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For some firms, an umbrella was the only return until Covid struck

By Financial Standard Team | July 7th 2020
Shareholders going through proceedings during the Safaricom AGM held at Bomas of Kenya in 2018. [Wilberfoce Okwiri, Standard]

For the first time in decades, Alois Chami, a veteran investor at the Nairobi Securities Exchange (NSE), won’t take home a branded umbrella gifted by any of the 60-odd listed companies where he has invested his cash.

The umbrella is a traditional “goodie” among others such as T-shirts, caps, free lunches and vouchers that companies gift shareholders who attend their Annual General Meetings (AGMs).

However, the ban on public gatherings to curb the spread of the coronavirus has seen many companies, for the first time in history, unable to organise physical AGMs.

“This is the first and worst time,” Chami told the Financial Standard on phone.

Chami, who started investing at the bourse in 1973, has since retreated to his upcountry home in Esikule village deep in Busia County.

The self-taught investor is a familiar face in most AGMs and is well known for firing tough questions to company executives tasked with protecting his money.

This year, Chami lamented has been frustrating with many questions sent virtually going unanswered.

Late April, the High Court ordered that any company listed on the NSE holds virtual general meetings if unable to hold a physical AGM, subject to approval by the Capital Markets Authority (CMA).

Last month, CMA issued guidelines for listed firms to hold virtual AGMs following the Court’s greenlight.

‘‘To protect the rights of all shareholders, we emphasize that all shareholders should be given ample time to raise their questions and receive explanations from the directors and management,’’ said CMA.

An analysis by the Financial Standard shows that virtual AGMs have not been smooth for the majority of the listed companies.

Firms have had to contend with technological hitches that disrupt the meetings which often feature company directors dialing in from different geographic locations.

Most companies have had to conduct several test runs for their meetings before inviting shareholders to log in.

Large companies have the option of outsourcing their entire virtual AGM to technology firms that supply the full connectivity needs required by the various board members.

This is however costly to small companies, which are required by regulators to maintain a similar degree of compliance to their larger counterparts.

Shareholders who experience connectivity challenges or are less tech-savvy might find themselves left behind in the proceedings and unable to offer their input.

Poor quorum

Chami has found himself in this group, owing to technological challenges, especially in his remote village confine.

Chami, who has attended 14 virtual AGMs this year, says that companies have been getting away with a lot of unanswered questions.

Using a football analogy, Chami observed that virtual AGMs have become a “walkover” with officials ignoring the participation of shareholders amid poor quorum.

“Majority of the tough questions go unanswered. They promise to handle them later but that doesn’t happen … you can’t even ask about dividends,” he said.

Chami, who prefers a hard copy of a firm’s annual financial report for deeper analysis, said he’s been unable to access the crucial document from most companies.

Investors are handed copies during physical AGMS and the reports are also posted on company websites but most companies take too long to do that.

The 70-year-old Chami further added of his inability to keep track of the companies he’s invested in due to poor access to information in his village.

“I’m calling brokers who aren’t answering. Accessing information on companies has become hard. It’s a tedious process to even buy a newspaper here. I have to wait for TV business news to learn about companies,” he said.

With companies shelving dividends and embarking on cost-cutting measures, Chami regretted that “humble” shareholders like him had been forgotten.

Companies have over the years been looking to cut down on freebies during AGMs to make the yearly meetings that run into millions of shillings cheaper.

AGMs offer an opportunity for shareholders to scrutinise books of account and give input to directors on the direction of the company.

However, they have morphed into social gatherings for freebies including lunch.

Safaricom, that has over 500,000 shareholders, was pushed to institute cost-cutting measures during AGMs.

However, the move was met with stiff resistance with shareholders demanding lengthy explanations.

Some shareholders argue that the freebies are the only thing they get from the company especially when it doesn’t offer dividends.

On the back of an economic downturn, the past few years have been harsh to companies and shareholders have had nothing in return.

Now, virtual AGMs seem likely to outlive the coronavirus era with companies realising their cost benefits.

Certified Secretaries of Kenya (ICPSK), the professional body for company secretaries Chief Executive Obare Nyaega noted that there may be no turning back in the post-Covid-19 era.

He observed that companies have realised the huge savings they are making as well as the benefits being derived from holding their AGMs virtually.

He, however, noted that there could be instances for a compromise - where companies will hold a hybrid of virtual and conventional shareholder meetings, but things are unlikely to return to where they were post-Covid-19.

“We will have hybrid meetings going forward. Some people like coming and shaking hands. But there is also the younger generation that favours the technological way of doing things. So, people will come to sit while others will be able to call-in and still participate,” he told the Financial Standard.

“We have seen this in our case where our members from neighbouring countries who previously could not attend our meetings are now able to participate virtually,” added Nyaega.

While the virtual AGMs might be inaccessible to some shareholders such as Chami - who might have challenges accessing the technological platforms, there is an improvement in terms of the engagement between management and the shareholders.

In the case of professional bodies such as the ICPSK, it has increased the number of people attending meetings.

Mr Nyaega noted that in the past, getting people under the same room was problematic but with the virtual AGM that the organisation held recently, it was able to increase attendance by 50 per cent.

“In our case, we give members agenda papers 21 days in advance and set up a portal online where you can post questions. This has been very effective,” Nyaega said.

“We have witnessed increased attendance from members. Compared to the physical meetings previously, we had 50 per cent more people this year. It is also easy to verify the membership of the meeting,” he added.

He said that the virtual AGMs offer better feedback.

According to Nyaega, such attendance and improved quality of debate might be unique to professional bodies or firms that have a homogeneous shareholding.

Tea factories

Even in instances where companies have many retail shareholders, they have access to a gadget that gives them access including through call-ins and use of Unstructured Supplementary Service Data (USSD) codes.

What other secretaries are doing like for the tea factories is have stations that are equipped with equipment and have people sit there and follow proceedings remotely while adhering to government guidelines

Nyaega added that the institute has been offering company secretaries of small and medium enterprises platforms to do AGMs in instances where such firms may have many members but lack the technology to undertake virtual AGMs.

ICPSK recently issued guidelines for company secretaries to follow when their firms are holding virtual meetings.

Motivating factor

Mr Nyaega urged companies to continue appreciating their shareholders by offering them goodies - only that going forward, the mode of delivery would be different.

The branded T-shirts and umbrellas have been a motivating factor for many retail shareholders to attend AGMs.

Other than the company showing its appreciation to the investor, these branded items also tend to partly help in brand building

“We found out that about 60 per cent of the people like the goodies such as notebooks, T-shirts and umbrellas given during the AGMs,” Nyaega said.

Nyaega added that since companies are now making savings through virtual AGMs, so they can courier the gifts to shareholders.

“It is a good way to appreciate shareholders. Few firms have been able to send these items to the shareholders, for instance, asking shareholders to present themselves at their branches and prove their shareholding to collect the goodies,” he said.

Chami acknowledges the devastating impact the virus has had on companies. But with many of them not offering him any returns this year, he further regrets the lack of freebies.

An M-Pesa message could have replaced the lunch vouchers during these tough times, he says.

“I used to give the umbrellas to old women in the village who appreciated. The umbrellas also help market the company more … This year we’ve been given nothing,” he said.

[Wainaina Wambu, Macharia Kamau and Frankline Sunday]  

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