Should board members vote their own shares in favour of the company’s remuneration report at the AGM each year?
The Corporations Act certainly suggests they shouldn’t, and the likes of billionaires James Packer, Kerry Stokes and Gerry Harvey have scrupulously followed this rule in recent years.
However, Melbourne-based film, cinema and theme parks outfit Village Roadshow continues to take a different path with its three controlling shareholders -- co-chairs Graham Burke and Robert Kirby along with deputy chair John Kirby -- voting their combined 42.66% stake in favour of their remuneration report each year.
This controversial tactic helped Village avoid a remuneration strike in previous years. The 2014 remuneration was opposed by 23.8% of the voted stock, and in 2013 it was 14.38% against. Without the triumvirate’s 68.3 million combined votes, Village would have been going into yesterday’s 2015 AGM with two remuneration report strikes.
However, the independent shareholders are getting angrier with each passing year because the company suffered its first official strike yesterday, with 31.54% voted against the remuneration report. Strip out the board insiders and it was more than 70% against.
It is not easy holding the Village Roadshow directors to account because in recent years they have consistently held their sparsely attended AGM at 9am at their Jam Factory cinema complex in South Yarra. In years gone by they would hold the AGM at the company’s Movie World theme park on the Gold Coast, offering free family passes to shareholders who showed up.
This partly explains why the company’s shoddy corporate governance practices have not been challenged at AGMs or been covered comprehensively by the business media.
Even the Australian Shareholders’ Association has only covered Village since 2014, and its 2015 voting intentions report actually supported the remuneration report, which showed the co-chairs pocketing a tasty $6.8 million between them.
It is not clear why ASIC and the ASX have allowed the controlling Village shareholders to continually vote in favour of their own large pay packets, despite written complaints having been lodged.
Similarly, it is also not clear why Village has been one of the five largest ASX-listed political party donors over the past 20 years, with almost $5 million of shareholder funds diverted, mainly to the Liberals.
Another governance flaw occurred earlier this year when chief operating officer Clark Kirby was issued some incentive shares that weren’t put to a shareholder vote.
The law requires that any share issues to a related party of a director must be approved by shareholders, but it seems that the company successfully argued to the ASX that a father-son relationship wasn’t deemed a “related party” under Australian law.
It is at moments like these that Australia’s corporate regulators really do seem like poodles.
For instance, Crikey recently reported that two Bradken directors had quit just before the AGM in order to avoid the public ignominy of being voted off the board.
Lo and behold, it later emerged that the ASX granted Bradken a special waiver so it did not have to hold any board elections in 2015.
The ASX should have instead required Bradken to formally put the two nominated candidates to the AGM. If they wanted to depart, why not let shareholders formalise it? Alternatively, the ASX could have required public disclosure of the lodged proxy votes.
It is not unusual for the proxy votes of contingent board spill resolutions to be voluntarily disclosed to the ASX, even though the vote never occurred.
This usually happens when the proxies are running strongly against the spill, as can seen in this example from Cash Converters two days ago.
Prime Minister Malcolm Turnbull used to live and breathe this listed company stuff, so it would be surprising if he didn’t turn his mind to some reforms at some point.
The federal government has recently improved its own disclosure around bond issues, setting a good example for the equity markets.
For instance, the Australian Office of Financial Management ran a tender for $800 million worth of 11-year bonds on Wednesday and disclosed 13 different facts on the outcome, including that there were 43 bids, 10 of which were fully allotted and another eight that were partially successful.
If it’s good enough for Canberra, why should the Commonwealth Bank be able to get away with auctioning off $1.5 billion worth of rejected retail rights in September and then disclose nothing more than the final price?
CBA wouldn’t even reveal how many of its retail shareholders didn’t participate in the offer and instead received $2 per share in compensation.
At least Westpac this week disclosed that more than 300,000 shareholders took up its recent share offer, but no listed company has ever released data on the number of bids lodged into a share auction.
Given that Turnbull recently enthusiastically launched a new app for the ASX-affiliated OnMarket BookBuilds that aims to “democratise” capital markets, he’ll presumably be open to improving disclosure and voting integrity in the listed company space.
For shareholder activists, it's not always easy to get your reasons for bidding communicated to shareholders. Stephen Mayne, a veteran of unsolicited board tilts, says he's been pleasantly surprised by Fairfax's approach.
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