At the halfway point of the 2014 AGM season, today we saw one of the more stunning examples of shareholder engagement forcing a leadership change inside a major public company.
While ASX 100 board rooms are still quite club-like, ultimately even the chairman must seek a fresh investor mandate every three years.
Today the 73-year-old Aurizon Holdings chairman John Prescott effectively fell on his sword after The Australian Financial Review reported that he regularly falls asleep in meetings.
The story ran off page one but the killer line was as follows in the spill on page 12:
“The AFR has spoken to three sophisticated investors who maintain they had emerged from meetings with Aurizon management believing that Mr Prescott had fallen asleep.”
It is never easy or pleasant telling a chairman to go but sometimes hard decisions need to be taken to maintain a culture of shareholder pressure and accountability. Today’s AFR hit on Prescott, fuelled by a report by proxy adviser Ownership Matters, was about as brutal as the game gets. Check out how the company spun it to the ASX this morning.
Prescott has effectively committed to be gone by the time of next year’s AGM and this commitment will reduce the protest vote he receives in Perth on November 12 from more than 30% to about 15%.
Still, the whole saga raises questions about why major Aurizon investors such as Perpetual didn’t intervene earlier to force a succession. There still seems to be a “score board mentality” prevailing where governance issues are downgraded if the share price is strong. Perpetual did this for years when John Gay was flying high at Tasmanian tree-lopping giant Gunns but investors ended up dropping more than $1 billion in that collapse. A stitch in time saves nine, as the saying goes.
There are plenty of other chairs out there who should go. Paladin Energy chairman Rick Crabb has served as a director for 20 years but the company has not paid a dividend since 1994 and shareholders have suffered $US1.6 billion in accumulated losses over that period. Why is he still leading the Perth-based uranium miner?
Fairfax Media is holding its AGM in Melbourne next Thursday and chairman Roger Corbett is seeking another three year term while promising this will be his last. If a share price has declined from more than $3 to 80 cents during a decade on the board, then a 72-year-old chairman who has spent several years in the key leadership position should be replaced.
White Energy chairman Travers Duncan is into his 80s. He was adversely named by ICAC in relation to the Mt Penny coal tenement but is legally challenging the finding and remains in the chair.
Similarly, Southern Cross Media chairman Max Moore-Wilton has been in the chair since 2005 and investors have dropped more than $600 million. The 71-year-old suffered a 43% protest vote two years ago and has flagged he won’t be seeking re-election next year but there is no clear sign of a successor.
Crikey recently reported on the old codgers who are increasingly prevalent at public companies and since then, a few more names have been mentioned in dispatches.
Pokies billionaire Len Ainsworth is now 91 but he is standing again at the upcoming Ainsworth Gaming Technology AGM in a Sydney pokies venue.
Feisty 75-year-old accountant Ronald Pitcher has also come onto the radar. As chairman of salary packaging outfit McMillan Shakespeare, he suffered a 46% vote against the remuneration report this week and was very dismissive in his public commentary.
I saw his high-handed attitude in all its glory at yesterday’s Reece AGM in Melbourne when he tried to block shareholders from asking questions of the billionaire executive chairman Alan Wilson when he was up for re-election.
Reece doesn’t even do the investors relations basics such as having a section on its website dedicated to shareholders. The founding Wilson family took out more than $5 million in fees and salaries last year and produced a derisory two page remuneration report. As remuneration chair, Ron Pitcher, whose old firm Pitcher Partners still audits Reece, has no problem with this. Perpetual is the second biggest Reece shareholder and could have caused a remuneration strike yesterday. But the share price is performing well and, as usual, it didn’t vote against any resolutions.
This made for a difficult time at yesterday’s AGM trying to argue for better governance when all resolutions were supported by more than 99% of voted shares.