John Collett and David Potts: Are AGMs worth attending?
They are not a bad idea if you own shares in a smaller company that does not get much press coverage.PT3M36S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2vjri 620 349 October 15, 2013
OK so it's not Fifty Shades of Grey but there's some salacious stuff in company annual reports, especially the one for where you work.
See how much the chief exec and directors are paid, and what they have to do to earn it. Mind you, I can't promise a racy read. The remuneration report can go on for pages and will be almost impenetrably dense. But that's half the fun - spot the tricks, such as excluding impairment charges for which they were responsible from the profit calculation used to remunerate themselves.
Other tittle tattle is also lurking at the back of the annual report, like details on the directors and how many board meetings they attended. Most telling of all is how much skin they have in the game since a director with no shares is a prime candidate for being captive of management which has its own interests.
Still, such is the national obsession about what executives get paid that the remuneration report is often the be-all and end-all for discussions at annual meetings.
I suspect it's the very drawcard for shareholders to take a packed lunch and show up for the free entertainment of watching executives squirm.
Hate to spoil the fun but, no matter how over the top it seems, executive remuneration is typically a tiny portion of a company's costs. Anyway, in this globalised world, executive pay has to be competitive with other countries, especially the US, if we're to attract the best talent.
Yet it's about the only thing shareholders get a say in, and even that's a recent development. Under the two strikes rule, a 25 per cent vote against the remuneration report two years in a row will force an election of the whole board at a special meeting where more than over 50 per cent is needed to succeed. So it takes two minority then one majority vote to evict the board.
That's a big leap going from 25.1 per cent to 50.1 per cent of the vote, but it's still worked a treat. It's frightened the bejesus out of boards, even those of companies that haven't been targeted, so that pay packages for top executives have become more incentive-based and aligned with shareholder interests.
For a glimpse of life in the last century take the kids to an AGM where you can vote. Sort of. You can't vote against the accounts, which can hide all manner of contentious issues, but you can vote for or against the one or two directors who are up for re-election, even though the result is already in the bag, thanks to proxies from the big shareholders.
Directors are elected for a three-year term no matter what, which older readers will remember as tenure. How quaint is that?
In this day and age you would think there would be an annual election which would make them more accountable.
And here's an idea from the Chartered Secretaries Australia to make AGMs less formal (read boring): leave the vote open another, say, 48 hours so that the time is taken up with a genuine debate and questions. Then shareholders could consider the arguments, make an informed decision, and cast their votes.
Debate would no longer be over-shadowed by proxy votes deciding the issue before the AGM is even held.