Why you need to be an active shareholder | Fin24
 
Loading...

Why you need to be an active shareholder

Jul 27 2016 10:37
Simon Brown

Simon Brown, founder and director of JustOneLap.com.

Related Articles

How I construct my portfolio

 

I currently hold 13 individual JSE-listed shares in my two long-term investment portfolios. This means that 13 times a year my broker sends me an email inviting me to their annual general meeting (AGM).

This is, as the name suggests, an annual event whereby shareholders can listen to management and, importantly, vote on various issues.

The management feedback is sometimes really good and, at times, not worth the time. But the bigger issue of an AGM is the voting. As shareholders, we are entitled to one vote per share (in some cases there are high- and low-voting shares, for example Naspers*).

The issues being voted on include electing board members, approving dividends and the annual report, voting for auditors, and confirming the remuneration committee’s suggestions on executive pay (this is a non-binding vote, which is a travesty).

Other important votes are about issuing new shares for cash (usually for acquisitions) as well as share buybacks the company may be proposing. Finally, there may be some special resolutions to be voted on; these could be about any number of important issues.

In other words, we’re being asked to ensure the company we own is being run by the people we want, in the way we want. Yet here’s the rub: very few private shareholders ever attend, and I am one of those who don’t.

 Frankly, this is lazy. We should absolutely be voting and we don’t even need to vote in person, we can instruct our broker to vote on our behalf via a proxy vote. They would require documentation from us and of course instructions on how we want to vote, so we don’t even need to leave home.

The problem is twofold. Firstly, oftentimes we have no idea how to vote. Sometimes it is easy – a wayward director who we think should be removed, or a proposed deal we don’t like. The second issue is that the actual process of securing a proxy vote is often a nightmare as you have to issue instructions, and brokers usually still do this manually.

But there are simple solutions to both of these problems and both are offered in other markets. Firstly, recommendations on how to vote: which resolutions to vote for and which to vote against. In Australia, the Shareholders Association makes recommendations on how to vote and in the US there are websites dedicated to recommendations; some brokers even offer suggestions on how to vote.

The second solution is to make it easier to actually cast your proxy vote. Most US brokers offer online voting, where you simply log in to your account, head to the voting section and if you have any upcoming AGMs, they will enable you to vote online via their websites.

Unfortunately, our local industry is not yet offering these solutions, but here’s my promise to readers and myself: I am going to try and attend at least two AGMs every year. They will most likely be for Johannesburg-held AGMs as that’s where I am based, but I do travel a fair bit, so attending an event in Durban or Cape Town is not out of the question.

Secondly, I am going to start voting. I am going to submit a proxy for every AGM I have the right to attend. If I am unsure about how to vote on an issue, I will abstain, and even if I abstain on every vote I will still submit a proxy via my broker.

We need to be active shareholders and it starts with the simple process of voting.

*finweek is a publication of Media24, a subsidiary of Naspers.

This article originally appeared in the 21 July edition of finweek. Buy and download the magazine here


NEXT ON FIN24X

 
 
 
Loading...