Lobby groups gatecrash annual meetings
The "tall poppy" syndrome is largely an Australian phenomenon. Doing well makes you a big target and there's no shortage of people who'll happily try to take you down.
Recently, that mood has extended to corporate Australia – or more specifically to AGM season, where interest groups try to use those meetings to advance their agendas.
Sure, we've always had vocal critics at annual general meetings, many who just try to push their own agendas.
Sometimes, they are even relevant.
AGMs are the new battleground
But now shareholder activism has taken a new turn. The AGM has become guerrilla marketing for lobby groups and their causes. Even when there's literally no chance of a resolution being passed, just putting the motion to the company's shareholders is enough to garner media attention for the cause. More so if the company is large or widely held by retail investors.
We saw exactly that this week with the resolution put to Woolworths (ASX: WOW) shareholders which would have – if passed – put limits on the company's operation of poker machines.
Bear in mind, these are legal, highly regulated gaming machines. They are operated by many, many hotel and club proprietors across the country, not to mention the listed casino operators. They are also in competition for the gambling dollar with lotteries providers and bookies, both listed and private.
And yet, a small group of shareholders decided to try to nobble their own company.
It's hard to escape the feeling that this was a marketing exercise on behalf of the lobbyists. If it's not, I'll look forward to the same motion being put to each and every ASX-listed business with exposure to gambling every year from here on.
I won't hold my breath.
A problem – but the wrong solution
To be clear, I'm not advocating for or against greater restrictions on poker machines. I think problem gambling is an important social issue that needs to be confronted and dealt with. Too many families are being affected by gambling addiction every day.
I am criticising the practice of targeting single companies as a proxy for an industry and in pursuit of a goal that is clearly out of reach. It is an abuse of the process.
Even if the motion was carried, the only outcome would have been to handicap Woolworths' business, with precious little impact on the industry as a whole.
Socially responsible or just 'feel good'?
I have no problem with investors who decide not to invest in companies who have gambling businesses.
However, socially responsible investing requires a personal ethical decision on what you are prepared to invest in – and it's a nuanced issue.
Sure, most of us can agree that cigarettes and guns probably fall outside the boundaries of socially responsible investing, but what about retailers that sell cigarettes. If pollution is bad (I think it's a safe assumption), then do we avoid all companies which aren't carbon neutral? Some don't invest in mining companies, yet happily put their money into companies that use the processed materials.
On the surface, it seems easy to make "ethical" investment decisions, but the reality is much more complicated.
Over before it began
The issue is that the resolution, as put, was never, ever going to pass. The proposers knew that, the company knew that, and yet it has earned thousands of words of reporting and commentary.
Mission accomplished for the lobby group in question – because the mission was essentially a guerrilla marketing exercise. The issue was raised and talked about, and all on Woolworths' dime, after it was forced to hold an extraordinary general meeting to deal with the resolution.
For the record, the motion only garnered 2.5 per cent support.
Of course, much of the commentary that followed has focused on the vote and Woolies' handling of the issue.
By virtue of the motion being raised, the company is now dealing with the distraction. Meanwhile casinos, pubs, TABs and bookies across the country continue to ply their trade unaffected.
If you want to genuinely affect social or regulatory change, it's a legislative and social issue. At the very least, a genuine effort would see the same approach taken to all listed companies in the same space – from Woolworths to Wesfarmers (ASX: WES), Crown (ASX: CWN) and Tatts Group (ASX: TTS), and only when those shareholders had garnered enough support to give the motion a fair chance to succeed.
Anything less is simply a PR exercise, with the "tall poppies" forced to foot the bill.
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Scott Phillips is a Motley Fool investment analyst. He owns shares in Woolworths.
You can follow Scott on Twitter @TMFGilla. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).