Companies that exclude journalists from their annual general meetings only arouse the media's curiosity still further.
The issue of the annual general meetings (AGMs) of public, particularly listed, companies seems to spring up perennially for one reason or another. The AGM is a gathering of all the shareholders - who are, after all, part owners of the company - to attend to matters that require ratification in terms of statute and good corporate governance, and to discuss issues pertinent to the efficient conduct of the company.
The purpose of an AGM is often misunderstood or even misconstrued. An AGM is held by a company once a year, and its purpose includes adopting the annual financial statements, electing directors, amending, where necessary, the articles of association, considering and approving resolutions that the directors believe are required for the conduct of the business, and discussing other matters that relate to the efficient and profitable management of the enterprise. In some cases the audit fees and directors' emoluments are also approved.
The annual financial statements are the responsibility of the directors and are signed off by them once the auditors have completed their review and issued their report. This information is circulated to shareholders in the annual report, which traditionally also contains a report from the chairman and perhaps other directors or senior staff that provides detailed information about the operations of the company and its prospects.
In South Africa, and many other countries, the AGM is a very brief affair, which is often seen as a "rubber stamp". There is nothing intrinsically wrong with this, particularly in the case of well-run companies. One cannot help feeling, however, that the AGM is so often an opportunity lost. It provides the ideal opportunity for the directors and management to share additional information with shareholders, and the meetings could be made more interesting and informative if they included a well-prepared presentation. In the modern era that would also probably involve a Sens announcement, via the JSE, to ensure that any information that was not already in the public domain and may prove to be price-sensitive was released simultaneously to the market.
The creative use of the AGM could so easily attract positive public comment and press coverage - and we all know the value of publicity.
This brings us to the latest controversy, if one is not catastrophising by calling it that, of whether or not the press should be present at an AGM. By definition, the simple answer is clearly "no" because it is a meeting of shareholders. This is the simple answer, but far from being the end of the story.
My opinion, and it is just an opinion from personal experience, is that inviting and welcoming journalists to an AGM tends to illicit a positive response and constructive free publicity in the form of copy in the major national daily and weekly press.
Journalists can attend only in the capacity of observers, with no right to address the meeting in any shape or form or to ask questions, but they may well, and are often encouraged to, write about the events covered at the meeting.
Experience has taught me that excluding journalists - which is perfectly legal if they are not also shareholders - can backfire spectacularly and result in a load of very negative publicity. Just as the economy moves in cycles between boom and bust, so do the fortunes of public companies. Some years deliver spectacular financial performance, and other years are rather more pedestrian or lean. This is accepted by shareholders and journalists as being the way of the world and should not be of concern to directors insofar as the AGM is concerned.
The real problem with excluding the press when a company feels that it has something to hide or is concerned that a noisy "minority" may wish to pose tricky questions, is that it typically arouses the curiosity of the journalist corps, who then pursue the matter with greater vigour than ever.
When push comes to shove, it is up to the company and its directors to decide whether or not to admit the press. But I would suggest that recent experience has shown that companies that have excluded the press have often fallen on their own sword!
- David Sylvester is the chairman of the Shareholders' Association, telephone 021 686 7567.
This article was first published in Personal Finance magazine, 2nd Quarter 2007. See what's in our latest issue