Don’t forget about your little fish this AGM season
With AGM season fast approaching, the temptation is to concentrate on your big shareholders to try to avoid any nasty or embarrassing surprises.
Are they happy? How are they going to vote? Is our remuneration structure appropriate? What are the curly questions they might ask?
But to concentrate too much on the big fish – and trust us, they most certainly warrant attention – is to do a disservice to some of your most valued and supportive investors: the mum and dads (and uncles, aunts, brothers, sisters etc) who choose to spend their hard-earned on shares in your company. They may account for only a fraction of your register but often they have invested real blood and sweat to get there.
What do the Commonwealth Bank, ANZ, NAB, Westpac, Insurance Australia Group, BHP and AMP all have in common? According to Australian Shareholders Association (ASA) data, each has a shareholding where small, or retail, investors make up more than 96 per cent of all shareholders.
Here are three very basic reasons why AGM season is a perfect time to make your little fish feel more than a little bit special.
- They pick and stick: And then they potentially buy some more. Your smallest shareholders are most likely also some of your most loyal, buying shares for the long run rather than any lofty ambitions of short-term gain or the fund manager’s classic quarter-by-quarter approach. They will stick with you through good times and bad and might even invest some more – provided you can make them feel wanted and engaged.
- They are your best advocates: Small shareholders do something their bigger counterparts might not: gather over weekend dinner parties, drinks and coffee catch-ups and talk about their day-to-day lives, including what they are investing in. If you’re keeping them happy (and your stock is performing), where are you going to find stronger, more natural spokespeople?
- The activists at the gate: If your smaller shareholders are sticking then one thing they aren’t doing is selling. And if they’re not selling, then there is no chance of their shares being snaffled up by activists (link to story on shareholder activism). Remember, Joe and Josephine Smith from down the street might own only a tiny portion of your stock. But add on the holdings of Max and Maxine Jones from around the corner and it’s just a little bit more still. Enough smaller shareholders who are unhappy and selling can provide big opportunities for the activists.
The question, then, is how you make your everyday shareholders feel something other than taken-for-granted when it comes to your AGM?
Chances are most of the bigger and institutional shareholders aren’t particularly interested in being there and will have done their voting by proxy – and quite often guided by proxy advisers, which means they may not even pay much attention to the underlying company message.
Apart from the opportunity for shareholders to register their vote, the AGM should feel like a moment in the sun for “the little guys”.
Yet so many AGMs still feel like they are heavily designed around big shareholders – and often appear to be a burden for the company itself.
In the words of the ASA’s policy and advocacy manager Fiona Balzer:
“The worst AGMs conclude after just a few minutes when companies do not take the trouble to make detailed presentations and then shareholders decline to engage in debate.”
The gold standard
Warren Buffett’s Berkshire Hathaway’s annual shareholders’ meetings might be the most obvious example of how to do things differently. What started out as a small gathering in an Omaha lunchroom in the 1970s with a taped sign on the door stating “meeting in progress” has evolved into an occasion that assembled hundreds of people by the mid-1980s, thousands by the time the 1990s came around and as many as 40,000 shareholders by 2015.
Investors attend from around the world (on a Saturday, no less) and the man regarded as the world’s greatest investor has been known to answer questions for more than seven hours.
Perhaps Buffett is the most extreme example of what an AGM might look like but closer to home, companies like Wesfarmers are having a crack at adding a little flavour to the occasion.
At last November’s Wesfarmers AGM in Perth, there were some forthright questions from shareholders about topics such as climate change and executive remuneration. But the AGM also featured a fashion parade, catered lunch and an appearance from a still-active 85-year-old checkout assistant to help entertain the 1800-strong crowd.
It was part-functional meeting, part-roadshow and inclusive of everyone.
BHP, in conjunction with the ASA, staged a retail briefing in July that was held in Melbourne but webcast far and wide, while the association itself is now holding hybrid AGMs that allow shareholders to vote on resolutions from homes, offices or via mobile devices (and ask questions via online platforms).
“The key here is to give the small shareholders a reason for participating in the AGM,” Cannings Purple Managing Director Warrick Hazeldine said.
“Don’t see the formalities as the reason for the AGM. We all know voter participation at AGMs is low – usually no more than 60 per cent of a company’s shares are voted – because these meetings are seen as a mandated waste-of-time.
“So turn your AGM into a celebration of the company, of what it has achieved, and what it wants to achieve, and structure it as a journey that shareholders want to participate in. Make your AGM a must-attend affair.
“This may take different forms – inspirational presentations, colourful and interactive exhibitions, meaningful engagement with shareholders, a show-and-tell that is worth turning up for.
“If you adopt such a strategy, you will turn your AGM from the mandatory financial year bookend that no one cares about to the once-a-year celebration of your company that will shine on for the ensuing 12 months.”
Warrick Hazeldine is a widely-published thought leader on the subject of corporate trust with nearly 20 years’ experience in advising boards, company leaders and senior executives. If you need help tailoring your AGM to fit an audience, contact Warrick.