The participation of the small shareholder in the annual general meeting : a reflection of good corporate governance?

Abstract

This paper analyses the level of small shareholder (SS) participation in the Annual General Meeting (AGM), assessing how this reflects upon the corporate governance of listed entities. It focuses on SS attendance, voting and proposals (excluding those of institutional and majority shareholders), improving SS participation and the significance of such AGM proceedings to listed company corporate governance. Empirical mixed methodology research is carried out in a Maltese listed company (LC) setting by means of semi-structured interviews with seventeen LC secretaries, five stockbrokers, an online questionnaire responded by fifty-four shareholders in different LCs, as well as the analysis of company notices and documentation relating to the AGM. Results indicate that SS participation is weak. Attendance is poor, and is often spurred both by legitimate factors such as information on current financial performance and by questionable ones such as refreshments served and venue. Shareholders seem uncomfortable in asking management formal questions and even in voting by show of hands, and therefore opt for informal interaction with management and for voting by poll, the latter often rendering attendance fruitless and even unnecessary by permitting proxies. As for proposals, they could induce management’s later action despite seldom, if ever, being approved, but their submission is rare and mostly frivolous, commonly hampered by a lack of financial knowledge. The study concludes that the current level of SS participation does not render the AGM a tool reflecting good corporate governance, as it does not keep in balance the interests of this shareholder with those of other stakeholders. For the sake of better direction and control, and, in particular, for more transparency and accountability, the AGM has to be less stage-managed, as well as more interactive and engaging towards such shareholder. This calls for increased management commitment, particularly towards more investor education and guidance.