The Australian’s Anthony Klan is normally a journalist who likes to stand up for the little guy getting ripped off by corporate spivs.
It was therefore surprising to read his story on Monday making misleading claims ahead of a Senate vote about how many extraordinary general meetings (EGMs) have been called by small shareholders using the so-called 100 signature rule. Klan declared:
“The 100-member rule has been misused by activists who have united and bought as few as one share each to bring about an EGM to push their agenda on issues such as gambling and logging.”
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Truth be known, changes were made after this happened to Wesfarmers and North Ltd way back in 1999. Investors must now buy at least $500 worth of shares, and petitioning shareholders under the 100-signature rule must retain such a “marketable parcel”. The share-splitting tactics suggested by Klan are no longer possible.
The Australian Shareholders’ Association provided conditional support to the government’s EGM plans after its draft proposal was released earlier this year. All the issues were summarised in this Crikey story in March.
Since then, there have been two more examples of the 100-signature rule being used, but neither related to an EGM.
Oil and gas company Santos was subjected to a brief resolution at its May AGM requesting that it terminate the Narrabri gas project in NSW. The company released this detailed statement when the resolution was lodged by 161 shareholders, and it was comfortably defeated by 99.22% of voted shares.
The Commonwealth Bank is also facing an AGM resolution on November 12 triggered by 100 small shareholders who have proposed a constitutional change that would require an annual report on how much carbon burning the financial conglomerate is financing.
As the petitioning shareholders pointed out in CBA the explanatory memorandum, 118 listed companies in the United States faced 132 climate change-related resolutions during the 2014 US proxy season. This is because the US allows resolutions to be proposed at AGMs by a single shareholder who has held more than US$2000 worth of shares continuously for more than 12 months leading up to the lodgement date.
Rather than a largely irrelevant debate about the calling of EGMs, we should be discussing a watering down of the overly onerous 100-signature requirement for resolutions at AGMs. The ASA is calling for the threshold to be cut to just 10 signatures for resolutions at AGMs where the shareholders are already paying for the mail-out and venue hire.
Anthony Klan ran the line on Monday that companies are spending “between $500,000 to $1 million to conduct” EGMs. In the past 20 years, only one ASX200 company, failed Tasmanian tree lopper Gunns Ltd, was actually forced to hold a standalone EGM on a different day to the AGM — and that was way back in 2003. When GetUp took on Woolworths over pokies in 2012, the AGM and EGM were held on the same day in Adelaide, reducing the cost of the EGM.
Truth be known, ASX-listed companies have spent far more money calling EGMs to approve the issuing of share incentives to CEOs than they have on the tiny number of standalone EGMs that have successfully been called over the past 30 years.
Finally, it is worth noting that Klan’s story on Monday finished with the following paragraph:
“In a note to clients about the proposed changes Corrs Chambers Westgarth lawyer Andrew Lumsden said the 100-member rule was introduced in 1983 and its removal was ‘long overdue’. ‘The reality is the 100-member rule has most often been abused by activists who seek to compel companies to consider resolutions that further their own agenda, with little regard for the collective benefit of shareholders,’ he wrote.”
Klan should have pointed out that Lumsden was Joe Hockey’s chief of staff from 1998 until 2001, during which time Hockey failed to overturn the 100-signature rule as John Howard’s minister for financial services and regulation.
Fifteen years on, Lumsden has maintained his rage about a non-problem. Here’s hoping Labor, the Greens and the Senate crossbenchers reject the latest Liberal attempt to reduce accountability for directors of ASX-listed companies.
If they need some data to help make that decision, here is a comprehensive list of the 31 times over the past 16 years that 100 signatures have been successfully gathered to trigger some form of event at a public company AGM.
However, the vast majority of these occurred at the AGM or on the same day as the AGM. As for standalone expensive EGMs suffered by ASX200 companies, one a decade is simply not a problem that needs to be fixed.
*Stephen Mayne is the former policy and engagement co-ordinator for the Australian Shareholders’ Association.