The AGM: Obituary of a unique Dalal Street tradition

TCS announced its first ever virtual annual general meeting (AGM) on June 11. If successful, the online trend will sound the death knell of a unique Indian market event — the retail shareholder-dominated AGMs held in a large public venue with hundreds and even thousands congregating for an afternoon of shop talk from all over India to exercise their rights as shareholders.

These shareholder-led AGMs are a throwback to the pre-reforms era when the annual meetings served to engage and reassure shareholders and often hit them up for more capital. And despite liberalisation and the growth of mutual funds and PE firms, AGMs have remained a show led by retail shareholders in India, unlike in the West where they are small, low-key, time-bound events attended by key fund managers invested in the stock. The AGM process in the West was further institutionalised through proxy advisory firms that take on the onus of helping fund managers take a call on how to vote on shareholder resolutions.

For those who have not attended, AGMs in India perfectly recreate the chaos, noise and atmosphere of a hectic bazaar coupled with a frenetic auction as retail shareholders clamour to be heard at length and clamber to be officially recorded (by name) for seconding resolutions and supporting them.

Indian AGMs — especially those of blue chips with large retail shareholding like Tata, Reliance, Mahindra or Birla are like Bollywood matinee — take up the entire afternoon, starting at three usually. There is some comedy — sometimes even slapstick — while other moments are tinged with familial emotions (and dramatic dialogues: “If the management cared for us, we would get a bonus”).

Many of these AGM regulars are steeped in the historical relevance and performance of the companies having held shares for three decades or more. They take great pride in their long associations with the companies and are often found (unfavourably) comparing the performance of the current directors to their predecessors. While some shareholders specialise in making directors on the dais squirm with discomfort with their well-researched questions backed with relevant data dug out of the annual report, others provoke similar reactions for very different reasons: they insist on gifting bouquets to directors, others recite couplets in praise of the company or the chairman; some investors’ keen interest in the company extends to commentary on the colour of the tie worn by the chairman (“you have worn the same tie as the annual report photo; surely you have another tie to wear”) and many bring different innovation, business and employment proposals to deliver personally to the management after the AGM is over.

 

Then there are the freebies that these retail shareholders have come to expect as part of their overall equity returns alongside dividends, bonus and rights shares and capital appreciation. While Vimal shirt pieces and discounted suit lengths are not in vogue anymore, shareholders continue to seek discount coupons to avail of a company’s products and services and some continue to oblige them by printing coupons at the end of the annual report. These coupons along with the AGM attendance slips form an active second-hand market where these are recycled to take advantage of whatever the shareholders are being offered at the AGM.

The fizz added to the occasion comes from free food (sometimes) and drinks (always) on offer to the shareholders — it is a tradition not a legal requirement. For someone attending a big AGM for the first time, it is a sight to behold as people with hundreds of proxy attendance slips queue to fill 2-litre bottles (and up to 5-litre jars) with 300 ml of beverages that each coupon begets. In companies like HUL and IHCL, where food boxes were served to shareholders, people have been known to turn up with vans to load up thousands of food boxes basis their stack of coupons — so much so that some had to create separate “wholesale” counters to cope.  

Another frequently repeated retail investor demand is for “plant visits” ostensibly to understand better the business of the company by visiting factories and other facilities, but more as a way of enjoying the company’s hospitality and a day out. Most present a logistical nightmare for the company secretary but these trips are often used to mollify retail investors ahead of the AGM.  

The AGM also creates an unlikely hero — the company secretary, often a shadowy figure in most organisations who specialises in staying in the background for the other 364, come into the limelight on this day as the primary interface with small investors. Most investor relations functions only deal with institutional investors in a listed company leaving the small fry to be attended to by the company secretary, who is their primary investor contact and source of information via the annual report. Indeed, with most small shareholders reliant on timely paper-based annual reports, the company secretary’s performance in this regard often sets the tone for the meeting.

While concerns have been raised about stifling shareholder voices and the inability of many small shareholders to have access to an online virtual AGM, firms with large volume of retail shareholders will see this move as a way not only to reduce expenditure and stress on logistics but also bring a greater degree of efficiency to the entire process. How they manage transparency in proceedings could decide the future of the annual meeting.

The writer is a communications strategist. bagchip@gmail.com; @bagchips on Twitter