Shareholder Associations and the Rest of Us - September 25, 2011 Shareholding in Nigeria has grown from a few thousand people in the early 70s to an estimated 10 million. The privatization program has had tremendous impact on share ownership. Between 1989 and 2005, 40 government- owned companies were privatized. Over 1.3 billion shares were offered for sale to the public and over 800,000 shareholders, many of them first time buyers, purchased the shares. In a bid to shore up public participation in the ownership of business corporations, government facilitated the establishment of a network of shareholder associations. At its inception, a government parastatal in charge of the privatization and commercialization program, the Bureau of Public Enterprises (BPE), funded the associations from interest earned on deposit of shares pending allotment. The associations are now funded through a per-capita levy placed on quoted companies. The Securities and Exchange Commission and the Nigerian Stock Exchange determine the levy, based on the number of shareholders in each company. The fund is collected and administered by the Stock Exchange. Apart from the government established shareholder associations, there are also independent shareholder associations. Independent shareholder groups were a rarity in the capital market until 1985 when the late Otunba Akintunde Asalu formed the Nigerian Shareholders Solidarity Association (NISSA) – one of the seven duly registered with the CAC. Taking a cue from NISSA, other shareholder associations began to spring up. Some emerged as a function of location, others as a function of focus but, in the main, others emerged to partake in the economic cum commercial benefits that came the way of a ‘group’ with so much leverage and relevance. The proliferation of these associations and the absence of measures to regulate them became their very undoing. Soon, it emerged that these groups, like all power blocs, became victims of their own success. The emergence of the private shareholder associations shows that Nigerian investors are no longer solely interested in the economic value of their shares but also in the right that share ownership gives them to influence corporate strategy and management. In the last 15 years, at least 30 shareholder associations have been established. The increasing number of these associations has led to recent moves by the Securities and Exchange Commission to regulate the associations. While the evolving shareholder activists are a positive development, the corrupt collaboration of some of the shareholders associations and corporate executives must also be addressed by regulatory agencies and reputable corporate leaders. This is much needed particularly with the increasing cases of corporate scandals in multinational companies and joint ventures operating in Nigeria. Thus, shareholders may influence the direction a company takes via the use of shareholders resolution. However, it has been observed that many annual general meetings in Nigeria are fraught with corruption. They are arranged in such a way that once the leaders of the shareholder association are bribed in one way or the other, shareholders only go to the event to sing the praises of management for a robust account, instead of actually asking accountants to look more closely into the accounts and raising pertinent questions. Even more dangerous and worrisome is the hand-in-glove partnership between some particular individuals who posture as leaders and or representatives of certain shareholder associations and certain vested interests in the market. These individuals are too quick to lend themselves to manipulation by such interests which are known to be inimical to the interests of the generality of investors.
Posted on: Thu, 18 Jul 2013 11:49:16 +0000