In the past year, minority shareholders of companies listed on the Nairobi Securities Exchange (NSE) have had a mixed bag of fortunes in terms of their representation and influence on boards of corporates.
While small owners in some entities remained subdued and manipulated, crops of activist shareholders have sprouted and are flexing their muscles to try and bring about change in how firms are run—turning the spotlight on the awareness of investor role in company management.
The recent government-engineered changes on the board of Kenya Power, for instance, put to question the little power minority shareholders of the utility wield over its affairs.
Despite their holding over 49 percent of shares in Kenya Power compared to 50.1 percent by the State, two elected directors—Vivian Yeda and Yida Kimoli were ousted from the board of the utility on orchestration of National Treasury Cabinet Secretary Njuguna Ndung’u without any resistance.
Interestingly, with the sizeable stake in Kenya Power, minority shareholders would have ganged up and either questioned or fought the State’s unilateral decision to remove the duo after a new government regime took over but this didn’t happen— providing a glimpse of the global concerns on minority rights.
Minority shareholders
In contrast to the timid minority shareholders of Kenya Power, a growing number of NSE-listed firms are feeling the heat of an alert group that is keen to have a bigger say in corporate governance.
For instance, NSE-listed agricultural firm Kakuzi was recently forced to make changes on its board in the wake of allegations of human rights abuses.
The firm was forced to carry out major changes on its board as its minority shareholders, mostly locals, pushed for a seat on the firm’s board.
Kakuzi was forced to appoint its second-largest shareholder, John Kibunga Kimani, as a director in a board shake-up that also saw Nicholas Ng’ang’a appointed chairperson.
Minority shareholders of the agricultural firm had previously complained of being locked out of the board, which was controlled by the British, Camellia Plc with a 50.7 per cent stake in Kakuzi.
Generally, there has been a growing trend where minority shareholders have forced their way into the boards of listed companies in a bid to make them more ESG-compliant. ESG is an acronym for environmental, social, and governance.
The often-quoted case of a minority take-over was that of how a tiny little-known activist investor that prides itself in investing for social good surprised Wall Street by forcing its way into the board of oil giant Exxon Mobil.
The hedge fund called Engine No. 1, ganged up with other shareholders to install three directors on the board of Exxon. Their goals were to push the energy giant to reduce its carbon footprint.
This case has served as a blueprint for many other minority shareholders interested in a paradigm shift in the way multinationals do their business.
Another ongoing case in Kenya is pitting businessman Joe Wanjui and Mr Wainaina Kenyanjui with a combined share of around 30 per cent in Limuru Tea against Uniliver Tea.
Mr Wainaina, through his Africa Reit, must have been taking notes as the saga of Engine No unfolded.
When the British multinational Unilever Tea, which owns the majority of the stake in Limuru Tea, attempted to sell its shares to American Fund CVC Capital Partner, Mr Wainaina and billionaire businessman Joe Wanjui, put up a spirited fight that culminated in the sale being blocked by the regulator even as the sole owner of Africa Reit agitates for a seat on the listed firm’s board.
The two minority shareholders have cited a litany of governance issues, alleging, in court papers, that Unilever is running Limuru Tea as its appendage having appointed itself to be the agent, sole buyer, and only marketer of all the tea produced by Limuru.
To right some of these wrongs, Mr Wainaina wants to get a seat in the highest decision-making organ of Limuru Tea.
Capital Markets Authority
And somehow, he seems to have caught the ear of the Capital Markets Authority (CMA), which has since stopped the sale of Unilever’s 52 per cent shares.
“We note that Unilever Tea Ltd is the majority shareholder with 52 per cent stake whereas Africa Reit is a significant shareholder with a stake of 27.31 per cent,” CMA wrote in its observations and recommendations.
“Unilever Tea is fully represented in the board whereas Africa Reit does not have a single representation at the board level,” said CMA in the findings of the report, which was sent to the chief executive officer of Limuru Tea Gerridina Johanna Maria Ten Den on December 3 last year.
It is not only in Limuru Tea that minority shareholders are trying to upstage the ‘Big Boys,’ most from multinational companies.
Another NSE-listed company that has been embroiled in the Goliath-versus-David kind of battle between majority and minority shareholders is Unga Limited. Activist investors at the NSE were also able to stall planned takeovers of Kenya’s largest grain miller Unga, casting a spotlight on their emerging role in the raging fight against the perceived abuse of corporate power.
Unga Group
Delaware-based Seaboard Corporation failed to win the required shareholder vote to buy out Unga Group, after vocal investors refused to sell their shares, arguing that the buyout offers undervalued the target companies by large margins.
Former BOC Kenya chairman Ngugi Kiuna, who holds a 7.6 per cent stake in the company, also on November 25, 2020, blocked the takeover of the industrial gas maker by Carbacid Investments, arguing that it undervalued the listed firm.
It is three years since Kiuna filed his case at the Capital Markets Tribunal and Carbacid and its majority shareholder Baloobhai Patel, and the deal drags on due to a lack of quorum at the tribunal.
To muddy things, after opposing its buyout Mr Kiuna bought more shares in BOC, taking his ownership closer to the 10 per cent threshold that allows one to veto a resolution to delist a publicly traded firm.
Mr Ngugi acquired an additional 93,000 shares currently worth Sh6.9 million in the year ended December, according to the company’s latest annual report.
There have also been concerns about how private equity groups approach workers’ pay, conditions, and safety in a climate where investors are scrutinising their ethics. This has been linked to a trend in which some firms opted to delist from the public markets once they are taken up by private players. BY DAILY NATION