Kenyan shareholders unwittingly bankroll companies' own downfall

Shareholders are frequently portrayed as victims when public companies collapse, blamed on poor management or bad markets, but this tells only half the story.

The narrative is familiar: poor management, weak boards, government interference, or unfavourable markets. Yet, shareholders themselves are frequently active contributors to the decline of the very companies that they own.

In Kenya, this reality is particularly evident with shareholders very eager to invest. The popular mantra of “let your money work for you” is deeply ingrained.

Many Kenyans proudly identify as investors, yet few appreciate that ownership carries responsibility beyond owning shares and waiting for dividends after every financial year.

To illustrate this reality, consider Eveready East Africa Plc. The Eveready Story: From Pride to Decline. Unfortunately, this applies to many companies in Kenya. If you are over 50 years old, chances are you bought Eveready shares when the company was listed. The offer was oversubscribed.

Eveready was then a household name. Talk of batteries, torches, and other sophisticated electrical accessories like spike guards, which were found in almost every Kenyan home.

Consumer behaviour

I was very young when I bought Eveready shares using my Sh9,000 savings. At some point, my brother, an economist and university professor, advised me to sell and cut my losses. I refused.

Well, I’m a diehard Kenyan investor and believe in our growth and sustainability.

In short, I know that we can do it. So, I believed in the company and decided to hold on.

Today, one has to only look at Eveready’s share price to understand how that decision turned out.

However, the question is not simply what went wrong, but rather: how did shareholders contribute to this outcome?

You can take this to the bank: The first and most overlooked way shareholders fail listed companies is through consumer behaviour.

 In Eveready’s case, the decline coincided with the influx of cheaper imported batteries, cables, torches and similar products to the issuer.

Similarly, another listed company in the cable manufacturing sector hit rock bottom as shareholders watched silently, criticised from afar, complained amongst themselves and participated enthusiastically by supporting competitors.

We rushed to buy imported products because they were cheaper or foreign-branded, even while holding shares in a local manufacturer producing the same goods. We failed to ask critical questions: Why were imports allowed to undercut local production without protective tax measures?

Why were local manufacturers left to struggle under constraint business environment?

Yes, international trade is important. But, unrestricted imports without some industrial cushion or protection not only destroy local manufacturing, but they also cost jobs, and hollow out listed companies.

Ironically, today, many Eveready-branded products on the shelves are not even locally produced. It has become cheaper to import than to manufacture in Kenya.

As shareholders, we must ask ourselves: How do we expect dividends from companies whose products we refuse to buy? Another major contributor to corporate decline is shareholder apathy at Annual General Meetings (AGMs). Many shareholders attend AGMs for the wrong reasons: To collect refreshments, receive attendance tokens or hear whether dividends will be paid

Blind approval

The agenda is shared way in advance, and documents are approved without being read.

Questions are not asked.

Resolutions are passed without scrutiny. Anything placed before shareholders is waved through as long as dividends are promised.

This culture of blind approval removes accountability from boards and management. AGMs become ceremonial rather than governance forums. A company cannot survive when its owners refuse to exercise oversight.

Lastly, the most damaging role shareholders play is in board appointments. The optics do not play us. We chose leaders with ongoing court cases, corruption and integrity concerns, and clear political and personal agendas.

Yet, when such individuals are presented for election to company boards, shareholders line up to propose and second their appointments. Even the strongest company, with sound management and capable directors, can be destabilised by the appointment of a few compromised individuals.

Good directors eventually walk away rather than be associated with poor governance. Others remain, and either conform or suffer unspoken damages. Either way, the rot spreads.

In companies where the government is a shareholder, the responsibility is even greater.

Yet policy decisions often work against shareholder value by failing to protect local industries, allowing dumping of cheap imports and even regulatory hurdles that make local production uncompetitive.

In such cases, the government fails not only as a policymaker, but as a shareholder entrusted with safeguarding public investments and jobs.

Therefore, the uncomfortable truth is that the shareholders are among the biggest contributors to the collapse of publicly listed companies.

They do this by abandoning their companies as consumers, approving what they do not understand, failing to question management and endorsing compromised leadership.

Ownership of companies must not be passive. It demands responsibility, engagement, and discipline. Without this, no amount of good management or regulation can save a listed company.

The fall of companies like Eveready should force us to confront a difficult question: Are Kenyan shareholders ready to act like true owners or only like spectators waiting for dividends?

The writer is a governance and climate policy expert and Advocate of the High Court of Kenya. ninmusa@gmail.com