Australian shareholders are fast developing a reputation for pursuing
good corporate governance – something that mining giant Rio Tinto
learnt the hard way yesterday when it was forced to withdraw a
resolution changing its constitution and restricting the possibility of
shareholder class-actions in the US.
Rio chairman Paul Skinner told the meeting yesterday that UK and US
shareholders had no problem with the proposal when it was voted on at
the London AGM on 12 April, although these figures have never been publicly released. This was a peculiarly Australian revolt
and, once again, those corporate governance kingmakers at Corporate
Governance International and Institutional Shareholder Services have
delivered another scalp.
Rupert Murdoch said the same thing when News Corp’s executive options
were voted down in 2003 – a move that I believe triggered the company’s departure to more shareholder unfriendly Delaware.
With an average of 790 million Rio Tinto Ltd shares being voted
yesterday and 637 million Rio Tinto PLC shares at the London AGM on 14
April, the controversial resolution was clearly opposed by at least 357
million shares – 25% of the 1.427 billion shares voted overall.
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The dual-listed company structure really is quite lax when it comes
governance. Shareholders were not even advised of the PLC vote before
yesterday’s Ltd meeting and the withdrawal of the resolution means now
we’ll never know. Can you imagine a political election being cancelled
on the day just because the pre-poll votes were going badly?
Yesterday’s performance was a good example of why corporate voting
should remain open until the day after the AGM – a move that would end
the “dead rubber” effect of meetings and would allow wavering
shareholders to listen to the debate before casting a final ballot.
Finally, Rio Tinto was quick to dismiss calls to unbundle its DLC
structure yesterday, even though finance director Guy Elliott admitted
the Australian shares always trade at a premium to their UK
Given that Rio has no operations in the UK, more than $30 billion worth
of assets in Australia, an Australian CEO, several Australian directors
and a stronger share price Down Under, surely it makes sense to shift
the global headquarters back to Melbourne, just like the old days with
Yesterday’s dropped resolution was all about forcing shareholders to
only sue in the Victorian courts. If Victoria is so good, shift the
whole company here. Brambles have dropped its cumbersome DLC structure
and its chairman, Don Argus, also chairs BHP-Billiton so presumably
Rio’s giant Australian rival is having a look at doing the same.
The two-tiered AGM process is most unsatisfactory and the different
voting patterns show how hard it is for Rio’s two sets of shareholders
to get organised. With so much index-hugging and superannuation
cash sloshing around Australia, Rio’s share price would probably rise
even more if it unwound the DLC and made Melbourne its primary home.
Maybe it’s time for a few state governments to start insisting on such
a move before Rio gets its next sweetheart deal to further exploit our
huge dowry of mineral resources.