Imagine
if our political leaders had their televised campaign debates after 99%
of those voting had already cast their ballot. That’s what happens at
public company AGMs, which largely explains why they have become a
complete non-event. A better system would encourage more institutions
to speak and vote at AGMs after listening to the debate, rather than
voting by proxy when the polls close 48 hours before the meeting.

One
solution might be keeping proxy or direct voting open until the day
after the AGM so that investors can react to the AGM presentations and
debate, or even just soak up the press coverage and market reactions
before finally casting a ballot.

This would keep directors on
their toes at the AGM and eliminate the “dead rubber” effect where the
whole event is a foregone conclusion and boards know the result before
the public debate even begins. It would be a brave chairman who
announced a profit downgrade at an AGM when he was also facing election
and the polls remained opened for another day.

Similarly, the
Americans have moved to full public disclosure of institutional voting
and we should do the same to get some more fund manager accountability.
This is particularly important given the growth of super and the
reluctance of fund managers to either attend AGMs or explain their
voting behaviour.

Retail shareholders feel powerless in the face
of huge proxy voting numbers by unnamed institutions. If they were at
least named we could then take up any grievances about voting decisions
directly with the fund. The Teamsters Union once picketed Boston-based
Fidelity after it became apparent the world’s biggest fund manager had
a conflict at Tyco and supported an Enron director’s re-election to the
board of Lochheed Martin. The union also led the successful US campaign
for disclosure of voting as this excellent article explains.

The
other easy way to empower small shareholders and revitalise AGMs would
be to disclose voting results both on shares held and shareholders who
vote. This is required for schemes of arrangement so why not extend it
to all resolutions.

Of course, it is unfair to give my $1000
worth of shares in BHP-Billiton the same voting power as AMP’s $2
billion, but disclosing the figures on an advisory basis would at least
make public the voting sentiment of smaller shareholders.

The
2001 vote on BHP’s merger with Billiton is a classic example. It was
supported by about 80% of the BHP shares voted but a clear majority of
shareholders voted against the deal, although this still hasn’t been
disclosed publicly. The registry companies such as Computershare keep
all these figures anyway, so what harm would come from making them
public?

John Howard is proud of turning Australia into the
world’s greatest shareholding nation, so it’s about time he stopped
treating us like mushrooms and gave us more power and accountability
mechanisms. At the moment, the field is massively tilted in favour of
big institutions and big companies – which are run by the same
inter-locking club of directors.

Peter Fray

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