The issue underlying the current corporate governance debate is the reality that when it comes to communicating with shareholders, Australian boards and company directors need to do a better job.
The issue underlying the current corporate governance debate is the reality that when it comes to communicating with shareholders, Australian boards and company directors need to do a better job. And it isn't only a question of improving the regime of continuous disclosure as a prerequisite of an informed market. It is time that the entire issue of inter-action between boards, management and shareholders is re-examined.
The annual report and even the AGM are headed to the dust-bin of history as new technology creates the opportunity for companies and their boards to have real-time interaction with their shareholders and investors regardless of where they are.
A polite discussion with directors over a cup of tea and a biscuit at the AGM is a fond memory. The reality is that many AGMs have become a blood-sport at which shareholders vent their spleen at directors they see only once a year.
There is no doubt that company websites have improved to include a great deal of updated information. But, proper as this is, it still lacks the personal interaction needed to make shareholders feel as if it is their company and that the directors are their elected representatives.
It boils down to the human touch versus the corporate touch. Investors can certainly make decisions based on the numbers and the prospects for future growth, but the human element is missing in terms of who are the people running the company and making decisions in the boardroom.
A director CV on the website doesn't really convey anything except that the person in question has had some education and experience that may be relevant to the company.
Why do people invest with Kerry Packer?
Certainly, there is an element that if he can do it you can also become richer by following his example. But Packer is known. His personality is known. His likes and dislikes are known. He is a real person to the investors and shareholders in his companies rather than someone in a suit that shows up once a year at the AGM.
The parallel on the political front is that those politicians who neglect their electorate are finding it increasingly difficult to get across the line regardless of the party support they may receive.
Increasing shareholder wealth is a noble aim and a duty of care that is inherent in the function of a board but is this enough?
Shareholder and investor relations are rapidly becoming the critical element in how a company is judged by the market. In a boom market, profits are the main game but, when things turn down, it becomes vital to retain shareholder confidence.
An even greater consideration in turning up the volume on the shareholder interaction button is the need to reinvigorate the trust between companies, boards and their shareholders that has been dampened as a result of corporate failures.
Talkback radio, interactive websites and television programs are gaining in popularity. It may be time to think about talkback boardroom (see cover story). After all, one of the most interesting bits about parliamentary democracy is question time when the government is challenged on its policies and how it intends to implement them.
Shareholders ask questions all the time on similar subjects but these are usually answered by the company secretary, CFO or accountant. Why not have a monthly interactive session with shareholders at which all members of the board are present and prepared to answer questions. It would give shareholders both large and small an opportunity to judge each director on their merits as long as the chairman fielded the questions around the table.
The last thing any board or company would want is for their shareholders to be as apathetic and uninterested in the affairs of the company as voters are about who governs this country.
Active and interested shareholders buy shares. They may buy the shares - but what they also want to know is who are the people they are trusting with their money? Previous corporate reputation may not be enough to convince investors.
Personal interaction on a boardroom level may change the dynamic and it will certainly go a long way to assuaging the fears of the government and the regulators that companies are not doing enough in terms of continuous disclosure.
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