From the ashes a thing called the…..”mailing list” arises

Published on 24 August 2010 by AfricanisCool in Corporate governance, For investors, For listed companies, For regulators

In Kenya new legislation deems that once something is published on the website of a listed company it is deemed to have been delivered to the shareholder. Beem-me-up-scotty-Star-trek-type-thing. To listed companies this avoids the hassle of dealing with the ignorant masses of retail shareholders. The SEC in Kenya and the Nairobi Stock Exchange have endorsed this.

To every listed company though, there are those shareholders that are important. The ones that will have something to say when they ask why their shareholder proxy materials were not delivered to their door. For example, the institutional shareholders that actively monitor the creation of shareholder value. Companies that adopt the deemed-Dr Spock communications method only will alienate professional investors. So these investors will need looking after. You will have a trend developing in Kenya where the mailing list will come back from the dead and start to grow and this will create an uneven playing field, or the perception of an un-even playing field in the communication platform. The more priveleged “more important” shareholders will receive their shareholder proxy material by courier or by hand delivery or by post. The ignorant peasant shareholder will not. The rich and influential will get richer and influential and the ignorant and poor will stay like that. This will be supported by the law.

Some institutions and funds are required to vote their shares and in the USA the existence of nominees or share held in “street name” has been seen to have disenfranchised shareholder suffrage. The Dodd Frank act in the USA and other initiatives are actively trying to put the vote back into the hands of the retail shareholder. In Kenya regulators are taking it away.

In the absence of progressive initiatives to provide shareholder choice the new mailing list will grow only after a shareholder has been aggrieved i.e. they don’t receive their proxy material and then they complain and then they do receive it. You will have a situation where shareholders will attend meetings under very different circumstances but in the eyes of the law they will have been treated the same. For the listed company, the man in the middle, issues of corporate reputation will arise and the African conspiracy theory attitudes may start shareholder activism. In shareholder votes, where contentious issues need shareholders’ votes, it will be very easy for someone to stand up and accuse a listed company of purposely or negligently not distributing shareholder information. The law will be irrelevant. Perception will be relevant. Once negative shareholder emotion kicks in then a different side to corporate sustainability, or lack thereof, will be seen.

For between US$10,000 and US$30,000 a year a listed company can take and make all reasonable efforts to ensure that shareholder proxy material availability is communicated to shareholders or delivered to shareholders. This is effectively an insurance policy against the sort of shareholder actions that may arise from not communicating at all or “beeming” shareholder material via Dr Spock’s Star Trek Enterprise. Its about corporate reputation. Oh and its good corporate governance. Actually delivering shareholder proxy materials to the owners of a company is good corporate governance.

African Investor Relations