The Securities and Exchange Commission of Pakistan (SECP) has decided to make its presence felt at the shareholders’ meetings of listed companies.

According to the Commissioner Capital Markets, Shahid Ghaffar, the corporate watchdog has started sending an authorised representative to participate in the proceedings at some selected company meetings. The purpose is said to be to “ensure that the AGMs are held in an orderly and meaningful manner in the interest of the minority shareholders”.

Declaration of dividend; approval of accounts; appointment of auditors; election of directors and ‘other special business’ are some of the usual items to be found on the agenda of company AGMs. By virtue of section 158(1) of the Companies Ordinance, 1984, every listed company has to hold an AGM within a period of six months from the close of its financial year, at least once in a calendar year.

The recently promulgated ‘code of corporate governance’ has reduced the maximum time for presentation of annual audited accounts to four months. Shareholders’ meetings provide once in a year opportunity to investors to meet the company board and discuss the company affairs, question the figures presented in the financial statements drawn up by the management and seek the board’s prospective view.

However, all of that is usually drowned in the cries for ‘gifts’, by the small shareholders attending the meetings. The ‘gift culture’ at the AGMs has witnessed dramatic fall in recent times, as managements have increasingly learnt to say ‘No’. But at some company meetings, the old habits have refused to die and even as the Secretary announces the first item on the agenda, small shareholders begin clamouring for a ‘gift’ for every one present.

And what are those gifts for which there is so much hullabaloo? A wall clock, a new year diary or calendar, a shirt piece, a two kilo bagful of sugar or even a lunch box. And the attendance of shareholders at such gift-giving AGMs is invariably phenomenal. Many men split their meagre shareholdings of few hundred shares in such companies among themselves, wife and children (notwithstanding the legal bar on minor being a shareholder).

Each member of the family then becomes ‘eligible’ for the gift and they make their presence effectively felt during the proceedings at the AGMs and more so afterwards at the tea table!

The Companies Ordinance, 1984 permits companies to hold AGMs at the registered offices, if they so wish. The desire to dodge gift seeking shareholders has been one of the reasons that increasing number of companies have shifted the venue of AGMs from convenient locations in the city to far off factory premises:

At SITE, Hub Industrial Estate, Nooriabad, Hazara and Hattar. The Institute of Chartered Accountants of Pakistan (ICAP) has recommended that managements ought to be discouraged from holding AGMs at the remote locations for it surely is inconvenient to other shareholders who genuinely wish to participate in the AGMs.

Companies with clean reputation and healthy financial record do not succumb to the shareholders’ pressure for ‘gifts’. But while blaming the small shareholders for their greediness, it has also to be recognised that they scarcely have the power to change all that is set to be approved in the agenda.

Often unlettered and with an aggregate stake of well under 10 per cent, small shareholders are neither able to understand the intricate entries in the financial statements, nor do they have the power to block the passage of resolutions that the board may propose to pass. It is essential that nominees of institutions on company boards, start speaking up for the shareholders instead of sitting as dumb spectators.

There is also the void of a strong, genuine small shareholders’ lobby, that needs to be filled. Perhaps, institutions could take a lead in the formation of such small shareholders associations. It is appropriate that the ICAP’s suggestion denying companies permission to hold meetings at remote locations be accepted.

Also, meetings should be so scheduled as not to allow companies to crowd them into scores of meetings on a single day. All that will make larger shareholder participation possible. Presence of a hundred shareholders at any AGM is understood to be a mighty big crowd. Compare that to developed markets:

At the annual meeting of ‘Berkshire Hathaway’ in Omaha, early this month, more than 14,000 shareholders turned up. They came to listen to the company’s chairman, Warren Buffet, who held forth for nearly six hours on everything under the sun.

But then, Warren Buffet is recognised to be the most successful investor of the 20th century; share in Berkshire Hathaway is the highest quoted stock on the New York stock exchange—now trading at breathtaking $75,200 a piece and the company itself commands market capitalisation of $99 billion; market capitalisation of all 726 listed companies on the KSE combined, by the way, works out to a princely $7 billion.