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In October and November, many listed Australian companies will hold their annual general meetings.
And while there’s been plenty of criticism this year about whether the humble AGM still does its job, it remains the only forum through which every single shareholder can have some small impact on the companies they own.
It’s been a tumultuous AGM season in the UK, where shareholders pushed out many an executive over their corporate pay. Back home, it’s been a year of feisty clashes between high-profile corporate personalities. We take a look at some of the most interesting AGMs coming up over the next few months.
This year sees the second round of AGMs affected by the ‘two-strike’ rule. Introduced in 2011, the rule dictates that a motion must be put at an AGM allowing shareholders to vote on a company’s remuneration report. If more than 25% vote against a company’s remuneration report two years in a row, a board spill is triggered, where shareholders get to vote on whether to retain or sack existing members.
More than 100 listed companies received a first strike in 2011, including big names such as Pacific Brands, BlueScope Steel and GUD Holdings. Stephen Mayne, the Australian Shareholders' Association’s policy and engagement co-ordinator, says watching how the rule plays out in its second year will be the most interesting aspect of this year’s AGM season.
“How many of them will have sufficiently reformed their pay practices to avoid a second strike? Of those that do get a second strike, what then happens with the board spill resolutions? That’s the unique new element, and will be fascinating to watch,” Mayne says.
Grocer Woolworths has earned the ire of activist group GetUp! for its majority ownership of 12,000 poker machines, which GetUp! claims are damaging the community. In a first for the increasingly powerful online group, its leadership organised retail shareholders of the company to petition for an extraordinary general meeting in July in order to put forward a motion to amend the company’s constitution, limiting its ability to make money from gambling. Woolworths took the matter to court, arguing there was no need for an EGM as the issue could be addressed at the AGM in November.
The Federal Court ruled that the EGM should be held on the same day as the Woolworths AGM on November 22, thereby minimising costs to the company.
“It’ll be very interesting to see if Getup! gets any traction with Woolworths shareholders,” Mayne says. The group is understood to be speaking to both institutional and retail shareholders to try to drum up support for the motion.
Even if it doesn’t succeed (it probably won’t), it could embolden the group to target other companies with business practices and models its members find objectionable.
Casino operator Crown’s AGM will not lead to a board spill (more on that later). But it will be intriguing to see how a controlling shareholder deals with the two-strike rule.
Crown received a 55.7% vote against its corporate remuneration report last year, but rather than holding steady on pay, the company opted to increase the pay of five of its top six executives (chief executive Rowen Craigie missed out).
However, the company has addressed some shareholder concerns about transparency in its annual report. It’s a lot clearer to see how the company awards bonuses now. Whether this will be enough to placate its shareholders remains to be seen.
It’s worth noting that a spill motion at Crown cannot gain majority support. The chair, multibillionaire James Packer, owns 48% of the company, but as a director-shareholder he is prevented from voting on remuneration. He can, however, vote on the board spill, and Packer has indicated he will to reinstate the board if it comes to that. This means almost all the other shareholders would have to vote to kick out the board for a spill to be successful.
Echo Entertainment Group
Packer, through Crown, is also a large shareholder in Echo Entertainment Group, and he’s put his shareholding to work.
Agitation to get his man, former Victorian premier Jeff Kennett, onto the board led to Echo chairman John Story resigning in June. In a statement, Echo said the continuing calls for Story’s removal, which were made by Packer, were damaging the business.
Since then, the company has been in turmoil. CEO Larry Mullin left last week, and board director Brett Paton resigned a few days before, reportedly in protest at the decision. Mullin’s exit quickly followed reports that Echo CFO Matt Bekier applied for a CFO position at Brambles during the Sid Vaikunta scandal earlier this year.
Fairfax has everything you need for an explosive AGM: wildcard shareholders such as Gina Rinehart, a disgruntled institutional registry who’ve had to put up with disastrous share-price falls, a chief executive who received a 50% pay rise this year, and an unendorsed candidate putting himself forward for the board.
Media analyst Peter Cox has put himself forward (for the third time) as a board nominee. The board, chaired by former Woolworths CEO Roger Corbett, have not supported the nomination, telling shareholders in the notice of the meeting that Cox does not possess the relevant management and board experience.
This has prompted some feisty criticism of the current board by Cox. He told Australian media writer Mark Day that “none of the directors appointed under Corbett's process satisfies all the requirements to which they say I should be held. They also seek a cultural fit but, with no ethnic, religious or staff directors. I assume the fit required is with the culture of the chairman."
Fairfax’s share price hit a record low today at 39.5 cents, down from 80 cents a share in February. Nonetheless, the going opinion is that Cox has little chance of gaining a seat, as institutional funds are expected to back the board’s recommendation.
Fairfax’s largest shareholder, Gina Rinehart, has not put forward any motions to be voted upon. But how she’ll vote is anyone’s guess, and with her 15% holding, there’s plenty of influence she could wield.
Fortescue may have gotten out of one continuous-disclosure pickle when the High Court found it hadn’t misled shareholders in 2004, but it got itself into another one this year, when it took a report in the Australian Financial Review to reveal the company had approached its lenders to have its debt covenants loosened. It is arguable that this is material information, which means it should have been disclosed to the market first.
At its AGM, on November 14 in Perth, Stephen Mayne says shareholders may also query the insistence of founder and chair Andrew ‘Twiggy’ Forrest on retaining control of the company, and “carrying too much debt and too much risk as a result”.
It’s widely speculated that the reason Fortescue hasn’t undertaken a capital raising this year is because Forrest is against it as it would dilute his 32% stake – another area shareholders might question.