Protecting shareholders\\\' rights

The regulators and other stakeholders talk about more loudly the shareholders' rights in Bangladesh than investors or shareholders themselves. But their rights are hardly delivered.
In the absence of enforcement or automatic delivery, the shareholders' rights turn out to be a mere talked-about issue in Bangladesh and remain confined only to the Company Act and the regulators' regulations. Who should fight for shareholders' rights? Definitely, it would be shareholders themselves. But the irony is that they are far away from such a battle for achieving their rights: they are naive and remain contended with whatever rights the company management mercifully delivers to them.
The Bangladesh Company Act and the various regulations of the regulator Bangladesh Securities Exchange Commission (BSEC) have outlined what rights the shareholders, specially the minority shareholders, shall enjoy and what resolution the corporate entities or companies shall have to get those passed by the shareholders in a general meeting or a special meeting with regard to the company's business and their capital structures. But the company management can pass the desired resolution easily. In Bangladesh, we did not yet hear any company failing to have any resolution passed by the shareholders.
Why has passage of the required corporate resolutions become so easy in Bangladesh? It is because the shareholders are not aware of their rights and more so they do not want to enjoy or assert their rights. The annual general meeting (AGM) of the shareholders turns out to be a mere routine work by the companies as the shareholders do not participate in the proceedings of the meeting. The number of attendees as shareholders falls drastically as the company stops giving any snacks or gifts to the shareholders in the AGM. As a result, the AGMs are attended by the company's employees and a handful of special, or specially invited, shareholders, and the company management can get any resolution passed very easily and very quickly. The AGMs come to an end within an hour or even in less time. The proceedings and resolutions are sent to the regulators and necessary permissions or actions are sought by the companies based on the resolution. The regulator only sees the papers and if it finds everything alright, it permits whatever is requested by the company.
In the early days when Bangladesh's stock market started its journey in 1976, shareholders were more active and they eagerly attended the company' annual general meetings and participated with deep interest in discussion on issues relating to company's business and shareholders' interest. The AGM ran into hours and shareholders were found to be engaged or blocking resolutions which were thought to be detrimental to their interests. Among the shareholders, DSE members, academics, accountants and persons representing the institutional shareholders used to attend such meetings. But those days of shareholders' activism are no more there. Now the AGMs are thinly attended and the management can wrap up the meeting as early as they want.
Why do shareholders lose interest in the company's AGM? The company management does not want active and knowledgeable shareholders to attend such a meeting or raise questions and say something that is not palatable to the top management of the company. At one stage, the top management starts hiring goons from the shareholders and the hired goons, who number a dozen or less, stand up and press for passing resolutions, as wanted by the company management. Any neutral or genuine shareholder, if s/he wants to say anything on the company's financial report is shouted down or forced to sit down by the hired goons. As a result, the shareholders having capacity to analyse the financial report at length stop attending the AGMs. Also, there are shareholders who attend the AGM only to grab snack packets. As soon as they get snacks or gifts, they leave the place of the AGM.
These shareholders do not even bother to enter the hall room of the AGM. As a result, though in theory the AGMs are attended by a few hundred small shareholders, in reality, the meeting is only attended by a few. In recent times, the regulator BSEC issued notices prohibiting distribution of snack packets or gifts among the shareholders who attend the AGM. The company management now does not keep ready any food or gifts for the shareholders, not even tea. The small shareholders who used to attend the AGM simply for food or gift items now stop going to the company's AGM. The AGM now turns out to be a useless forum for discussing anything regarding the business of the company. Bangladesh's stock market perhaps is unique in the sense that here everything can be passed by the management of the company without shareholders' support or any short of discussion by them.
Shareholders' rights here now mean the rights and also privileges of the majority shareholders who are the sponsors of the company and who 'manage' the company. In many cases, the so-called majority shareholders or the sponsors of the company turn out to be minority shareholders as they already sell their shares in bullish market. In the absence of shareholders' activism the regulator is to bear an extra responsibility on behalf of the shareholders. What is called shareholders' meeting is nothing but the meeting of the sponsors or their employees and the management of the company. The regulator should see how in Bangladesh's stock market the shareholders' activism can be restored.
The writer is Professor of Economics, the University
of Dhaka.
 abuahmedecon@yahoo.com