A frisson of excitement ran through the newsroom last week. Pick n Pay had just gifted us a news story. The struggling retailer had decided that only shareholders could attend the AGM. That meant no guests and certainly no journalists.
Great for a slow news week: a corporate event transforms into a news event.
Of course, it wasn’t the first time journalists had been blocked from attending an AGM. In the 1990s, struggling furniture group Rusfurn refused to allow journalists at its AGM. It turned into a high-profile controversial event that marked a significant milestone in the group’s demise and eventual rescue by the JD Group.
Then there was Relyant Retail, part of South African Breweries’ unwieldy industrial conglomerate. At a particularly sensitive time in its drawn-out unbundling, CEO Chris Wells decided that journalists shouldn’t be allowed to attend the AGM. Not much good came of that decision either, though Wells went on to briefly lead Transnet.
But it’s not just struggling companies that prefer to keep the prying eyes of journalists away from their under-stress business. Ninety One, which is neither struggling nor under stress, has a policy of obliging nonshareholders to secure approval to attend its AGMs. As it turns out, that approval is hard to come by. And you’ll find out only minutes before the meeting is due to start.
Also on the fund management front, Sygnia regularly blocks journalists and other nonshareholders from attending its AGMs.
Reinet, the Rupert family-controlled investment vehicle, also insisted on shareholder-only access at its AGM last week.
And then there’s the unsettling increase in “technical issues” that block virtual attendance, perhaps a subtler way to deal with unwanted attendees.
However, despite some outstanding exceptions, prohibiting attendance at AGMs is an unusual board tactic. Hence the excitement about Pick n Pay’s categorical statement on the matter ahead of its latest AGM.
On the evening before the 8.30am AGM, in response to several requests for a link to the meeting, Pick n Pay sent the following message: “Thank you for your interest in our Pick n Pay AGM. Attendance is restricted to verified shareholders, duly appointed proxies and authorised shareholder representatives only. As a result, members of the public are unfortunately not able to attend the shareholder meeting.” Note the use of the passive voice as though the restricted attendance is down to some noncorporeal powerful entity over which the board has absolutely no control.
And then, in an attempt to demonstrate how accommodating Pick n Pay actually is, we’re reminded of what we can attend.
“You are, however, very welcome to join our results presentation in October, where we will share an update on the group’s performance and strategy.” And then, lest there be any doubt of its commitment to openness: “We also remain committed to engaging openly and transparently, and our team will continue to respond to any questions you may have.”
Undeterred by this unequivocal rejection, intrepid FM journalists decided to hang around the virtual entrance to the meeting in the hope that some technical glitch might enable access.
It turns out that there was no problem whatsoever getting into the meeting. It also turns out that the meeting contained no headline-grabbing news; absolutely no reason for the public (including workers and consumers) not to have access to the meeting.
What there was was an interesting discussion between CEO Sean Summers and a few shareholders. (A week later the FM was told we had been able to access the meeting because of an oversight by the event-hosting company.)
So, what is the issue with attending AGMs?
When it comes to company meetings, section 63 of the Companies Act requires shareholders to present evidence of their shareholding if they want to speak, vote or participate at a shareholders meeting. There’s no specific mention of nonshareholders who might want to attend without speaking, voting or participating.
The few companies that block nonshareholders claim that the AGM is a company meeting and so the only people entitled to attend are shareholders. And yes, in a technical, legal sense a company — even a public listed company — is a private juristic person, as opposed to being an organ of state with a public function.
But the notion of a private company is a dated one, belonging to an era when companies were much smaller affairs with modest operations. Perhaps it’s time to bring it up to date.
Anyone able to recall Rusfurn and Relyant Retail might also remember Dawnlaan Beleggings vs JSE from way back in 1983. Essentially, judge Richard Goldstone ruled that the JSE might believe it is a private entity, but that belief would ignore the commercial reality and public interest role it plays. As Goldstone saw it, a private company’s legal form doesn’t determine reality, its function does. If true for the JSE, surely it could also be true for Pick n Pay, Ninety One and Sygnia.
Almost every company listed on the JSE could be said to have a public function. That’s because decisions made by the boards of these companies have an impact on a broad range of stakeholders — employees, consumers, suppliers — beyond their shareholders. If you have any doubts, ask any one of the tens of thousands of individuals whose lives are set to be impacted by Pick n Pay’s section 189A restructuring plan.
Indeed, given the nature of their business, it’s deeply ironic that Ninety One and Sygnia are serial offenders on the AGM front. What is more public than scooping up billions of rands from individuals across the economy and pouring them into investment opportunities across the economy? Every day Ninety One and Sygnia make decisions that will affect the lives of millions of South Africans. Surely that’s the ultimate public function?
On what basis can they justify being treated as private companies with no public function? These are companies that beg to be open to public scrutiny, especially given the nature of 21st-century investment with all its slicing and dicing of assets.
It’s no longer a case of creating a portfolio with 100 shares in SABMiller, Anglo and Naspers and pitching up at the AGMs. Today a host of middlemen and advisers exist between the ultimate beneficiary (the saver, investor or employee) and the shares in which they are invested. In most cases these investors would be hard-pressed to name those shares.
Indeed, such is the slicing and dicing that it’s likely anyone whose savings or pension is being managed by a fund has some exposure to companies such as Pick n Pay and Ninety One, whether they know it or not.
So here’s a thought. Before Ninety One tells the FM that it can’t attend an AGM because it’s not a shareholder, even a holder of part of a share, it must prove it. In an AI world, surely it’s possible to go behind the layers of advisers and identify every shareholder. Perhaps companies should be obliged to do this before they prohibit attendance by “nonshareholders”. (And imagine how delighted the anti-money-laundering crowd would be.)
Even those savers/investors who do actually know what shares they own are frequently unable to participate at AGMs because most JSE shares aren’t held directly in the individual owner’s name. They are registered in a nominee account — typically a bank, broker or central securities depository recipient. If beneficial owners want to participate at the AGM they have to do battle with a nerve-racking multilinked bottleneck to reclaim their rights. It’s rarely a successful battle.
Given all that, you have to wonder why journalists bother, given that AGMs are often not terribly exciting and, as Pick n Pay reminds us, the media is welcome to attend results presentations.
But AGMs, unexciting as they often are, tend to be less choreographed than results presentations and can reveal much about a company and board dynamics. Moreover, shareholders attending AGMs are inclined to be more probing than analysts at presentations, who are often a tad too deferential. And being able to see how directors respond to questions at the AGM tells you a lot more about them than their pithy bios in the integrated annual report.
Perhaps it is exactly for those reasons that boards would prefer we didn’t attend.
Boards also complain that the presence of nonshareholders restrains the flow of discussion or prevents discussion of private matters. This is not only laughable; it bumps up against insider information restrictions. The board has no business discussing private matters with shareholders at AGMs.
Shareholders — just like nonshareholders — do not have a fiduciary duty to the company, so AGMs are not the place for discussion of private and sensitive information likely to blur into insider information.
Anyway, it’s not as if companies don’t get together, privately, with their large institutional shareholders ahead of every AGM and have very cosy chats in a bid to ensure there are no surprises in the resolution voting.
It shouldn’t be necessary, but perhaps it’s time for the JSE to issue a statement on “nonshareholder” attendance at AGMs.
Of course, the easy alternative is to buy a share in every listed company, pitch up, ask interminable questions and take all the sandwiches.
