Date: October 8, 2008
|8 October 2008
“It’s never easy fighting for the rights of the minority shareholders, no matter where you come from. It’s even harder to do so in the local market, where the talent pool is limited and independent directors are usually known to the company owners. Their actions therefore are seldom perceived to be independent even where there is no reason to believe so. As well, there is usually tight control by a handful of powerful parties and this mean that minorities almost always have to go along with what the majorities decide.” R Sivanithy, The Business Times, Oct 16, 2003
Shareholder Issue Management is an investor relations exercise. How well a company manages a shareholder issue depends on how good it is on crisis management. Very often, the crisis is due to a dismal failure on the part of the company to manage a potentially explosive issue well.
It is our finding, that companies which are not strong on investor relations are likely to face issues with its minority shareholders. This is because the Company has not developed the communications channels with its minority shareholders.
Minority shareholders in Singapore post CLOB are now more assertive and more discerning: seeking accountability from the Board and Senior Management.
Minority shareholders are now organized. With the advent of SIAS, minority shareholders have now a strong voice.
SIAS has acted responsibly and worked hard to establish credibility with retail investors, the authorities, listed company management, and the media.
SIAS champions shareholders issues in an un-confrontational manner acceptable to companies – preferring Boardroom resolution to a Courtroom resolution. Our first approach, if possible, is to discuss the issues with Board members and senior management behind closed doors. One cannot deny that in Asia saving face is a crucial factor and therefore SIAS does not rush to name and shame. SIAS makes issues public only when companies refuse to meet minority shareholders or SIAS to discuss the issue(s) and fail to communicate in any form. We go public as a last resort.
We encourage minority shareholders to raise issues with decorum at company meetings. In fact, SIAS has published a Code of Conduct for minority shareholders to help them prepare for Company meetings and to know their rights and duties. We have also issued guidance to Chairman of meetings on how to conduct meetings and how to manage difficult situations.
To-date we are pleased to note that most of the companies facing minority shareholder issues have responded positively to SIAS’ call or have called upon SIAS to meet and work out a win-win solution.
We represent minority shareholders at company meetings only when the Board or Senior Management has refused to discuss the issue outside the meeting. This has been rare, to my recollection.
SIAS is sometimes asked to act as a intermediary to resolve issues between Company and its shareholders. This may be seen by some as unusual as an organization representing minority shareholders, we may not be impartial in our approach to an issue. But we have won the confidence of both sides, to act as an intermediary. We hear both sides before deciding on the cause of action that should be taken to resolve the issues. We seek an amicable settlement, thus avoiding unnecessary adverse publicity to a company and a consequent loss in shareholder value.
However, SIAS will not shy away from championing the cause of minority shareholders even though the Company may be working with SIAS on investor education or in shareholder communication services. Our posture in the Longcheer debacle is a case in point. We lost the support of the sponsor but we could not compromise the interest of minority shareholders.
We assist public listed companies with the shareholder communications by providing a platform for the companies, senior management and board members to reach out to shareholders. We profile companies to retail investors to enable them to choose companies with good investment prospects. To-date 37 public listed companies are benefiting from this programme. This is designed to reduce shareholder issues and crisis management. It enables the companies to place information relevant to shareholders in a timely and periodic manner. It diffuses unnecessary disputes.
We organize dialogue sessions between listed Companies and their shareholders to enable both parties to meet face-to-face, clear wrong perceptions and establish the truth. Often, shareholders labor under wrong perception created either by rumors or media reports. Sometimes, it is reluctance by the company to place all facts before its shareholders that create suspicion and anxiety.
We have assisted or intervened in disputes between Companies and their minority shareholders. To mention a few; Pidemco-DBS Land Merger, AFP and Golden Agri Saga, SembCorp Marine Privatisation, Chartered Semi Conductor Rights Crisis, China Aviation Oil Debacle and Yellow Pages Boadroom Crisis.
Other initiatives include: meetings with shareholders, meeting with the Board & Senior Management, Dialogue Session between company and shareholders, Pre-AGM Meetings, Press Statements, Website Initiatives like Online Q&A, Web Casting of Interviews with the Board, Chairman / Director / CEO.
Crisis management is our forte. However, SIAS recognizes that any unwarranted attack on a company will eventually affect shareholder value. Both the company and its shareholder want grow. So, both parties should avoid an issue becoming contentious and affecting growth.
Some common causes of dispute include shareholder value, dividend payment, director’s fees, management remuneration packages, share options, tax credit distribution, company’s business expansion plans, and independence on the board.
Good Corporate Governance practices should ensure good investor relations climate in the company. Management and shareholders must work together to ensure shareholder value. It does harm to both parties if they continue to take the adversarial path. A tripartite investor relations between a company, it’s shareholders (SIAS) and SGX will ensure a harmonious investor relations climate in Singapore. There should be, in my view, an informal body set up to settle disputes between companies and its shareholders if a conciliatory approach does not achieve a settlement. For instance, shareholders and company could avoid cost by convening an EGM to settle an issue in a confrontational atmosphere or litigation.
We shall now focus on shareholder issues management, the common causes and the reasons for disputes, followed by a few case studies.