Need for shareholders association to protect investors

SALEH AL SHAIBANY –
saleh_shaibani@yahoo.com –

It is about time Oman go back to the basic about attracting much needed foreign investments at a time the country need it most.
The first question should be raised is the transparency of large corporate companies in Oman before we focus on bringing foreign businesses.
The government has already put in place sound corporate governance’s laws. However, but local corporate businesses find a loop when it comes to partnering foreign investors.
The loop they exploit are in the laws that exist between shareholders and executives of the capital market firms. Many feel that investor protection is exploited by local partners.
The supposedly blue chip shares traded in the Muscat Securities Market (MSM) are still languishing at the bottom when most of the global markets are recovering. Lack of transparency caused investors funds to take a severe knock, wiping out thousands of rials from their original investment.
But then it is easy for them to blame the government because they deliberately create confusion in the companies they control in the listed companies.
Local shareholders may be hoodwinked but international investors cannot be fooled. We need their financial power to keep the index up but disclosure rules must be revisited for that to happen.
Many feel corporate decisions are still shrouded in mystery and they thrive on secrecy. For example, it is not easy to find out how much a Chief Executive Officer gets in annual bonus.
On what basis they get thousands of free shares is the other riddle or how they justify on acquiring another company which members of their families are already holding stakes.
One investor was left scratching his head when he learned the amount of money a senior executive was paid off for early retirement at a time when net profits of the company were going down.
Information leaks are still rampant as well.
It looks like confidential files are being ‘left carelessly’ on a table of a popular coffee shop for somebody else to pick up. In case you are wondering why a business leader of a listed company is carrying a briefcase while having coffee with someone on a Friday then you should know what is in the bag.
Unless corporate governors start to severely reprimand offenders, then capital market investors would continue to lose confidence. They will also continue to lose money because the people who sit in the boards make a mockery out of disclosure rules to sway decision their way.
Executives always seem to ignore the fact that they are working for their shareholders. But deals continue to be made in the interests of senior managers or to suit the needs of board directors and not ordinary shareholders.
In the past, there were questions on mergers of big financial companies, whether executives from both sides adhere to transparency laws. Investors would always be told two companies are merging when the truth one is acquiring the other. There are also loopholes in the financial accountability.
Shareholders would not know that they are financing a new headquarter complete with state-of-the-art gym, a luxury club, a 200 metre swimming pool with a jacuzzi and private office elevators, all for the pleasure of a handful of senior executives. Not to mention a fleet of Mercedes or BMW cars, replaced every five years, standing outside their offices.
Some of the shareholders, when they attend the Annual General Meetings (AGMs), feel like lambs being led to the slaughter house with the Board of Directors sharpening their knives.
In Oman, rarely a proposal from the Board has been rejected in the AGM meeting. That is because shareholders hear carefully orchestrated words, with some facts cleverly withheld and proposals are read through in a blurring speed.
It is time to have a chorus of voices from investors speaking out against poor company disclosures.
Perhaps it is also time to have a shareholders association powerful enough to humble senior executives of listed companies to be compliant. The shareholders association may be what is needed to boost the MSM index and attract more foreign investors.