It is fair to say that angry shareholders lining up to fire questions at a beleaguered board is not a situation in which Gulf CEOs are particularly well versed.
Not only are there few companies with enough publicly listed shares to justify such adversarial annual general meetings, but the corporate culture of the GCC — in terms of bureaucracy and legal framework — is hardly conducive to shareholder activism.
"Often boards are viewed as a continuation of tribal meetings, where the head of the tribe has his say and what he says is law," explained Fahad Toonsi, manager at accountancy firm PricewaterhouseCoopers (PwC), who has worked with companies in Saudi Arabia and Kuwait.
Family business
"Things are kept within the family, within the business community and the message is don't make a ruckus out of it and solve things in a friendly manner."
Abdul Aziz Al Yaqout, regional managing partner at DLA Piper Middle East, added that the key to the issue is the absence of a legal framework for investors to take action against boards. He has attended AGMs in Kuwait and Germany and the difference, he notes, is remarkable.
"[The system] does not incentivise shareholder activism. It would really become frustrating for people if they wanted to become shareholder activists, because they wouldn't get anywhere. The legal framework isn't there," Al Yaqout said.
Peter Gotke, Vice-President of Depositary Receipts at BNY Mellon, said that his firm has had a lot of experience preparing CEOs and CFOs for meetings with investors in either London, New York or Hong Kong, where they may look to list through depository receipts, such as DP World, which BNY does not represent or Bank Muscat, which they do.
Gotke said that while in the past it was a very new concept for business honchos from the Gulf to meet investors face to face, they are now coming around.
"Historically, it was very hard for CEOs to go and listen to some of the questions that were being asked — let alone give answers," he said.
"But increasingly they expect to receive the tough questions and are prepared and give good answers and by doing so they build trust with the investment community."
It is a point that PwC's Toonsi also notes. The reluctance on the part of CEOs to listen to shareholders — as well as a legal framework that presents activism — is only part of the problem. There is also little desire on the part of investors to engage with the companies in which they have invested.
Companies in the region often feel that shareholders vote with their feet alone, and that if they don't like the way the board is acting then they will simply sell their shares. This is not only the fault of corporate culture, but investor culture too.
"What I'm calling for is pretty minimal. I mean just attendance of AGMs is really abysmal," Toonsi said.
"I've attended one that was recalled twice with only one attendee, and that is not only a cost to the company — not only an embarrassment to management and the board — but it also tells the company that why should they bother about corporate governance if investors don't really care? It's a two-way road," he added.
