1. Their relationship and attendant issues 1

2. Shareholders are the owners, but directors’ duties are to the company – not to any particular class of stakeholders. While directors’ duties are to the company, it cannot be ignored that shareholders are the owners of the company. NATURE OF RELATIONSHIP 2

3. Institutional shareholders Small private shareholders Large private shareholders Corporate Shareholders TYPES OF SHAREHOLDERS 3

4. Mutual funds Pension Funds Insurance Companies Investment institutions In UK, it is believed that institutional shareholders hold, on an overall basis, a majority of shares of all listed companies. INSTITUTIONAL SHAREHOLDERS 4

5. Long term interest in share value growth Current returns are still important They have the power and ability to influence Boards But do they have the time to pay attention to every single company Monitoring systems for danger signals INSTITUTIONAL INVESTORS PERSPECTIVE 5

6. 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 SMALL PRIVATE SHAREHOLDERS 6

7. 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. LARGE PRIVATE SHAREHOLDERS 7

8. Group, or holding companies. Differ from institutional investors. Have a long term interest in the company. Can influence the Board most. Tax structures often inhibit holding companies. How SBP/SECP rules are creating groups CORPORATE SHAREHOLDERS 8

9. 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. SOME INTERESTING FACTS 9

10. Rules on disclosure of shareholding pattern. Important changes in shareholding pattern are required to be notified to SEs (The 3% level for UK). Register of Directors’ interest in shares or debentures of the company (UK) CONCENTRAT ED SHAREHOLDI NG 10

11. Accountability of the Board Transparency / communication Minimizing conflicts of interest between directors and shareholders Good management leading to: Good returns Capital growth Fair division of spoils WHAT DO SHAREHOLDERS EXPECT? 11

12. 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 HOLD ON BOARD 12

13. Direction: One way reporting or Two way communication Nature: Formal or Informal communication Scope: All or some shareholders Frequency: Regular or irregular, need based. COMMUNICATI ON BETWEEN SHAREHOLDE RS & BOARD 13

14. Between Board and institutional investors Large companies: many institutional investors Small companies: not enough attention from Institutional Investors Between NEDs and major shareholders Chairman is often an NED Role of SID PLANNED MEETINGS 14

15. Chairman’s Statement OFR (including analysis) Compliance Statement (with CCG) CSR – Sustainability reports NON-FINANCIAL REPORTING 15

16. Combined Code says: Encourage attendance Let them ask questions Separate voting (avoid grouping issues) Vote counting: Show of hands / one vote per share Proxies Electronic voting THE AGM 16

17. Dialogue with companies Evaluating their disclosures Judicious use of vote ROLE OF INSTITUTIONAL INVESTORS 17

18. 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? SHAREHOLDERS ACTIVISM 18

19. Re-election of directors Re-appointment of auditors Approval of accounts and reports Approval of directors’ remuneration Justification for past payments Proposed Schemes Dividend recommendations Changes in share capital AREAS OF SHOW OF DISSENT 19

20. Association of British Insurers (ABI) National Association of Pension Funds (NAPF) Institutional Shareholders Committee (ISC) International Corporate Governance Network (ICNG) BODIES SUPPORTING ACTIVISM 20

21.  Residual rights to property and profits  Right to equitable treatment  Protection against inside trading and market abuse  Disclosure and transparency RIGHTS OF EQUITY SHAREHOLDERS 21