You’ve heard before about the way companies rort corporate elections
but we’ve now actually crunched the numbers on the two biggest rorts of
all – the old “no vacancy” trick and the abuse of undirected proxies
held by the chairman.

I’ve failed in 24 tilts over the past six years and in 16 of these the
board has declared there was “no vacancy”, even though each
company constitution provided for many more directors to be
elected or appointed. In political elections, the number of vacancies
is known before an election is called. In corporate elections, the
board can decide the number of vacancies after they see how many
candidates nominate and they can pick any figure they like.

The effect of declaring “no vacancy” is that the outsider has to
receive a higher vote than one of the incumbents – but the average
incumbent in Australian corporate elections receives more than 98% of
the vote.

And the chairman always has a wad of undirected proxies in his back
pocket – courtesy of the system that delivers votes to the chairman
when someone forgets to fill in one of the boxes. This is the
equivalent of someone who leaves a box empty in a political election
being assumed by default to have voted for the government.

As the following table shows, undirected proxies averaged 17% in the 16
corporate elections where the “no vacancy” tactic was deployed against
me. Assuming I’d received 100% of the directed proxies in all these
contests, this would have only been successful at AMP in 2003 and Gunns
last year, when the lowest incumbent vote was 91% and 92% respectively.

The biggest final vote that would have failed was last year’s Fairfax
tilt where 100% of the directed proxies would have been reduced by
undirected proxies to 98.8%, which would have fallen short because the
lowest incumbent vote was Mark Burrows who got 99.25%. If that isn’t a scandal, I don’t know what is.

How open proxies and the “no vacancy” rort make it impossible to crack boards

Company Year Assumed Proxies For Final Result Outcome
NRMA 2000 100% 45.07% defeated
ASX 2000 100% 69.04% defeated
WA News 2000 100% 70.56% defeated
ASX 2001 100% 76.6% defeated
CommBank 2000 100% 77.43% defeated
David Jones 2000 100% 78.53% defeated
AMP 2000 100% 80.23% defeated
ASX 2002 100% 86.14% defeated
PMP 2001 100% 89.11% defeated
NRMA 2001 100% 90.39% defeated
NAB 2000 100% 90.82% defeated
Southern Cross 2001 100% 91% defeated
John Fairfax 2001 100% 91.76% defeated
AMP 2003 100% 93% successful
Gunns 2005 100% 97.43% successful
John Fairfax 2005 100% 98.8% defeated