Getting The Most Out Of An AGM

Foreword from ShareInvestor

This article “Getting The Most Out Of An AGM” by Lee Su Shyan was first published in The Straits Times on 18 Oct 2009 and is reproduced in this blog in its entirety.

A little homework can make attending an annual general meeting a fruitful experience

I must confess: I first started attending annual general meetings not when I started investing, but only much later, as part of my job.

As a proxy, I go to various hotel meeting rooms or far-off corners of Singapore to attend fractious company meetings, where directors are being booted out or contentious deals get the thumbs down.

The more uproar there is at the meeting, the better, since this results in a more colourful story.

I learnt about how groups of shareholders try and gain more votes and how companies try to push through proposals.

But investing-wise, I walked away little the wiser.

In a confrontational situation, directors clam up and investors get little or no insight into the workings of the company.

Wearing my investor’s hat, I believe the ideal AGM would be one where there is a cordial dialogue between investor and board – where investors understand the company’s business and whether they want to stay invested, and directors find out more about their shareholders.

One such textbook AGM must be the one held by Berkshire Hathaway in Nebraska. Shareholders travel from all over for a weekend of activities. The highlight is a six-hour question and answer session with the “Sage of Omaha”, Mr Warren Buffett.

Questions are filtered by experts and Mr Buffett talks frankly about his investing philosophy and everything else.

But such AGMs are few and far between. Instead many investors I know feel that attending AGMs is a waste of time.

This could be because of the bad rap AGMs get. It seems as if many of the investors are there for the free food and nothing else.

On the flip side, many directors barely smile, hardly mutter a word and, as soon as the meeting is over, melt away as quickly as possible.

Other meetings are dominated by a few investors and their questions.

With many AGMs falling short of the ideal, it is timely that the Singapore Exchange has issued a guide for investors on how to make attending an AGM a much more rewarding experience.

Here’s my take on how more can be got out of such an outing:

Investors, Do Your Homework

How much you get out of an AGM depends on how much you put in. Many investors barely flip through an annual report when they receive it but instead go to the AGM hoping to be educated on the basic facts.

Doing the preliminary legwork is increasingly important as annual reports get bulkier with more information every passing year.

Directors’ pay may be a relevant issue, but do read the notes and explanations before launching into a heated tirade about overpaying directors.

Investors, Have A Sense Of Proportion

I have come across investors who ask the board about one particular number in the notes to the accounts – out of the hundreds of numbers. Not only do these irrelevant questions take up precious time, they irritate other shareholders.

After all, retail investors are not analysts who need to identify the right numbers for their calculations of valuations.

I feel that the time is best spent at AGMs trying to engage the chief executive and the directors about their outlook on the business, the strategy and the direction of the company.

Investors, Learn How To Ask Questions

Investors often hit the nail on the head with their questions. But if it is an awkward one, they risk being fobbed off with a non-reply by a director. At this, some investors lack the courage to press the point, or because they are unprepared, are unable to refute the director’s argument.

Equally, there are some who enjoy hogging the mike and pose a long-winded question which loses the director halfway. The director answers part of the question and misses out the rest.

Boards, Use This Occasion To Engage Your Shareholders

Many of the blue chips have upped their game. The AGMs of companies which I have attended, such as Singapore Exchange, Keppel Corp and SingTel, prepare slides which cover the financial year-end results and give a useful overview of what has happened during the year.

This means that investors are brought up to speed and do not need to ask basic questions about the events of the year.

But many other companies treat AGMs as an obligation and rush through it.

When no questions or poor questions are asked, investors lose attention, the meeting quickly wraps up and a valuable opportunity is lost.

Other companies are worried about breaching laws by disclosing too much, and rely on saying as little as possible about the business.

Now that SGX has come up with a guide, which should be required reading for every investor, I hope that soon I will be attending an AGM to learn more about the company, rather than to write about its feuding shareholders.