Last week the annual report of a hotel company was circulated to its shareholders. A small slip was attached to the report that stated that no gift, money or food would be provided to those attending the annual general meeting. It really made people think whether shareholders have fallen so low as to deserve such a notice?
The Nepali corporate world was really introduced to public shareholders only after the establishment of the stock exchange. The then Company Act required at least a quarter of the total number of shareholders to be present at annual general meetings making it practically difficult for companies with a large number of shareholders to get the requisite quorum for the meetings. With shareholders crossing the forty thousand mark in some companies, this provision became absurd. Though the new Companies Act has made shareholder strength and presence the criteria for a quorum, it is still interesting to see minority shareholders in action during these meetings.
The last month and the coming two months are when companies generally hold annual general meetings. It is very interesting to see people with just ten shares occupy the podium for hours, telling people who hold more than 90 percent shares what to do in order to make the company perform better. The wish list of these shareholders is never-ending-from gifts to transportation expenses for attending the meeting to free meals and even cash rewards. They feel that as owners they can demand and get what they want. A group of such shareholders have become a permanent feature at each of these meetings and they raise issues that are most of the time either stupid or nonsensical. The worst of course is that there have been violent incidents in the past where people have been manhandled.
The main reason for all this chaos is that our Company Act takes democracy too far. We believe that a Nepali Company Act must have that touch of socialism. We tend to forget that companies are a capitalist concept in the first place. The present Company Act requires that 'public' shareholders nominate directors from their own shareholder group, and also auditors. Minority shareholders have made this a major issue. They tend to forget that the directors seated at the dais very likely have enough voting power to see any of the resolutions through anyway. These outdated and impractical clauses in the Company Act give people enough reasons to create pandemonium.
People who've never had the pleasure of witnessing one of these meetings should get themselves named proxy for a shareholder and go to take part, or at least observe, the fun. The loudest din breaks out when the time comes to appoint auditors. The Act, for reasons of its own, requires an auditor to be appointed and his remuneration fixed at the shareholders meeting every year. Here you can see and indeed even participate in the honourable process whereby an auditor is auctioned and bargained over like a Dasain mountain goat. It is miserable to watch members of a respected profession being made laughing stocks just because of antiquated laws.
What is urgently needed is a review of the legislation in order to make it more pragmatic and suited to contemporary business mores. The people who hold a greater number of shares should have their way and as long as legal conditions are complied with, minority shareholders should really have no reason to complain. We need these changes quickly-there are companies that want to share their success with the public but fear that dark day that they must suffer every year when company business starts to seem like fish-mongering. Nepali shareholders, regardless of the size of their stake in a company, need to graduate to being serious investors and play a more positive role in making companies efficient, transparent and profitable.
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