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Shareholder activism: Stakeholders disagree to agree

By on May 4, 2015

Shareholders and regulators in the Nigerian capital market have expressed dissatisfaction over the activities and operations of either parties. This was the fallout of a recent deliberation at the Grey Matter Dialogue, organised by commercial law firm, Banwo & Ighodalo, in Lagos.

Discussing the theme: “Whither the Nigerian Activist Investor – How Nigerian Minority Protection and Corporate Governance Rules Engender or Inhibit Shareholder Activism,” a panelist, Yewande Sadiku, chief executive, Stanbic IBTC Capital Limited, observed that institutional investors represented a large proportion of investors market, yet remained a very passive bunch.

According to her, only the retail investors are active and usually agitated, and “institutional investors do nothing to shape or direct the market. Top shareholders are not necessarily more oppressive in the Nigerian market. They hold larger shares and thus their voices should be significantly higher, yet this is not always the case.”

It is quite easy for minority shareholders to agitate, she said, saying all they need is to get 25 minority shareholders together, convince them to vote in a certain manner and this gives them the power to have a say against a majority shareholder with 10 percent shareholding.

Yewande said “we understand that a scheme does not require regulatory approval. I don’t think it is right for any regulator to take away the right of a shareholder. It is their right.”

What regulators should be concerned about is shareholders having a disproportionate influence on the market, she said further, noting that it was important that shareholders be proactive and that they drive the direction of the market.

“When minorities speak, in most cases, it is assumed that they are oppressed. So, sometimes, they set disproportionate reactions. If we cannot do transactions… then we cannot do any delisting,” Yewande argued.

Another panelist, Genevieve Sangudi, managing director, The Carlyle Group, noted the existence of limited engagement of regulators with institutional investors, who rarely engage the market, explaining that “they only become reactive when it is almost too late.”

In her summation, she raised a poser as to whether activist actions really have long-term benefits on the capital market. To her, more private equity institutional investments should be encouraged in the Nigerian capital market.

Uaboi Agbebaku, company secretary/legal adviser, Nigerian Breweries plc, who was also on the discussion panel, said opportunity was quite available for shareholder activism in the Nigerian capital market, but the relationship between the retail shareholder and regulators was sore. “We need regulators to take a step back to access and see if their regulations are indeed for the interest of the minority shareholders as they claim,” he advised.

Nornah Awoh, chief equity analyst, Palesa Capital Market Associate Limited, also a panelist, told participants that the issue of activism in the Nigerian capital market environment had its own intricacies and challenges, with specific regard to the level of enlightenment and education in this part of the world.

“Most of the challenges we face in the market don’t even come from smaller companies, they come from the larger ones,” he pointed out.

On the part of the regulators among the panelists, Mary Uduk, director, Fund Management and Collective Investment Schemes, SEC, pointed out that SEC had a responsibility to protect “All” shareholders, whether minority or majority.

However, she agreed with the others that institutional investors had done nothing to shape the market. “I totally agree with this. Whereas, the reverse is the case in other jurisdictions,” she said.

At the end, participants agreed that without the regulated there would be no regulator, thus there was need for individuals and companies to work towards developing laws and regulations to govern the capital market. It was also noted that the law had moved on in many jurisdictions, and the Nigerian capital market was gradually being left behind.

Tinuade Awe of the Nigerian Stock Exchange encouraged institutional investors to strive to do more to shape the discourse in the market and drive direction, saying “you must get up to your responsibilities at this time.”

Asue Ighodalo, founding partner of Banwo & Ighodalo and chairman of Sterling Bank, in his closing remark, reiterated that the real challenge in the Nigerian capital market was the failing of institutional investors.

“If they get up to their obligations, we will see a more articulated and well-directed investor market. On the other hand, if we engage the regulators more, we will get better regulations. So, the onus is on us all, to start working,” he said.


[Business Day]