Alice reflects on what he has learned from 34 AGMs in the last three months.
I have decided to take a few days off from attending AGMs, replacing the high octane world of talking to those very clever people called directors, for spending time with fellow trainspotters. More precisely Trevor, Kevin and I have been sitting for much of the last few days on a seat next to platform 8 of Doncaster Railway Station.
As there is a lull of trains passing through the station and Trevor and Kevin have gone to get some chips, I thought I would look back at the 34 AGMs I have attended since the beginning of May.
My name is Bond, Nominee Bond
With one notable exception, there has been no problem attending. Admittedly I did own shares for most of the companies whose AGMs I attended, but I found nearly without exception, saying the words 'private investor, I hold my shares through a nominee account, I have no letter of representation, so happy to sign in as a non-shareholder' was received with a smile from the registrar and immediate entry into the AGM room.
If one looks at the situation from a registrar's point of view, he/she can relax if I sign in as a non-shareholder because that means I cannot vote, in other words I cannot vote against any of the resolutions during the formal part of the meeting so it is unlikely that the registrar will have to recount the proxy votes, a tedious task at the best of times.
A helpful tip -- it helps if one has a smile on one's face and talks to as many people as possible (although preferably not at the same time). This should be no hardship, or disadvantage, as one of the purposes of an AGM is to network with all the attendees, even the suits.
The one exception to obtaining easy access was the legendary OPD (LSE: OPD) 2009 AGM where three of the four non execs were not in attendance (from memory -- bad back, pressure of work, washing one's hair).
At that AGM, attendees were required to say who they are, supported by driving licence/credit card, which was both very silly and pointless because it proved nothing. The registrar will usually have a computer list of mainly nominee accounts so, if you are put in this situation, say you hold shares through one of the larger brokers such as Barclays or TD Waterhouse and this should suffice.
In conclusion, in the vast majority of cases access to AGMs is very easy.
Coping with crusty chairmen
I should perhaps mention that from time to time one does come up against the crusty chairman. This happens when the chairman is of the old school. He lives in a time-warp, a time when shareholders were seen but not heard.
They are often abetted by a nervous company secretary. The warning sign is the whispering that goes on in the background once one has signed in -- the registrar talks to the company secretary, the company secretary talks to the chairman, the chairman speaks to the advisers. The chairman will attempt to ensure that the world of 'speak only when one is spoken to' still holds.
He will attempt this in one of two ways -- by making a speech at the beginning of the meeting along the lines of "only shareholders who have provided documentary evidence are able to speak during the meeting" or he will attempt to bring an end to the Q&A within a couple of minutes.
My advice to dealing with crusty chairman is to take one of the following approaches:
- The high horse approach: we are owners of the company, we only get to see the directors once a year. We should therefore be given the opportunity to question the directors for at least half an hour. This approach worked well at both Fenner (LSE: FENR) and Vectura (LSE: VEC), both sizeable companies in terms of market capitalisation but who could improve their investor relations skills.
- The softly softly approach: explain in measured terms that the vast majority of chairman are happy to take questions, this is seen as a evidence that companies are willing to engage with shareholders. As an olive branch, suggest that the questions are taken after the formal part of the meeting has been completed. This approach was adopted at Axis-Shield (LSE: ASD) and Chime Communications (LSE: CHW).
Feeling your way with fund managers
A creature rarely seen at AGMs is the lesser-spotted fund manager. This is mainly because he (they are usually male) is usually granted a one-to-one meeting with the executives once, sometimes twice, a year. Incidentally, many months ago, one chairman candidly admitted to me that they provide much more information to City institutions than to private investors. I sold out immediately, frustratingly the shares have risen in the meantime. This is bad news with regard to corporate governance.
Mainly through the hard work of another Fool, I have discovered in the last few months, that fund managers don't read financial statements, relying on broker notes instead. As a result they are often ignorant of the salaries the directors have voted for themselves -- perhaps is a case of living in a world where everyone 'earns' a six figure salary, so what is £0.5m a year between 'friends'?
It is therefore not such a surprise that Bob Holt's -- CEO at Mears Group (LSE: MER) -- amended share option scheme was passed (2.5m share options, strike price 1p) without much of a protest. There was an excellent article in Investors Chronicle about this.
Long term vs short term
Following on from the above, I have seen statements in the press recently along the lines that 'City grandee' Sir David Walker, he of banking reforms, is thinking about granting long-term shareholders preferential voting rights over short-term traders. Apparently "the move would encourage institutional investors and other established shareholders to take a more active and engaged role in the stewardship of big companies."
That's all fine in theory but terrible in practice. Institutional investors have not shown an appetite for getting their hands dirty and actually pushing directors to correct wrongs. In the majority of cases where a company has underperformed, a City institution will sell its holding as it has become an embarrassing rounding difference in its portfolio, rather than work to replace the board with a more dynamic management. Instead, in companies such as Celsis (LSE: CEL) and OPD, it is left to private investors to stir up the directors.
Some sympathy for suits
I have been critical of suits (professional advisers) in the past. Admittedly they do make an inviting target when they sit in on AGMs in their pin-striped suits, playing with their signet rings and BlackBerries, often at the same time.
But having criticised chairman and fund managers, it is only right and proper that I criticise private investors. At the BTG (LSE: BGC) 2009 AGM, someone queried why the intangible figure had shot up from £6m to £166m. Clearly they had no idea how accounts are prepared, and this type of question is not atypical of those asked by private investors at AGMs. So possibly it is no wonder that it passes through the mind of the minor public schoolboys as they sit through yet another AGM, that the world would be a better place if they were no go areas for private investors.
I, on the other hand, hope that Fools reading Alice's AGMs will begin to attend AGMs. It would bring down the average age of those attending and more importantly, they will no doubt rise the bar when it comes to the quality of the questions asked. Here's hoping.
Discussion board poster AliceInWonder1 is a serial AGM attendee and is keen to encourage other private investors to take a more 'hands on' approach with their holdings. He doesn't hold shares in any of the companies listed above.
