Towards an Informed Shareholder
Editorial
Stabroek News
June 18, 2004
It was touch and go but the Demerara Distillers Ltd Annual General Meeting did go ahead on Friday. Only hours before, lawyers on behalf of Christopher Ram and two other shareholders had failed to convince the judges that the meeting should be halted on account of the company's annual report being deficient.
It is interesting that the Full Court simply said the plaintiffs had left it too late rather than dismiss the main argument on disclosure. In fact DDL now says that within 21 days it will provide the information, much of which is such basic fare as the residential addresses and occupations of its directors and any interest in any shares or debentures of the company vested in the director, his wife or his infant children.
What is sad is that such requests had to go through the court when the regulations are clearly laid out in the Companies Act of 1991. For all DDL's contentions of being an international company, it is remarkably clumsy in how it handles any questions about its finances.
In addition to the shareholders' complaint, the Guyana Securities Commission had asked the company a week before the AGM to call it off so as to provide further information, in the main related to DDL's recent acquisitions. This advice was brushed aside by Chairman Yesu Persaud who refused to put the company's 9,000 shareholders at risk for something that neither he nor the company knows about.
What risk they would be in is unclear but DDL's lawyers went to court to ensure that the meeting went ahead.
This was the first real test for the enforcement of the Securities Industry Act. It was a failure. Maybe the council was too timid in simply advising DDL to call off the meeting, but it could also be said that DDL simply rode roughshod over a council that has yet to find its feet.
But while Ram failed to halt the meeting, he has won a significant moral victory that may at last see directors begin to listen to the real owners of their companies, including the 9000 who own DDL. Of course many shareholders are not sophisticated enough to understand the complexities of a company's finances. They attend the AGMs as if they were some grand day out replete with freebies, snacks and drinks. How many shareholders at the DDL meeting could actually evaluate the company's net return on assets? Then there might have been those who were vaguely troubled by the developments in the court but were not confident enough to ask the difficult questions.
What they need to do is actually sit down before the meeting and read the annual report. If there is something they don't understand they should call a friend or even a prominent shareholder and have it explained.
As the self-taught investor Winston Tyrell said in a recent interview, "Most people only reflect on profit and dividend. There is need for further investigation. One must be able to garner how the company is performing from selective information in the annual report. Anyone with a primary school education is capable. It requires the will to learn the basics and asking questions from persons with knowledge."
This current lack of sophistication is one of the reasons that the stock exchange has failed to see significant trades in its first year of operation and it would be in the interest of the council to organise seminars where investors can learn how to evaluate company accounts. A better informed investor is one who will be more willing to buy and sell shares and help to bring some liquidity to the market.
But the onus remains on the companies. It is time for them to comply fully and willingly with the regulations. More importantly they must start to respond to shareholders' questions, the difficult ones. Out of all the court filings last week, maybe something positive could actually emerge.