Shareholder Activism in the Digital Age
Technology has become so pervasive in our daily lives. It’s now possible to get a degree qualification, sign petitions and even buy groceries online. It’s only reasonable that one should also be able to virtually attend meetings, and where necessary, participate in voting processes remotely.
Shareholder activism is a phenomenon that is restructuring the relationship that shareholders have with corporations. It’s characterised by shareholders using their equity stake in a company as leverage to put pressure on management to take certain policy decisions. To expect shareholders in various jurisdictions to travel to a central point to be able to ask questions and engage with the company’s board chair and directors on a public platform is illogical in an age where digital communication is nearly global.
The chief executive of U.S-based Bed Bath & Beyond, Steven Temares recently resigned from his position, after facing increasing pressure from an activist shareholder group who were calling for his resignation and seeking to oust the retailer’s entire board. The group argued the retailer needs to recruit a new CEO, reverse its weak sales by streamlining the number of products it offers and improving its inventory among other issues, all aimed at turning around the company’s profitability.
In this modern age it’s a complete mystery why companies don’t provide all shareholders electronic or telephonic access to their annual general meetings (AGM), if not for voting then for the chance to engage the board.
A small company, Orion Minerals, for example, has offered its shareholders to dial in to proceedings at its AGM in Perth in June, according to a Financial Times journalist. Those shareholders will not be able to vote; however, they will be able to participate in a meeting that previously would be handled by a proxy.
In South Africa, MTN Zakhele Futhi, the multinational telecommunication company’s BEE shareholder structure was scheduled to hold an AGM as per regulation. With most shareholders not being able to physically attend in person due to various constraints, the company opted for a virtual voting system to reach quorum for the passing of resolutions. The shareholders were able to participate in determining the outcomes at the AGM and the client was able to reach consensus on various resolutions.
Granted, some AGMs can be bland, box-ticking affairs and concluded within 10 minutes, attended by the smallest number of investors. But others are far more contentious, with the board challenged on executive remuneration, a source of growing unhappiness among investors, share issues along with environmental and community concerns.
These meetings can drag on for hours, as recently witnessed with Anglo American’s AGM in London that the company’s South African investor base could only access through Twitter and Facebook commentaries from activists grilling the resources company.
For the sake of corporate transparency and accessibility companies must give as wide a range of shareholders as is possible the opportunity to participate in these annual meetings.
Enter iProxy and iMeeting offerings from Ince. iMeeting is an interactive, virtual platform that facilitates shareholder attendance at a live Annual General Meeting. Attendees can simply logon, view a streaming webcast, have a live interactive forum with the speaker and subsequently vote on resolutions. The iMeeting solution has benefits for both board and shareholder alike. Due to the virtual, easily accessible nature of the iMeeting platform, attendance levels are to increase. The solution also enables the board to have a greater sense for shareholder sentiment.
Votes placed within an iMeeting session are sent together with those lodged through the iProxy solution to those tallying votes for an efficient, seamless voting process.
iProxy is an online proxy voting solution for the digital age. With shareholders being able to vote on resolutions in absentia, iProxy takes the process of submitting of proxy voting forms into the digital space. iProxy mirrors the paper-based proxy voting system and can be used in conjunction with, but not replace, paper-based voting. The benefits of using iProxy’s online voting solutions means attaining a higher rate of responses and making it easier to reach the required quorum for any legal meetings. Results of iProxy voting are securely sent to those tallying up the votes at the live annual general meeting so that results on the various resolutions can be announced.
Corporate Governance: A Fund Manager’s Responsibility?
(iCorporate Action for Fund Mangers) is a cloud-based platform that allows for simple and seamless participation in voting resolutions. It has comprehensive audit, tracking and reporting functionality that allows fund managers to automate the reporting on voting activity, across any platform.
The product allows fund managers to vote on resolutions as well as report on voting activity in accordance with CRISA standards.
Issues of corporate governance have received major attention in the media for some time, and were recently reinforced by the Steinhoff saga, in which the company’s management team was found to have acted fraudulently. Could these “accounting irregularities” i.e. fraud, have been avoided? Some think so, but how?
An increasing call has been sounded for a bulk of the responsibility to lie with fund managers with regards to the funds for which they are the custodians. Fund managers are being called to take so-called ESG aspects, that is environmental, social and governance factors into account, when investing and voting on contentious corporate issues, as they effectively are the ones best placed to hold company management teams accountable.
Several recent South African corporate failures have had hefty price tags for both pension funds and individual households. These failures have arguably been in large part due to environmental, social and governance catastrophes in these companies.
Fair and Right
South African fund managers have in the past either sided with company management or, frequently, refused to participate. Those days are over. The recent erosion in value that has resulted from a cavalier attitude to corporate governance is staggering and amounts to R375bn in the case of Steinhoff alone, according to All Weather Capital’s chief investment officer, Shane Watkins. He was opining on the issue of Shoprite chairman, Christo Wiese’s plan to dispose of high voting deferred shares in Shoprite for R3.5bn. Wiese acquired these shares back in 2000 for 1c.
Watkins has asserted that any proposal brought about to fix what has become a contentious issue among Shoprite stakeholders must not only be legal but must also pass the test of being fair and right. He has said that barring significant changes in the current proposal, All Weather Capital will vote against it.
Fund managers now need to apply their minds and ensure any solution they vote to support meets the highest standards of corporate governance. The idea that corporate governance issues are just as important as bottom-line of financial issues, will no doubt bring a move towards a more fair and just investment environment.