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It is natural for retail shareholders to question the significance of voting as they hold less shares than substantial and majority shareholders. Since "every vote counts", retail shareholders can protect their interests when everyone makes it a point to vote.

In reality, retail shareholders in general are indifferent to shareholder meetings. They seldom attend these meetings and exercise their votes. This leads to the low voting rate in shareholder meetings. If voting rate is low, shareholders' interest cannot be protected. Many corporate actions that were not in line with the interest of the shareholders recorded low rating rate but high approval rate. During 2015-16, there were 93 rights issues proposals (including open offers) that required approval from minority shareholders. The average voting rate was 27%, whereas the average approval rate was over 90%.

Substantial and majority shareholders are not invincible

The majority rule applies to voting. However, this does not mean that substantial and majority shareholders always get their way.

Substantial and majority shareholders do not necessarily have absolute advantage. To protect the interests of minority shareholders, substantial and majority shareholders and connected parties may be restricted from voting if they are involved in a substantial sale, acquisition or connected transaction. Some company motions may require a higher threshold to approve. For example, a privatisation proposal requires a minimum approval of 75% of the votes held by the non-interested shareholders (i.e. shareholders other than the controlling shareholder and parties acting in concert with it) who attend and vote at the shareholder meeting. The calculation of votes held by the non-interested shareholders cast against the resolution is not more than 10%.

Voting is a fierce battle and the votes of a few minority shareholders will not sway the results. As long as the minority shareholders come out to vote, they can monitor, challenge, and even overturn some corporate activities that are not in line with their interests.

Attending shareholder meetings

In addition to voting, shareholders are entitled to attend shareholder meetings. While some shareholders may attend for the complimentary snacks and gifts, the purpose of attending these meetings is to raise questions to the company directors and management, and express any opinions regarding the company's business and prospects. This will allow the management and board of directors to hear the opinions and voices of different shareholders.

If retail shareholders have doubts about the proposed motions and major transactions, they should attend the shareholder meeting to understand how these can bring about benefits to the company. They can voice their concern and ask the chairman to explain. This type of dialogue can help to monitor the actions of the management and directors, and hold them accountable. They cannot assume that everything is settled after submitting a written report for shareholders to vote.

From a financial perspective, voting can shape the company's decisions. It is a waste of opportunity if retail shareholders do not to exercise their votes or attend the meetings. When companies are poorly managed, they may result frequent highly dilutive fundraising activities, and fail to meet business targets. If shareholders do not want to exit, they should exercise their voting rights, and attend the shareholder meetings to raise their concerns with the board and independent directors.


30 November 2017