OPINION: New Respect for an Old Ritual

By Michael S. Olympios

 

The annual meeting got a big boost this year from Marfin Popular board of directors. After last year’s theatrics with former Chairman Lazarides and the eulogies staged, the new board gave new momentum in terms of shareholder democracy.

Shareholders’ outrage is absent from the latest shareholder gatherings in 2006 as well as cynicism from the top. One thing is certain however about annual general meetings of banks. They won’t be boring.

The truth is that in some companies some speeches are often long-winded and overly upbeat. And yes, some shareholders ask pointless questions.

The standard for corporate governance however in the Cyprus Stock Exchange remains its flagship stock – Bank of Cyprus. In an age where corporate governance is a front-and-center issue, the meetings represent true shareholder democracy, the one opportunity a year where all shareholders can see management face to face and ask questions. Bank of Cyprus attracts more shareholders than any other company although this year it is expected that Marfin Popular Bank will challenge that tradition. AGMs this year will likely be more interesting than the past amid new competitive challenges and take-over fever. The question looking ahead however will be on executive pay. Although there are many other issues that shareholders are likely to raise, mostly performance related, executive pay is likely to receive more attention than ever before. If nothing else, they say, executive pay should be transparent and related to performance. In fact, some old practices might even be worth improving.

Reporting executive pay is becoming a big issue in Europe and in United States.

According to a UK poll commissioned by the Financial Times in June 2003, 78% of the people believe that directors of large companies are overpaid while 80% think that top executives cannot be trusted to tell the truth. Similar results were reported from United States. Professor Andrew Chambers from UK raises the following question:

“Does it matter what the general public think about directors’ pay or because of the way pay is communicated? Directors’ pay, he argues, is complex and traditionally it has not been transparent. Its communication suggests there is something to hide.”

On the other hand if it becomes too easy for journalists to understand, according to Mr Chambers then the company may draw unwelcome and unwarranted attention to themselves and no one wants to be leading in this respect.

But analysts and even many shareholders can read the whole story and increasingly are raising the tough questions at AGMs. It wasn’t until the corporate governance code gave that chance to shareholders and to the AGM a new meaning.

Take for instance Laiki Group. In the past during Lazarides era, the gatherings were a monumental waste of time and money and an empty ritual. Most shareholders couldn’t raise a question, executives almost never said anything new and independent directors weren’t even available for questions. It was an elected monarchy with small investors powerless to voice their concerns. That has changed.

Today the new board is very concerned with shareholders’ interests and the board is seeking to please almost every single shareholder in providing adequate explanations to their concerns. The new era of AGMs has arrived and companies across the board better take notice.

 

Michael S. Olympios is Chief Consultant at Allied Consultants, [email protected]