notice of the meeting and details of the agenda.

They have the opportunity to ask questions and do not have to say in advance what they are planning to ask.

Daya emphasises that the spirit of the Companies Act is that AGMs should be a forum for constructive debate.

King III goes further and encourages dialogue. The board is encouraged to delegate to management the task of handling stakeholders’ concerns proactively and encouraging shareholders to attend AGMs. An annual meeting is therefore not simply a regulatory requirement. Daya feels strongly that South Africa needs more active shareholders.

He says: “Shareholders must ask the right kinds of questions, because, in general, I see a kind of apathy among South African shareholders.

“They should exercise their right to question management to ask about issues that trouble them. We need a few more people like Theo Botha, who actively asks very difficult questions at annual meetings.”

This, he says, will ensure that more directors are held accountable.

According to Daya, King III also encourages companies and shareholders to establish forums and associations, and to have websites where questions can be answered.

Shareholders should also be informed that they are entitled to make use of legislation such as the Promotion of Access to Information Act to obtain information from a company.

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