Axe two-strikes rule, Penrice directors say
The directors of Penrice Soda have called for the ‘‘two-strikes’’ rule to be revoked after avoiding going down in history as the first board dumped under the contentious rule.
Chairman David Trebeck and his deputy Andrew Fletcher were both re-elected after receiving 78 per cent of a historic board re-election vote at an extraordinary general meeting convened in Adelaide today.
Both men had already created a bit of unwanted Australian corporate history, with the small Adelaide-based chemicals manufacturer the first to have faced a board spill after shareholders rejected the company’s remuneration report two years in a row.
‘‘Ideally, the two-strikes policy should be terminated,’’ Mr Trebeck said. ‘‘Shareholders who are sufficiently disgruntled with the performance of the board can always muster the numbers to requisition an EGM and move against some or all directors – as happened with Penrice in 2009.’’
The ‘‘two-strikes’’ rule was designed to deliver shareholders a greater say in the executive remuneration policies of large corporates, particularly as pay packets bulged often at odds with diminishing shareholder returns.
But after the meeting, Penrice Soda chairman David Trebeck said the negative vote received against the remuneration report ‘‘had more to do with general shareholder disaffection’’ – the company’s poor performance, a declining share price and the absence of dividends – than it did with ‘‘the intended purpose of
the vote: excessive executive pay’’.
Shareholder advocacy groups and large institutional funds have largely delivered positive feedback on the ‘‘two-strikes’’ regime, and the fact that company directors were now more open to stakeholder feedback.
‘‘I’m not convinced,’’ Mr Trebeck said. ‘‘I think directors generally are more than capable of identifying and
responding to prevailing shareholder sentiment without needing a legislative sledgehammer to do it for them."
Penrice has suffered mounting losses and a plummeting share price in recent years, leading to agitation from five per cent shareholder London City Equities for board renewal.
Three potential directors put forward by LCE were defeated, each receiving about 25 per cent support.
Penrice recently announced it would cease production of soda ash – an ingredient used in glass-making – and instead import it in a bid to slash costs.
Mr Trebeck said Penrice will no focus the company’s future and working in the interests of shareholders. He also criticised the disruptive nature of LCE’s shareholder activism.
The vote on remuneration reports was previously non-binding, until the two-strikes rule was introduced in 2011.
There are concurrent calls from both companies and shareholders to simplify executive pay reporting requirements.