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Since the start of the year, Ten Network Holdings’ share price has plunged 67%, from 84 cents to 30 cents. Ten has struggled for ratings, and has had to cut several new shows prematurely after they failed to make a splash.
But despite that, iron magnate and recently-published author Gina Rinehart, who owns 10% of the company, has attended only eight of 14 board meetings (57%) since she joined.
That’s a number that proxy company CGI Glass Lewis, which advised shareholders on corporate governance, is concerned about. In a note to clients released yesterday, CGI criticised Rinehart’s attendance. The company, owned by an American parent, expects board directors to attend at least 75% of meetings. After Rinehart’s 57% attendance, the next lowest figure at Ten was far better – director Christine Holgate attended 85% of meetings.
American proxy companies often use the 75% attendance figure as a minimum, as under American corporate law, companies are required to disclose if their directors attend less than three quarters of meetings.
Martin Lawrence, of Melbourne-based proxy company Ownership Matters, says his company has no hard minimum attendance figure for directors.
“But of course,” he says, “the general preference of all investors as well as judicial authorities [should matter ever come to court] is that directors should attend meetings. It’s difficult to see how they can discharge their duties without attending most of them. Attending meetings isn’t the beginning and end of those duties, but it is a prerequisite.
“If someone’s missing a quarter of board meetings, we’d be asking questions.”
Corporate governance consultant Julie Garland McLellan, who chairs Oldfields Holdings, says she expects attendance of about 90% at her boards, barring exceptional circumstances.
“Everyone has a holiday sometime, and everybody gets sick sometimes. That’s one or two meetings you would miss if you had monthly meetings.”
Meetings scheduled quickly to deal with unexpected events can be more difficult to attend, but if a board was scheduling meetings a month in advance and one director was missing more than 30%, Garland McLellan says she’d be asking “serious questions about their commitment”.
Board meetings are easier to attend today than they were in the past. For the purposes of attendance records, phoning-in counts, as does the use of Skype or other video-conferencing methods.
Bounty Mining, where Garland McLellan also holds a directorship, uses Skype for its frequent, short board meetings.
“Because of the video, you can pick up on far more nuances,” she says. “If the CFO says something and the chair of the audit committee suddenly sits up very straight, the people on Skype can see that. I’m very fond of Skype.
“But unless there are special circumstances, I would worry about a director who always only attended by technology. The board pays for a director to come and be physically present. It adds to the quality of the communication.”
Sometimes, a lack of attendance, even electronically, can point to a director having too many commitments. “If you’re on a plane, for example,” Lawrence says, “you can’t possibly attend, even by phone. If that happens a lot though, maybe your other commitments mean you shouldn’t be on the board.
“Being busy isn’t a good excuse.”
Despite her attempts to join the Fairfax Media board, Rinehart’s directorship at Ten Network Holdings is her only listed board commitment. However, she’s also the executive chair of her own company, Hancock Prospecting, through which she holds her ownership of Ten.
Garland McLellan says it’s her experience that directors who are substantial shareholders in a company can be more lax in their board commitments.
“Director-owners can feel that their directorship is a privilege of ownership rather than a service that they are providing to all of the shareholders,” she says.
“I think that’s quite a worry – it leads to this strange feeling they can act from their interest as an owner. I’m not saying that Rinehart’s doing that, but there’s a strong tendency sometimes.
“If I had a large shareholder on my board who wasn’t turning up, particularly without plenty of advance notice, and they weren’t attempting to reschedule meetings or attend through some sort of teleconferencing, I’d be concerned they were just using their directorship to gain confidential information to benefit their holding.”
Chairs can encourage attendance by pulling the director aside and making the expectations of directorship clear, or, in extreme cases, asking them to leave the board.
This is more difficult when somebody receives their directorship primarily due to their shareholding.
“If they have enough votes, that director can just vote themselves back on the board,” Garland McLellan says. “That makes the chair’s job much harder. He or she has authority only from other directors. But as a chairman, you need strength of character and courage to broach difficult subjects with strong and independent people.”
Lawrence is less concerned about shareholder-directors not attending – “as long as they don’t collect a fee for their board seat”.
To make expectations of directors clear, some companies have formal policies around director attendance, which they make known to prospective directors before they join.
Some companies, including Ten, also allow directors to appoint alternates to attend for them, should the director miss a meeting.
This is common on government boards, where a minister or parliamentary secretary may, by virtue of their position, be assigned a board seat, but appoint a senior bureaucrat to regularly take their place.
On Ten’s board, Rinehart lists her alternates as Fairfax director and Hungry Jack’s founder Jack Cowin, who is already a Ten board director (with 92% attendance), and Cheryl Edwardes, an executive at Rinehart’s company, Hancock Prospecting.
Garland McLellan warns that the use of alternates can be complex, as they may in some instances not be covered by a company’s director insurance and are thus accepting a personal risk to appear on the board.
Her preference is not to use alternates. “If I’m not available for a board meeting, well, that’s that. For someone else to get up to speak on my behalf – to do the necessarily due diligence, background reading and the like – is a huge ask, especially in addition to all the legal liabilities.
“My preference is just to appoint the alternate as board directors [in place of the original director] – it’s cleaner, and it gives shareholders a choice about who represents them.
“I take a pretty dim view of people who habitually miss meetings. As I take a dim view of people who haven’t thoroughly read their board papers. Being a board director is a lot more than just turning up to meetings. But turning up to meetings is a start.”