CBZ , a prominent Zimbabwe listed banking organisation, recently published wording that proposes to amend its memorandum and articles to enable electronic communications with shareholders. This is a bold move given that the legislative environment is not specifically supportive of this and there does not appear to have been consultation with the market with any of the broader market participants including regulators.
The positive thing about CBZ’s move is that it is an unsolicited statement by the private sector saying let’s take the next step forward because we have a need for this. The Board has obviously taken a conscious decision to obtain legal opinions, consult with their share registrars and amend their constitutional documents. I will not go into the practical issues arising from the approach CBZ has taken at this point.
No overall guidelines have been issued by regulators yet on the issue of electronic shareholder communications in Zimbabwe and the country has been struggling to re-launch an initiative to re-hash its outdated corporate governance code. The Companies Act is outdated and the regulatory structures are in a state of flux following the economic tsunami that hyper-inflation brought.
Is this bad or is it an opportunity? It’s an opportunity to start with a clean sheet and look 20 years into the future and adopt practices and a regulatory environment that is complemented by the current spurt in online communications infrastructure and tools.
The sanctity of the hard copy annual report is still protected in most sub-Saharan African markets but, shareholder apathy, shareholder ignorance and directors’ focus on saving money, means that many companies are not delivering their shareholder proxy materials in hard copy to shareholders in advance of the AGM – typically companies make the annual report available at the AGM and rely on the newspaper publication of the AGM notice to inform shareholders that shareholder proxy material exists. How they (the shareholder) get it is their problem. It’s logical that in a regulatory vacuum companies will start to come up with their own initiatives in line with their interpretation of laws that, when promulgated, did not know that the internet would exist.
I have studied the regulatory issues of website disclosure internationally (particularly in the US) and its complex if you take it seriously. If you don’t take it seriously it’s easy to dismiss retail shareholders as ignorant and irrelevant.
The principle of investor protection is of paramount importance to the SEC and there is ample precedent to see how the process of electronic communications has evolved, thanks to the SEC’s openness and transparency. In all cases, in my opinion, the SEC acts in a manner that protects the shareholder on their behalf, whether they are (the shareholder) is ignorant or not. All of the relevant stakeholders are consulted and the SEC publishes comments from the very many interested parties.
None of this debate in the US is happening in African markets. I can’t decide if African listed companies should adopt a different model altogether, one that does not go to the same extent as the US on account of the fact that “Africa marches to the beat of its own drum”. African regulatory markets don’t have the resources or legislation to do this, or the skills and pan African organisations such as ASEA have yet to make any statements on the online arena as a platform for investment promotion to be more competitive in global markets. ASEA has recently opened the door to co-operation with third parties to achieve their objectives and a substantive head for the development of the association, Silvana Wanjiru, was appointed last year. Silvana is forward thinking so there may be some hope for getting online investor relations onto the pan-African agenda at some point in future.
Dominic Jones , a world leader in online investor relations, has this opinion about the trends in African markets regarding de-linking the direct communications channel with shareholders:
“Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses.”
Whilst CBZ’s move is positive, CBZ needs to know, as do the regulators and all other players, that progress in this area has to be a team event, crafted from international best practice as amended for the very unique circumstances prevailing in our markets. To craft these solutions requires knowledge of best practice online communications, corporate governance, PR, marketing and financial reporting.
Here is an extract of the wording of the announcement which, at the time of writing this, does not appear on their website:-
1. It was further Resolved:-
“That the Board be and hereby authorized to amend Article 129 by deletion of the last sentence and substitution thereof with the following:
Soft copies of the Director’s report, accompanied by soft copies of the statement of financial position and statement of comprehensive income and all other documents required to be annexed to the statement of financial position shall at least fourteen days before each meeting be delivered by electronic means to the registered e-mail address of every member. The publication of the said statements and accompanying documents on the Company‘s website address and the sending of such documents by e-mail from the Group Legal Corporate’s Secretary’s Desk or such other designated person shall be deemed sufficient delivery to members.
”A printed copy of the Director’s report, accompanied by the printed copies of the statement of financial position and a statement of comprehensive income, and of all other documents required to be annexed to the statement of financial position, shall at least, fourteen days before each meeting be delivered by electronic means of if so requested, sent by post to the registered address of the requisitioning member.)”
2. It was further Resolved:-
“That the board be and is hereby authorized to amend Article 133 by its deletion and substitution thereof with the following:
133. A notice may be served by the Company upon any member whether by electronic means, personally or by sending it through the post in the prepaid letter, envelope or wrapper, addressed to such member at his registered address or e-mail address”
3. It was further Resolved:-
“That the Board be and is hereby authorized to amend Article 135 as follows:
In line 2 by the addition of the following words, after the word ‘advertisement’: ‘and or publication on the Company’s website; in line 3 by the deletion of the words ‘or which may be’ and after the word ‘advertisement’ by addition of the words ‘or electronic means’; in line 5 after the word ‘newpapers’ by addition of the words ‘and the Company’s website’. In line 8, after the word advertisement’ by addition of the words ‘and or electronic means’ and in the line after the word ‘published’ by addition of the words ‘or the date the electronic communication was dispatched’”
4. It was further Resolved:-
“That the Board be and is hereby authorized to amend Article 139 as follows:
In line 1, after the word ‘delivered’ by addition of the words ‘by electronic means to the e-mail address of the member.’’
There are a number of companies in Zimbabwe taking their online investor relations practices seriously, however none have yet taken steps to adopt electronic communications by amending their constitutional documents.
My conclusion is that this move should be positive in Zimbabwe and will hopefully stimulate debate.
More on Kenya here