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    The Shareholders: DR Safdar A Butt

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    Ahsan
    This document discusses the role and types of shareholders. It defines a shareholder as the owner and beneficiary of a company who bears risk and has decision making power. There are two main types of shares - ordinary shares, which provide voting rights and claims on profits/assets, and preference shares. Shareholders can be internal, seeking to own and run the company, or external, investing only for returns. Large private shareholders can greatly influence companies in Pakistan. Institutional investors like pension funds have a long term interest in share value growth and the ability to influence boards, but may not have time for every company. Shareholders expect accountability, transparency, and good returns from companies. They hold power over boards through approving certain transactions and electing

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    The Shareholders: DR Safdar A Butt

    Uploaded by

    Ahsan
    213 views23 pages
    This document discusses the role and types of shareholders. It defines a shareholder as the owner and beneficiary of a company who bears risk and has decision making power. There are two main types of shares - ordinary shares, which provide voting rights and claims on profits/assets, and preference shares. Shareholders can be internal, seeking to own and run the company, or external, investing only for returns. Large private shareholders can greatly influence companies in Pakistan. Institutional investors like pension funds have a long term interest in share value growth and the ability to influence boards, but may not have time for every company. Shareholders expect accountability, transparency, and good returns from companies. They hold power over boards through approving certain transactions and electing

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    This document discusses the role and types of shareholders. It defines a shareholder as the owner and beneficiary of a company who bears risk and has decision making power. There are two main types of shares - ordinary shares, which provide voting rights and claims on profits/assets, and preference shares. Shareholders can be internal, seeking to own and run the company, or external, investing only for returns. Large private shareholders can greatly influence companies in Pakistan. Institutional investors like pension funds have a long term interest in share value growth and the ability to influence boards, but may not have time for every company. Shareholders expect accountability, transparency, and good returns from companies. They hold power over boards through approving certain transactions and electing

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    213 views23 pages

    The Shareholders: DR Safdar A Butt

    Uploaded by

    Ahsan
    This document discusses the role and types of shareholders. It defines a shareholder as the owner and beneficiary of a company who bears risk and has decision making power. There are two main types of shares - ordinary shares, which provide voting rights and claims on profits/assets, and preference shares. Shareholders can be internal, seeking to own and run the company, or external, investing only for returns. Large private shareholders can greatly influence companies in Pakistan. Institutional investors like pension funds have a long term interest in share value growth and the ability to influence boards, but may not have time for every company. Shareholders expect accountability, transparency, and good returns from companies. They hold power over boards through approving certain transactions and electing

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    The Shareholders

    Dr Safdar A Butt

    Who is a shareholder

    Owner Beneficiary Risk bearer Decision maker

    Types of Shares

    Ordinary shares Preference Shares Other types

    Features of Ordinary Shares

    Permanency No nominal cost to the company Residual claim on profits Residual claim on assets Voting rights

    Cumulative voting rights

    Right of purchasing new shares


    4

    Classification of Equity shareholders

    Internal (invest to own and run_


    Corporate shareholders (holding companies) Families, groups of friends

    External (invest only for a return)


    Individuals Institutional investors.

    Internal Shareholders

    Controlling shareholders Majority not a necessity Scene in the West Situation in Pakistan

    External Shareholders

    Generally not on the board. Lack of unity Lack of interest Therefore, lack of influence

    Small Private Shareholders

    Individuals Only interest in share price change No long term interest Only a little interest in earnings Reactive buyers/sellers Biggest losers when things go bad No influence over Boards
    8

    Large Private Shareholders

    Individuals (but may be acting through trusts, private limited companies, etc.) Have long term interest in the company May have great influence on the company May provide bulk of executive directors In Pakistan, these people are the focus of corporate governance endeavors.

    Corporate Shareholders

    Holding companies Multinationals Groups Characteristics

    10

    Institutional Investors

    Mutual Funds Managed Funds Pension Funds Life Insurance companies Banks In UK, it is believed that institutional shareholders hold, on an overall basis, a majority of shares of all listed companies.
    11

    Institutional Investors Perspective

    Long term interest in share value growth. Current returns are still important. Ability to evaluate performance. Power and ability to influence Boards. But do they have the time to pay attention to every single company. Monitoring systems for danger signals.
    12

    Role of IIs in CG

    Capability and Capacity to influence. Dialogue with directors Regular evaluation of financial reports
    Flag off danger signals Sharing info with other stakeholders

    Judicious use of Vote Could / should seek representation on board

    13

    Some interesting facts


    10% of EDs in European companies do not know who their top 50 shareholders are. 25% of their CEOs had met only half of their top 50 shareholders In Pakistan, most listed companies have majority held by a family or group and they do not seem to attach any importance to any other shareholder.

    14

    Expectations from a Company

    Accountability of board members Transparency in all transactions Company interest over self interest Effective and efficient management leading to good returns and capital growth. Fair share of real profits.

    15

    Shareholders Hold on Board


    Shareholders must approve: Class 1 transactions

    Large size relative to size of the company

    Related party transactions Financial statements

    Audit report is for shareholders

    Directors remuneration Shareholders elect and can remove directors.

    16

    The AGM

    Attendance should be encouraged Asking of questions to be encouraged Individual voting on issues (No grouping of issues) One vote, one share Proxy facility

    17

    Communication between Shareholders & Board

    Direction: One way reporting or Two way communication Nature: Formal or Informal communication Scope: All or some shareholders Frequency: Regular or irregular, need based.

    18

    Communication Instruments

    Statutory reports Chairmans report (OFR) Compliance reports Newsletters, circulars Meetings with major shareholders Correspondence

    19

    Shareholders Activism
    Refers to stand taken by shareholders against recommendations of the Board. Do they have adequate rights or power?

    Result less important than show of dissent.

    Can work only if institutional investors participate. Do institutional investors have a duty to communicate with other shareholders?
    20

    Areas of Dissent

    Re-election of directors Re-appointment of auditors Approval of directors remuneration Approval of annual accounts Dividend recommendations Changes in share capital Other approvals
    21

    Shareholders Activism - 2

    If institutional investors join hands with smaller shareholders. Monitoring of board performance Direct intervention Regular evaluation and sharing of analysis But remember, institutional investor organizations are all run by managers so they have affinity for managers.
    22

    Thank you
    S A Butt

    23

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