As Barbadians become increasingly aware of and more interested in the various investment vehicles available, purchasing shares in one of the publicly listed companies no doubt presents a viable option.
Shareholders make a financial investment in a corporation, and this entitles those with voting shares to elect directors. Ordinarily, they are linked to the management of the company through the board of directors and do not have the right to be involved directly in company management.
However, shareholders have the right to remove directors or refuse to re-elect them if not satisfied with their performance.
While boards may want to know shareholders’ views, directors are not normally required to comply with their wishes.
Since the average Barbadian is likely to be considered a small shareholder, the question can arise of whether the interests of small shareholders are adequately represented.
The October 25, 2009 SUNDAY SUN editorial stated that local shareholders in public companies and credit unions must bestir themselves to attend annual general meetings and call the directors and managers to account for their stewardship.
“Clearly we are entering a new phase in our economy as locals become more interested in investing in shares, but along with that new interest, they must be empowered with the knowledge that permits them to participate in the affairs of their companies,” the writer said.
The regulatory authorities were therefore called upon to promote education about share owning and the role that shareholders can play in companies in which they have invested.
Meanwhile, Barbados Association of Corporate Shareholders president Doug Skeete spoke of the “marginalization” of small shareholders in an address to the Caribbean Investor Conference in 2008.
“Since profitability seems to count for more in Caribbean public companies than corporate governance, price of products or other factors, there is another trend that has been taking hold in Barbados that is most troubling to some of us with an interest in the development of Caribbean stock markets.
“I am referring here to the emerging marginalization of small shareholders,” he said.
Skeete noted that when the Barbados Stock Exchange was established, the Government of the day felt that the exchange could help achieve a more equitable distribution of the country’s wealth.
“Private companies were encouraged to go public through a number of incentives that were given by the Government.
“Investing in equities by the small man in the street was seen as a new phenomenon but there was hope that with education and some prompting, small prospective investors would take the plunge and participate in stock market activities,” he said.
The accountant said this matter of small shareholders’ marginalization is important when one realizes that the number of Barbadians owning shares in public companies in Barbados hardly exceeds 15 per cent of the population.
A December 19, 2011 article on businessbarbados.com entitled Answering The Call For Sound Financial Information noted that traditionally, shareholders in publicly listed companies in Barbados have been a patient lot compared to their counterparts in larger countries.
“They have held on to shares, often passing them on to another generation, content to settle for a decent dividend and leave the running of the company to executives and directors who are supposed to know best,” the article stated.
However, it noted too that investor knowledge and expectations were growing as the reality of a regional stock exchange draws closer.
In addition, the article said analysts and advocacy groups are encouraging closer scrutiny of how companies are being managed and what executives and directors are doing to create value for shareholders.
“There are growing demands for greater disclosure of financial information, and better quality information on which to base investment decisions.
“In effect, the balance of power between corporate management and shareholders in Barbados, which has traditionally favoured management, is shifting towards shareholders.
“And this shift will require a change in management style as shareholders demand greater transparency and accountability from senior executives and boards of directors,” it stated.
According to Philip Atkinson, head of assurance services with PricewaterhouseCoopers in Barbados, the tight-lipped approach of past generations of management will no longer work with better educated and more demanding investors.
Noting that those days are over, he said today’s investors want to know how well management is looking after things and whether or not they have backed a winner.
“They are also beginning to understand that they have the right to ask for more information to assess performance,” he said.
Atkinson said agitation in the investor community has been growing steadily over the past decade and it will continue to do so as capital markets in Barbados and across the Caribbean become bigger and more sophisticated.
“Chief executives and directors have to accept this and adapt to it,” he added.
“They have to become accustomed to closer scrutiny, and even criticism, but most of all their companies will need to meet the dual challenge of collecting and communicating critical financial information.”
In essence, Atkinson said public companies in Barbados, like their counterparts in more developed capital markets, must now acknowledge the importance of investor relations as a key function within the management process.
“Very few, if any, Barbadian companies are holding regular shareholder sessions or making presentations to the investor community where there can be any real two-way communication between management and investors,” he added.
Atkinson said that publicly listed companies’ communication with investors has been done via a single publication – the annual report – followed by the annual general meeting, and little else of substance during the rest of the year.
