From the ashes, a new AGM could arise

From the ashes, a new AGM could arise

The body that probably knows most about annual general meetings, corporate governance and regulation wants the federal government to destroy the AGM as we know it and start afresh with something more closely related to the 21st century than the 19th.

If Chartered Secretaries Australia has its way, the tedious ritual and decision making function would be removed from the AGM – no more voting, no more chairmen with proxies in the back pocket making the whole process a dead rubber anyway, no more technical shilly-shallying over motions put and seconded and points of order.

The necessary voting functions would be separated from the AGM and handled electronically, freeing the meeting from historical records and process and, potentially, allowing it to become a genuine engagement by directors and senior management with shareholders large and small.

CSA – the professional body representing the nation’s company secretaries - wants the AGM to become more focussed on a company’s future rather that the historical record of the previous financial year. That should re-engage the institutional shareholders and analysts who generally give AGMs a big miss, leaving the floor to a relative handful of retail shareholders and the odd special-interest group with barrows to push and axes to grind.

CSA’s 52-page submission to the Commonwealth’s corporate law advisory body, the Corporations and Markets Advisory Committee (CAMAC), is decidedly radical when most other bodies seem to have pretty much given up on the AGM as a lost cause – an ancient institution primarily designed for retail shareholders who don’t attend anyway.

CSA policy director, Judith Fox, says the chartered secretaries took a different tack.


“We decided to rethink the general meeting, given that it was created in an era of horse and coach, pen and ink, limited printing and a fledgling postal service, all of which dictated that members would physically meet with directors annually, directors they quite possibly knew personally anyway,” says Fox.

Fox says the reality of the AGM in its current form is that it’s meant to be about the engagement of retail shareholders but it does not and it won’t be a forum for institutional shareholder engagement without changes.

Debate at AGMs currently is of little value and, because of the linkage with the financial statements, the meeting is required to look at historical data. Why would a retail shareholder want to attend a meeting to discuss old data?

Basically, the CSA makes a case that the AGM is broken. In off-the-record conversations I’ve had with various directors and CEOs over the years, that is a given. The cost, especially in the time of the executive team and board, for a generally dreary show attended by, at most, a few hundred retail shareholders, is ridiculous.

With the occasional exception of a company in one sort of a crisis or another, the “debate” is non-existent. The Australian Shareholders Association makes an effort when it can, but aside from Stephen Mayne’s questioning (and he’s now with the ASA), AGMs held by major corporations over the years have been million-dollar expenses mainly for the pleasure of Jack Tilburn grabbing yet another hour upon the stage for a rant.

(The following figures provided by Mayne for three of the biggest AGMs in the latest season illustrate that the ASA is out-performing the overall AGM: BHP-Billiton - only 481 shareholders attended the AGM in Sydney but ASA represented 3107 shareholders owning 13.6m shares; National Australia Bank - only 315 shareholders attended the AGM in Perth but ASA represented 3048 shareholders who owned 11.77m shares; Woolworths - 490 shareholders attended the AGM in Adelaide but ASA represented 2304 shareholder who owned 6.83m shares. But that’s still a sideshow - BHP has more than 3.21 billion shares on issue, NAB 2.3 billion and Woolworths 1.34 billion.)

CSA’s Judith Fox says tinkering with the existing framework won’t make the AGM work.

“As a decision-making event, the AGM is a wash-out. In the overwhelming number of cases, institutional shareholders have voted before the meeting, determining the outcome.

“Removing the decision-making function of the AGM would see an investor meeting take place separately from voting.”

The CSA submission proposes that a listed company would still have a statutory obligation to hold a meeting of shareholders at least once every calendar year. The meeting need not be linked to the reporting season.

Shareholders and their representatives would have to be given a reasonable opportunity to comment on and/or ask questions regarding at least the directors’ stewardship of the company (collectively and individually), the company’s financial position and performance, its operations and strategy, culture and governance, remuneration practices and outcomes for key personnel (although not required to be linked to the last remuneration report), and the outcomes of any shareholder business conducted since the previous shareholder meeting.

“The meeting would encourage the engagement with both retail and institutional shareholders,” says Fox. “As a discussion of company performance and prospects, it would certainly attract institutional shareholders, media and analysts. It would engender more meaningful discussion and improve the quality of the debate.”

Companies would still require decision-making votes on election of directors, the remuneration report, constitutional changes and the like on the current regulatory timetable, but voting would be done directly with the polls open for a set period, say, 28 days. With electronic voting the default option, proxies would be no more.

The CSA reckons embracing current technology would provide quick wins. Shareholders would be able to request hard copy voting forms if they wish, but an opt-in system should operate for receiving hard copy meeting materials.

Direct voting by a mandated poll would do away with proxies. Fox argues that the proxy system – the transfer of the shareholder’s rights to attend and vote to another person – is an anachronism.

“We have seen many problems with the current system, some of which have required legislative intervention,” she says.

Instead of lost votes and proxy voting complexities, the mandated direct voting would ensure the result of resolutions was the will of the eligible shareholders who voted on them.

Some companies already have separate shareholder information meetings as well as the required AGM. Telstra, for example, gets more shareholders turning up for the information session than the AGM.

From a journalist’s viewpoint, covering AGMs can be a cruel and unusual punishment and, with fewer journalists operating for slimmed-down media companies, fewer AGMs will receive independent public scrutiny.

Between fulfilling legal requirements and the usual back-slapping and either self-congratulations or apologies over performance, it’s rare to have any worthwhile information elicited.

I’d be tempted to go a step further than the CSA and make the compulsory shareholders’ meeting part of the reporting season. Publish the figures and excuses one day and allow no further comment until the shareholders’ meeting the next . That would guarantee institutional and analyst engagement, lifting the quality of questioning.

Shareholders would get to eyeball their board, CEO and CFO performing under pressure. The data would be fresh and the management team as prepared as they ever should be to explain it.

If treating all shareholders on an equal basis resulted in less time for one-on-one analyst briefings, well that wouldn’t be such a bad thing either.

Heck, you could even allow media questions in the same all-in session and still have the opportunity for tea and bickies after.

But I guess Jack Tilburn might not like sharing the spotlight.

Michael Pascoe is a BusinessDay contributing editor.

Michael Pascoe

Michael Pascoe is a BusinessDay contributing editor. He comments on companies, markets and the economy.

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