In addressing the topic of small shareholders, it is indeed imperative that the focus be on minority shareholder in corporate Barbados, since the two are inextricably linked.
It would therefore be a public disservice if we did not take a step back in time to reflect on the initiative of broadening the base of share-ownership. By its very nature, this concept gave rise to small share-ownership in a corporate society that excluded its workers, perhaps not with malintent, from ownership in the business enterprises they helped to develop and sustain.
It is no secret that the foresight of Prime Minister Tom Adams laid the foundation for a metamorphosis in the mass ownership of shares in local public companies.
Just as we speak with unbridled acclamation in recognition of the enduring advantages of free education, we owe it to the present and yet unborn generations to bring to mind the platform that propelled the advent of broad-based share ownership in public companies.
The presence and active participation of the ordinary working class at a company’s annual general meeting, with rights not dissimilar from their employers, are manifestations of a social progression mirrored only by the granting of adult suffrage and the reparations of slavery granted to benefactors under the 1980 Tenantries Freehold Purchase Act.
Like new enlistments in a platoon of seasoned warriors, minority shareholders repose their confidence in those charged with directing the affairs of the company.
However, the composition of the majority of our corporate boards may cause some shareholders to question whether the interests of minority shareholders count for anything.
Besides the provisions contained in the Companies Act that compel company directors to have regard for the interest of its employees and shareholders, the next rung in procurement of confidence resides in the auditor.
However, a post-Enron report suggests that the auditor be appointed by the majority shareholders who would approve the continuation of his engagement. It is for this reason that noted Columbia University law Professor John Coffee Jr has suggested that the company auditor should not be elected by all shareholders, but only by minority shareholders.
While the professor’s suggestion may never see the light of day in the local corporate environment, the Companies Act makes provision for civil remedies by way of derivative actions.
These actions constitute claims brought by an individual shareholder in his own name, but on behalf of the company. The fundamental caveat in instituting such claims reposes in the fact that commencement of these actions require a certain level of financial muscle that may not linger in the pockets of small shareholders.
Perhaps the time has come when, either by legislation or moral suasion, minority shareholders are vested with the right to elect a director of their choosing. Alternatively, companies should designate and declare which of their directors will oversee the interests of minority shareholders, whose principal interest resides in obtaining full and fair disclosure of all material investment information.
• Hilford Murrell is an attorney-at-law and financial consultant.
