KARACHI: The shareholders’ annual general meetings (AGMs) provide an opportunity once in a year to investors to meet the board and discuss company affairs. Yet in Pakistan, the participation is seen to be generally low.

Most minority shareholders who do attend are caught yawning at AGMs for 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.

The regulators could perhaps also place a bar on scores of meetings in a single day so as to make larger shareholders’ participation possible. While it is sad that the presence of enormous crowd of shareholders at company AGMs, as seen in stockholders meetings of Warren Buffet’s Berkshire Hathaway in the US or the Dhirubhai Ambani’s Reliance Life Insurance in Mumbai, are lacking in Pakistan, the boards of directors of Pakistani companies also count their blessings for they do not have to confront the dreaded ‘Sokaiya’ — a form of specialised racketeers unique to Japan that extorts money from companies by blackmailing and threatening to publicly humiliate managements, usually in their annual shareholders’ meetings, by exposing mainly the secret amorous exploits of directors.

In the AGMs of scores of local listed companies the questions by some genuine investors on the figures presented in the financial sta­tements are usually drowned in the cries for ‘gifts’ by the small sha­­reholders attending the meetings.

The ‘gift culture’ at the AGMs has witnessed a dramatic fall in recent times as managements have increasingly learnt to say ‘No’ following strict prohibition by the regulators.

But at some company meetings, the old habits have refused to die and small shareholders continue to pester the boards for such petty gifts as a wall clock, New Year’s diary, shirt piece, 2kg bags of sugar or even a lunch box.

Since the Companies Ordinance, 1984 permits companies to hold AGMs at the registered offices, if they so wish, many do as a means to dodge gift seeking shareholders.

It is 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.

Part of the blame for the minority shareholders greed perhaps rests on the company boards which deny shareholders their due share in company profits through payment of dividend. Out of 562 listed companies, as many as 114 did not declare dividends despite earning profits, according to Karachi Stock Exchange Annual Report 2014.

But the Finance Act 2016 has again coerced managements in companies with huge reserves to pay dividends or bear a stiff penalty.

Many heads of corporates suspect that the government introduced ‘compulsory dividend payout regulation’ in the last budget, less for the love of general investors and more to protect its own revenue receipts, since the government holds more than half the total stock holdings in the market and dividends from high return yielding stocks is major source of revenue for the state.

For the preceding fiscal year, the government had set a target of Rs82 billion as receipts from dividend on its securities.

Recently, the Securities and Exchange Commission of Pakistan (SECP) issued notices to more than 70 ‘defaulter companies’ to clear their defaults within a fortnight or prepare to pay heavy fines.

The progress on that front has not been made public but the regulators could perhaps dispatch its representatives to monitor the proceedings at AGMs of selected companies or to those which have controversial items on their agenda.

In the normal course of an AGM, the agenda comprises approval of accounts and profit appropriations; appointment of auditors and ‘other special business’.

The ‘code of corporate governance’ reduced the maximum time for presentation of annual audited accounts to four months, which by virtue of section 158(1) of the Companies Ordinance, 1984 was six months from the close of its financial year.

Published in Dawn, September 20th, 2015

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