Customs Street Advisors is a full service investor relations firm based in Lagos, Nigeria.

Fending for Themselves: Who’s Looking out for Shareholders?

This week on Street Talking in NEXT, I deplore the atrocious treatment retail investors regularly receive from companies on the Nigerian Stock Exchange.

In his immensely entertaining account of the global economic meltdown, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis – and Themselves, the author, Andrew Ross Sorkin, who is also the chief mergers and acquisitions reporter of the New York Times, describes a charged scene during a Lehman Bank board meeting held in July 2008. As the bank struggled to raise capital, Dick Fuld, its mercurial chief executive, invited Gary Parr, vice-chairman of Lazard Frères, the venerable investment bank, to provide his board with objective counsel on alternatives. Soon after the session began, Fuld felt that Parr was using it as an opportunity to ‘shamelessly plug’ Lazard’s experience with such Armageddon scenarios. Quickly, Fuld cut Parr off and thanked him for coming. Later that day, he telephoned the Lazard banker and threatened to fire him. The unflappable Parr replied, ‘that may be hard because you haven’t hired us yet.’ I enjoyed reading that story.

In the interest of full disclosure, I would like to inform readers that in my personal and professional lives, I do have selfish interests. I am not wholly motivated by altruistic impulses. Hold that against me if you will. I am only human. Gladly, I have never been crafty enough to raise my slate of selfish interests to an art form where it acquires the Machiavellian grand status of a hidden agenda. At the end of this article, you will read that I am the principal of an investor relations firm. I have had to issue that disclaimer because it captures the dilemma that consultants who sell cerebralware face every day. They will always be open to the charge of salesmanship even in non-bakeoff situations. But it would be incorrect to misconstrue selfish interests with pecuniary instincts. A lawyer’s pro bono work in defense of civil rights is driven as much by a moral alter-ego as her training to fight for the oppressed. If the rule of law prevails in society, then the lawyer’s practice will do just fine. This is long-term greediness.

Events in the past six months have made me ponder the fate of retail shareholders on the Nigerian Stock Exchange (NSE). Used and abused would not be a far-fetched description of their lot. Once pampered as darlings, memories of that feverish courtship are a distant memory. In those days, companies seeking to raise capital paid for giant billboards, had toll-free public offering numbers and insisted every staff member wore a branded t-shirt to declare their undying affection for small-time investors. The offering ads were even targeted at them with themes more geared to fast moving consumer goods. Married life has been a different story altogether. Forgive the well worn cliché, but today, mom-pop-and-sonny investors justifiably feel dejected, neglected and exploited. All this time hardly a word from the companies. If this is not fraud then it cannot be far off. It is all man for himself and no one for all.

Customers, on the hand, have been spared the pain. Companies are going the extra mile to retain and acquire new ones. No wise manager wants to mess around with clients these days. Lose one and it could mean a pink slip at the end of the month. To prop up this self-preservation ethic, having a regulator that demands right treatment for customers goes a long way. In this respect, bank customers must be blessing the Central Bank for its new regulation on dedicated help-desks for complaints on ATM transactions. Lately, one can hardly read the papers without coming across adverts of all sizes showing contact details for bank officers responsible for dealing with these queries.

All these have got me thinking more about the processing of retail shareholder inquiries at companies. In most NSE companies, there is no single officer whose responsibility it is to respond to investors’ concerns. Emails, telephone calls and postal mail arrive daily at public companies from shareholders in Kafanchan, Akwanga, Osogbo, Eket, Gboko, New Bussa, Wukari, New Rochester, Bonn, Houston and Toronto. Some are too old to travel the distance, others too busy. But their questions are the same: what is going on at our company? Most of these mails end up in the trash basket while callers are put on eternal hold, stuck listening to numbing tunes.

Do not get me wrong. I am not implying that appointing or training internal persons to handle such requests will lead to a surge in demand for a company’s shares. That would be preposterous. In fact, tying positive share price movements as a justification to provide shareholders with information that they should have reveals a perverse culture. It is a good-in-itself. Until companies recognize this, retail shareholders, like ghetto children, have little choice but to go on digging in dustbins and dirt heaps. But mark my words the cost of a wasted generation of shareholders will boomerang on the companies themselves.

The original article may be read here on the NEXT website.

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