Lunch, or rather the absence thereof, dominated the first Safaricom AGM. Andrea Bohnstedt looks at what Safaricom’s catering failures may have set in motion in investor relations management.
Anticlimax
With the Kasarani Stadium booked as the venue for Safaricom’s AGM, the event ended up being a bit of an anticlimax, and for Safaricom’s management, that was perfectly fine: They had explicitly, and repeatedly, emphasised that none of the usual freebies would be handed out at the AGM: No lunch, no t-shirt, no umbrella, no baseball cap - too expensive, and therefore not good shareholder value (Kenya: Don’t Come to Safaricom for Lunch ). And it worked: Instead of the 30,000 shareholders expected under a lunch-and-freebie scenario, around a tenth of this number turned up. But even then, the preoccupation with lunch would not go away: 80% of the time at the AGM, Chief Investor Relations Officer Les Baillie said, was spent arguing over the missing food. Technically not an agenda item, but Baillie and his colleagues had decided to let participants have their say on this hotly contested point. Ultimately, all proposed motions were passed, but even then, the most intensely debated item actually on the agenda was the amount of the dividend to be paid out – predictably, the suggested amount was not enough.
The big lessons?
- That few retail investors know what they are doing: The Safaricom AGM threw a very sobering light on how little many retail investors really understand about their investment activities if all they care about is that now notorious lunch. During the IPO process, hardly any of the retail investors had listened to cautions against taking out loans to purchase shares – and the government, keen to spread the love – and the shares – in what was partly a political IPO, had made little effort to ensure extensive investor education and protection. Only now has the Central Bank of Kenya (CBK) come forward and admitted that it had been wrong to let customers borrow to participate in the IPO.
- And that other companies will follow Safaricom’s lead in slim-line AGMs: ‘We got our point across’, said Baillie, reviewing the AGM – and now that Safaricom has done the trial run, and taken the flak, several CEOs of other listed companies have said they would follow the mobile operator’s example. Safaricom CEO Michael Joseph, become a social occasion to a meeting fulfilling its original functions.
Perspectives
The CMA is reportedly formulating guidelines for the trading of real estate investment trusts on the Nairobi Stock Exchange (NSE), making another investment vehicle available for retail investors. At the same time, the mess of several pyramid schemes has yet to been cleaned up: Their popularity shows that the get-rich-quick lure was stronger than any understanding of the fundamentals of investment – the same draw that the windfall earnings from a handful of wildly oversubscribed IPOs had.
Safaricom’s outsized role in the market always draws extra attention to anything the company does. So the lunch debacle of their AGM should really serve as an eye opener for the capital markets industry and the regulator, the Capital Markets Authority (CMA) to take a long, hard look at investor education and protection – not an easy task when the CMA’s credibility has been tarnished by the mismanagement and failure of several stock brokers. Safaricom have offered their support to the CMA, but can only do little on their own, Baillie says, not the least because their efforts could easily be seen as biased.
For other listed companies, this is also a useful moment to rethink how they communicate with their investors beyond just cutting back on catering expenditures – many companies still treat both inquisitive individuals and media with a good degree of distrust. Technology can be used to make a big difference: As the first of several fibreoptic cable ventures come on stream, digital communications, now legally acceptable as a binding form of business communications, offer new platforms to strengthen investor communications. Rob Stangroom, an experienced investor relations advisor, not only believes in online technology, but also argues that many listed companies have not understood the wider potential of a proactive investor relations management: He thinks that large shareholder bases should be seen as a marketing opportunity. Investment data required for effective shareholder communication can be merged with an operational brand to improve overall reputation, which can ultimately also improve share value (Kenya: Investor Relations Management: Perspectives ). However, even this is likely to bypass the small retail investor who is mainly concerned with lunch and the free t-shirt.
After the public indignation over their catering failures, Safaricom’s management can now go back to business – where the profusion of small retail investors again makes life difficult. They are considered a factor in locking in the share price at its low level (Kenya: Unlocking Safaricom's Share Price ) as there is not enough liquidity in the market. The company is currently considering several options suggested by financial advisors, but has, for now, ruled out a share buy back – not because the CMA would not be amenable to changing the laws that currently do not allow this, but because they would find it hard to justify spending that much money.
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