Friday, September 16, 2011

The Annual General Meeting (AGM) Part 2

Part 2 of the AGM series will shed some light on the AGM itself, decorum to observe and who to approach. Please note that this is all narrated from a personal perspective, as I have been attending AGM for quite a few years now and have, over time, picked up some cues on who to approach and what to ask from experience. None of this is cast in stone, however, and therefore readers are free to modify any of the suggestions below to suit their own personal preferences.

For information, the experiences detailed below are a result of the compilation and culmination of attendances at the following AGM/EGMs: Ezra, MIIF, Swiber, Tat Hong, China Fishery, FSL Trust, Boustead, Kingsmen Creatives, MTQ and Suntec REIT. Since almost all AGMs are held on working days, be prepared to take leave in order to attend (unless you are a retiree with time to kill).

Mechanics of AGMs

An AGM is usually held at a hotel function room or if the Company is keen on saving money, then it will be held at the Company’s premises (for info: Boustead and Kingsmen AGMs are held at premises, while MTQ and SIA Engineering hold theirs at a hotel). You should bring along your identity card as well as a copy of the Annual Report and any documents which came along with it, as well as a pen and your prepared list of questions and notes. At the counter area, register your name with the staff and they will hand you a sticker (colour varies) to paste on your clothing. Some AGMs will hand you a poll slip stating the resolution to be voted on, and this will state your name, IC number and the number of shares held in the Company. These poll slips will be used for tallying in cases where voting is done by poll instead of a show of hands.

Assuming you are early, there will usually be time to find a good seat and to interact and mingle informally with Management (and other shareholders). The section below will focus on the proper behaviour and decorum to be observed at such meetings, in order to create a good impression and be able to gather the information required to make an informed assessment of the Company and its prospects.

The CEO will be in charge of reading through each resolution and asking for a proposer and seconder (a basic formality). There will usually be a pause before asking for a show of hands, as the BOD and Management would allow questions to be asked before putting the resolution to a vote. Once all questions have been posed and answered satisfactorily (and this includes both formal and informal questions), the resolution will be put to the vote. Unless there are violent objections, most resolutions will be passed without much fanfare.

Decorum, Etiquette and Behaviour

I can’t stress more on the importance of proper behaviour at the AGM proper. After all, it is a corporate meeting and therefore one is expected to at least dress presentably and behave in a civil and cordial manner. For myself, I treat the AGM as a business meeting and therefore I will usually dress up in corporate wear, with long/short-sleeve shirt, long pants and socks/shoes. I have seen retirees who are dressed much more casually, but no one comes in a singlet and sandles (obviously). Dressing well also gives a good impression to Management that you are a serious investor and assuming you approach them with the right attitude and armed with the requisite knowledge, you may leave a deep impression on them. There are reasons for this which I shall go into shortly.

In term of decorum, it is only polite to ensure one does not interrupt the proper proceedings of the meeting, and to save most of the questions till after the meeting proper (to be taken “offline” as it commonly referred to). When invited to formally ask questions (usually by standing in front of a microphone), one should be civil and polite when posing the question. I have personally witnessed cases where shareholders get agitated over some perceived grievance and decide to air their frustrations through the microphone for all to hear. Management may take quite a while to placate the incensed individual and normally, when one is caught up in that frame of mind, nothing useful ends up being discussed and everyone’s time is wasted. Indecorous behaviour is normally tolerated as the BOD and Management strive to be professional, but there have been cases where sarcasm is thinly veiled and where Management has been known to admonish the shareholder (so that they feel some measure of chagrin or mortification, hopefully).

My style is often a non-confrontational one – I will arm myself with the questions and approach Management after the meeting proper by asking if they are free for a discussion. They are usually quite pleased to engage shareholders, though what they say and proclaim is usually coloured by personal bias and unbridled optimism (most of them own part of the company, and are therefore loathe to admit anything bad about it). The personnel of importance to approach include the Chairman, CEO, CFO and any divisional heads; all others can only give a rather one-sided view of things which may not be useful; and they may literally rattle on and not give you the chance to extricate yourself from the idle chatter.

For accounting and finance –related matters (e.g. sales, revenues, margins, loans, debt, gearing and ROE), approach the CFO or the Finance Director. For strategy-related matters, industry prospects and plans for the future, it is better to speak directly to the CEO and/or Chairman. For the record, I have personally spoken to Benedict Soh (CEO) of Kingsmen Creatives, FF Wong of Boustead (Chairman and CEO) and Mr. Kuah Boon Wee (CEO) and Mr. Dominic Siu (CFO) of MTQ. For other matters pertaining to the Annual Report or other news-related queries, it will be useful to approach the IR contact, but make sure they are internal personnel and not staff from an IR company. Some examples would be Keith Chu from Boustead and Andrew Cheng of Kingsmen Creatives who are the designated IR spokesperson from their respective companies.

There are also no hard and fast rules as to how to approach each person. Generally, a smile and a warm handshake (coupled with an introduction) would suffice. The next section will discuss on how to ask the right questions (and also how to avoid potentially embarrassing ones) and to dig out the required information in order to make your personal trip worthwhile.

Fact-Finding and Questioning

An AGM is to be viewed as a fact-finding “mission” for the enterprising investor, and if one is well-prepared with a list of questions (see Part 1) and equipped with the requisite knowledge of the Company (e.g. divisions, margins, plans and other pertinent details), it will make the discussion much easier and more casual. If not, it can sometimes resemble an interrogation session whereby shareholders will ask inane and inappropriate questions and make Management wince and grimace. I have yet to see the BOD or CEO recoil in horror, but the way some shareholders ask questions (combative tone, threatening demeanour) makes me feel quite a measure of pity for the one being questioned.

It is usually good to start off with some casual and general remarks or questions before one digs deeper. Leading questions and statements could include commenting on the company’s excellent performance before delving into an aspect which requires attention, or to congratulate the CEO for a good financial year before questioning him on his plans and strategies. As part of human relations, it is important to blunt any impact of difficult questions and try to wrap your tongue around the question to make it sound more palatable. A good example might be querying the Management on why debts have increased by so much in the Balance Sheet. Instead of asking the question point-blank (which may elicit a defensive response), it may be better to para-phrase it to sound something like – I understand debt has gone up significantly, but was this for a planned acquisition or was it already part of Management’s budget? Phrasing a question to sound politically-correct may make it seem like you are being superficial, but unless you are on friendly terms with the Management, it is better not to put them on guard; for this may also frustrate further attempts at digging out important nuggets of information.

Also avoid asking loaded questions which “corner” the person and leave him with little room or choice to manoeuvre or reply. Examples of loaded questions would be “Do you think the company can only do better this year?” - this essentially forces a response in the positive, for no Management would like to paint the company in a bad light. Ask open-ended questions instead of those requiring a “Yes” or “No” absolute reply.

Another irksome area is that of vague questions. Some questions are so general that Management is given room to answer almost anything. There is the problem of not being focused enough to be able to obtain the answers you seek, and this wastes time and effort. Try to support each question with some facts of your own or numbers; this will give the impression that you know your stuff and Management will feel less inclined to hoodwink you. You could perhaps say – I heard that the oil and gas industry is poised to dip into the doldrums, what is your take on this? Or on a question on margins, you could say – I noted from my analysis that operating margins for XX division were only XX% compared to YY% a year ago, may I know the reason for this and what is Management doing to address this? Being focused and drilling into details also forces Management to ruminate and think on the problem in order to give you their best answer (though some answers may be spur of the moment types intended to cover their ignorance of the situation!).

The last area I must talk about is that of silly questions. These probably take the cake in terms of being not just irritating but also a complete waste of time. I can, offhand, quote two of the most common silly questions I have heard at almost every AGM/EGM. One of them is the classic “dividend” question – Will the BOD be paying higher dividends next year? I mean, hey, no one can even forecast their results in the next quarter, much less a year later! The second most irritating question would be – Why is the share price so low? Can Management do something about this? Obviously, the hapless shareholder should know better than to burden Management with something as trivial as the share price when he should be focusing his energy and effort on understanding the business better! These questions almost invariably draw a polite (sometimes forced) smile and the standard reply that it is not Management’s duty to track the share price and there is nothing they can do to manipulate it, other than (of course) running the business well and growing it. It’s about time that shareholders realize - if the business does well, the share price will naturally follow.


An AGM is a very rich source of information for investors and therefore, I feel it is a must for all investors to attend. After all, it is only once a year that you get the chance to rub shoulders with senior Management and the Board of Directors and also get to question them on various corporate actions and strategies. By sizing them up in person, an investor can also pick up subtle cues from their body language which may signal a lack of confidence, or at the opposite end of the spectrum, hubris. Face to face interaction is important as Management is less able to hide behind the computer screen to type away on a prepared email response, and they will be far less dismissive as compared to talking over the phone (where they may also be reading from a script). One can literally test how Management and the BOD react to “awkward” questions and accusations and to see how they (stoutly) defend themselves, or if they have a proper and reasonable response to a pointed question.

Part 3 will focus on the aftermath of the AGM – how one should organize their notes and thoughts, the impression which they take home after meeting the Management and BOD face to face, as well as the essential follow-up which must be done as part of the on-going due diligence as an enterprising investor.


Calvin said...

Hi Musicwhiz,

That's an interesting post on AGMs. I personally think people should make an effort to attend AGMs at least for some of the stocks they invest in to get a better feel of the management team, the company business overall.

By the way, I like what you write in your blog. Very informative on the stocks which you invest in. I think it's quite similar to my Passive Income investing strategy. If you don't mind, we can do a link exchange. My website is



Musicwhiz said...

Hi Calvin,

Thanks for visiting, so far you're the only one who has left a comment 5 days after I posted this up LOL! I was wondering how people felt about AGMs but it appears many either do not attend, or do not think it necessary to attend.

Sure, I've added your blog to my list of good blogs to visit. Keep writing and all the best!


Calvin said...

Thanks for the add!

Look forward to more fruitful knowledge exchange in future.