The Internet plays a big part in our lives these days, so it was only a matter of time that a bright spark would ask if minutes of annual general meetings (AGMs), particularly of public-listed companies, should be posted online as more investors demand increased transparency?
The common legal position in Malaysia, Indonesia and Singapore is that such minutes must be recorded and entered into books, which are then kept so that these can be inspected by a company’s shareholders.
In Indonesia and Thailand, the law provides further that companies submit such minutes to their respective capital market authorities.
The laws of Malaysia and Singapore, on the other hand, require that companies keep complete AGM minutes at their respective registered offices; these minutes are to be open for inspection by any shareholder, at no charge.
As to whether any law requires publication of AGM minutes in a forum as public as cyberspace, the common stance on this in Malaysia, Singapore, Indonesia and Thailand is that there is no need to do so, be it on a company’s website or anywhere else online.
Having said that, some of these countries do consider publishing AGM minutes online a best practice. Thailand, for one, thinks so, under its AGM Checklist Guidelines issued jointly by the Stock Exchange of Thailand, the Thai Investors Association and the Thai Listed Company Association. These guidelines set out good corporate governance practices relating to AGMs, with the aim of meeting international governance standards.
Similarly, Bursa Malaysia has its Corporate Governance Guide-2nd edition which recommends that companies adopt the “best practice” of posting their AGM minutes on their corporate websites to “promote transparency in the information disclosed to the public”. Notwithstanding that, Bursa has, in certain circumstances, also recognised that even such a best practice may not be in a company’s best interest. So, despite the fact that Bursa’s CG Guide-2nd edition seems less preoccupied with minimum disclosure requirements, at the same time, Bursa also acknowledges that the companies should consider whether such disclosure would be helpful to their shareholders and other stakeholders without significantly breaching “reasonable commercial confidentiality”.
In other words, Bursa is sensitive to the occasional need for a company to refrain from publishing, so far as it is appropriate to particular circumstances, the proceedings of an AGM.
Bursa’s recognition that protecting a company’s interest should prevail over a transparency best practice is something with which the law has had regard for a long time.
For example, in the case of R vs Mariquita & New Granada Mining Co, the Court of King’s Bench held that “the proposed daily and hourly inspection and publication of all the company’s proceedings would be tantamount to admitting the presence of strangers at their meetings, and would probably be found very prejudicial to the shareholders.”
This case reminds us that there is a line between shareholders and members of the public; and that the right to inspect AGM minutes is, under the common law, limited to only shareholders because they are considered to have a legitimate interest in the affairs of their company.
Whereas publishing AGM minutes, online or off, widens knowledge of a company’s affairs to those whose interests are not necessarily aligned with that of the company. In the worst-case scenario, people who may not wish the company well, say, its potential litigants may wish to read the minutes to fish for information against the company and its shareholders.
So, as Bursa acknowledges well, granting members of the public access to AGM minutes is not without its drawbacks.
For example, wider disclosure of AGM minutes may scare AGM participants into censoring their remarks, and so not be forthright, during the AGM, as they may want to guard against what strangers might think of them.
So granting wider access to AGM minutes may actually impede frank and open discussions among shareholders and a company’s management. Here are just a few ways in which publishing AGM minutes publicly might have a negative backlash on a company and its shareholders:
Outsiders to a company may infer from AGM minutes discord and disagreement that never actually happened during the AGM. Worse, they may glean from the minutes that there are factions among the shareholders, which may affect how they think about the company’s future;
Should some shareholders suggest alternative ways to doing things, outsiders who do not appreciate healthy, lively and robust dialogue might perceive such alternatives as arising because those shareholders have little faith in the company’s present managers;
Those taking the minutes may not be able to capture comprehensively the context in which some AGM participants make their remarks.
So, without the necessary background to these remarks, outsiders might construe such remarks in a way that the participants never intended, and so they risk being misunderstood.
In taking care to ensure that everything is minuted and is not misrepresented or misconstrued, those taking the minutes may be so zealous in editing and correcting the minutes that the original intent of publishing to the public, that is, transparency, will be lost.
In its place, will be attempts to make the minutes so politically correct that the result is general to the point of being so vague that nobody reading them will be able to discern the thinking process and debates behind the decisions made at AGMs.
If the recent events, where snippet of minutes of board meetings that have been going viral on the Internet are any indication of what is going to be the norm, we are also likely to see very guarded board members which will result in a limited discussion in the boardroom.
All of the above, in the end, can often lead to poorer decision-making due to the restricted dialogue in company meetings.
As seen above, there is clearly a difference in opinion as to whether wider publication of AGM minutes would bring about better corporate governance practices such as transparency and probity or, conversely, actually be detrimental to the commercial interests of companies.
There is still a very lively discussion on this issue, and perhaps the best thing to note about that in the interest of corporate governance is that at least people are discussing the pros and cons of releasing corporate information.
As some say, if many people are thinking about a problem, that is already half the problem solved.
© CORSTON-SMITH ASSET MANAGEMENT SDN BHD 2014