Don’t throw out the snacks at AGMs

End-April not only saw the usual rush of annual general meetings (AGM) by listed companies with their financial year ending on Dec 31, but also a renewed debate over the form and standard of these corporate sessions as well as the conduct of some shareholders who regard AGMs as the “annual great makan”.

Questions on the kind of refreshments companies should serve at AGMs and whether free gifts should be given to shareholders are not new. Neither is the inconsiderate behaviour of shareholders at AGMs.

But this year, Securities Investors Association Singapore (SIAS) president David Gerald issued a statement to chide misbehaving shareholders. Noting how some rush for the food at AGMs and pack it to take home, he said: “Some even spill the food, bringing maids and grandchildren without showing any regard or being mindful of other shareholders.”

Mr Gerald reiterated that the freebies and food available at these meetings are a privilege, not a right, of shareholders, and that AGMs should be about the annual report and shareholders seeking accountability from the board.

What is missing so far in the discussion on AGMs, however, is what companies and shareholders can do to make the sessions more productive for all parties.

Why do AGMs exist?

They are meant to allow investors to question the company on its business plans, shareholder returns and performance, and for the board directors to address any concerns or issues raised by shareholders.

The focus should be on the substance, not the form, of the AGMs.

This is perhaps why some companies have decided to hold no-frills AGMs where guests are served just water, coffee and tea.

Gone are the days of grand buffet spreads, with even a jazz band thrown in for good measure. More companies are also doing away with freebies such as grocery vouchers, which are given out during their AGMs. And instead of bulky 500-page AGM reports, some firms are now releasing the reports on CDs and thumb drives.

Yet, some investors seem to be stuck in the past.

At one bank AGM that I recently attended, one shareholder was overheard telling her friend on the phone not to attend because “the goodie bag the company gave this year has nothing, only a few cakes”.

Another shareholder was telling her partner that the AGM is getting worse each year and asked aloud whether the bank was doing well. She seemed to be equating the form of the AGM to its corporate performance and outlook.

While the bank had served only beverages post-event and gave out paper coupons to shareholders for the redemption of goodie bags, the irony is that it reported a robust performance for the given year, with optimistic goals set for the year ahead.

Yet, the bank’s shiny financial performance was dulled by its lack of goodies — at least to some shareholders. So, what can be done to rectify such perceptions and make AGMs more useful for shareholders as well as the company?

Just this week, a report in The Straits Times said SIAS is appealing to all firms listed on the Singapore Exchange (SGX) to support its initiative of raising the standard of AGMs. The exercise would involve engaging a team of analysts to research the listed companies’ annual reports and come up with relevant questions that should be raised during their respective AGMs. Besides analysing annual reports, the team will conduct research and surveys on corporate governance and investor rights issues.

It is encouraging for the investors’ rights watchdog to step up to push for better curated AGMs, where investors can have a more robust discussion on topics.

However, the usefulness of tea receptions after the meetings should not be disregarded. After all, people connect better over food.

Companies can turn the post-event makan sessions into a networking opportunity for directors and shareholders to mingle and interact freely. Such food fellowships also allow shareholders who did not have the opportunity to ask questions during the AGM to do so in a more relaxed setting.

These food sessions also reduce the distance between the shareholders and the company directors — who would usually sit at a long table on a stage in the ballroom during the AGM — and could further engage shareholders’ interest in the company.

AGMs present a once-a-year opportunity for management to share its vision and create a bond with shareholders over snacks and coffee.

By having after-event interactions with retail investors, management can strengthen the confidence of shareholders in the company, as they develop a sense of familiarity with the directors while getting a better understanding of the company’s fundamentals.

For companies, their objectives at each AGM should be building rapport with shareholders so that they would stay invested for the long term. Board directors and C-suite executives who regard AGMs as a yearly chore should change their mindsets.

And while gifts are a privilege given to shareholders and not a right, these small gestures of goodwill play a big role in giving shareholders a “feel-good feeling” about the company — which can be just as important as buy ratings by stock analysts.

Perhaps a method to prevent the misbehaviour of shareholders would be for companies to opt for more stringent checks on the attendees at the AGM. An example could be having a stamp or recognition tag per investor. This is to prevent additional “guests” from showing up uninvited and taking advantage of the refreshments otherwise meant for the shareholders.

AGMs do not have to become carnivals, but adding some of these gestures to an otherwise staid affair may help the company keep shareholders’ confidence in the long run.

ABOUT THE AUTHOR:

Angela Teng is a business reporter with TODAY.