The time has come to review and revisit the purpose served by physical meeting of shareholders in this era of electronic voting and other issues raised above by all the stakeholders, professionals and authorities.
By Subramaniam R Iyer
The Merriam-Webster dictionary defines a ‘meeting’ as “an act or process of coming together” or as “an assembly for a common purpose”. Corporate law contemplates two types of shareholder meetings—the annual general meeting (AGM) and the extraordinary general meeting—whose purpose is to arrive at decisions after discussions and vote on the proposed resolutions.
The ordinary business, which is the adoption of accounts, declaration of dividend, appointment of auditors and directors, is left out of the purview of postal ballots by the Companies Act, indicating that the legislature intended that these matters need to be voted on at an AGM. However, SEBI and securities laws (often at variance with the Companies Act) have a listing agreement (for ‘listed companies’) which, inter alia, mandates electronic voting for ordinary business. The electronic vote is received by the company prior to the meeting date and the members who attend the meeting may fill in ballot slips at the venue. The aggregate of electronic and ballot votes are the results declared after the meeting.
Take a mid-level listed company with, say, 10,000 members. Usually about 50 members would be physically present at the meeting. The promoter group usually controls 40% and more of voting power. Shareholders are geographically scattered. Electronic voting is used by promoters and all institutional investors. Physical votes at the meeting typically account for less than 1% of the votes received in all.
Ordinary business to be transacted at an AGM includes the declaration of dividend. Shareholders can decrease but not increase the rate of dividend as recommended by directors. It is illogical to even assume that any shareholder will ever demand such a reduction.
Adoption of accounts is another resolution that cannot be commented on by a non-finance background individual. Annual reports today are really technical with new accounting standards, increased corporate governance and consequent reporting. It is difficult for even a finance professional to meaningfully analyse consolidated balance sheets of very large companies that have umpteen subsidiaries and are involved in many business activities.
Quarterly results have to be published and all important developments have to be reported to the bourses regularly. Most corporates have regular interaction with analysts. So, the accounts or any technicality therein are never really ‘discussed’ at an AGM. Appointments of auditors and directors are also not really discussable at a general meeting as individual shareholders are unlikely to have a contrary point of view in these matters. Special business can be conducted by postal ballot or electronic voting. This also does not warrant a physical meeting of shareholders. This article is not meant to show disregard for the capability and understanding of the average individual shareholder, but to address the issue of whether the purpose of a shareholders’ meeting is really served under the current legal framework?
Share splitting and lower face values have made it possible for a person to have invested as little as `100 in shares and be entitled to attend an AGM. Is it really worth his or her time to spend half a day, besides the expense on transportation, to attend and vote at an AGM? The shareholder ‘mafia’ in each city comprises of such shareholders who demand various favours at the meeting for their ‘silence’. Electronic and postal voting recognise the principle of voting rights being proportional to shareholding rather than ‘one person, one vote’ as was the old practice in pre-electronic vote era.
In summary, there is no value-add to the knowledge of shareholders about the performance of the company at the forum of physical meetings. The authorities must seriously consider immediately doing away with the concept of mandatory physical meetings for all companies. Electronic voting ensures shareholders’ supremacy in the corporate management structures. The time has come to review and revisit the purpose served by physical meeting of shareholders in this era of electronic voting and other issues raised above by all the stakeholders, professionals and authorities.