AGM Season in Review
GUEST COMMENTATOR: Cannings Purple associate director Michael Vaughan provides his insights to the recent AGM season.
As one season finishes, another begins.
And as summer starts, December’s festivities close the door on another season – that of the AGM.
We look at five takeaways from some of the annual shareholder meetings we attended this year.
POSITION VACANT
At the smaller end of the market, the lack of shareholder engagement and participation is acute.
There was more than one meeting we attended where, other than the Board, company secretary and auditors, we were the only people at the meeting.
Meeting numbers for larger companies that tend to attract a crowd were also noticeably down on the previous year.
Don’t expect this to recover until share prices start to.
NEVER STRIKE TWICE
The lack of shareholder engagement in AGMs flowed through to the voting which had the effect of distorting the results in some instances.
Take Paladin Energy (ASX: PDN), where a vote of around 5 per cent of the total investor base against the remuneration report was sufficient to deliver a ‘first strike’ against the Board – despite widespread reductions in Directors’ fees and the salaries of senior management.
At Heron Resources (ASX: HRR), a second strike designed to trigger a Board Spill Meeting was recorded, amid allegations from the Heron Board that the move was a corporate tactic rather than any genuine grievance against the company’s remuneration practices.
Expect to see more of this in future, which could lead to a review of regulations around the remuneration report.
DEATH BY PROXY
The increasing influence of proxy advisors on shareholder voting continues to be a source of frustration for some companies.
Recommendations to vote against the reappointment of executive directors based on corporate governance grounds seemed to be an issue, often characterised as ‘protest votes’ in the resultant media coverage for higher profile companies.
Building a relationship with these groups outside of AGM season and before a report has been released is advisable, when it’s possible.
Otherwise, companies need to be conscious of how resolutions will be interpreted by these groups when putting matters forward.
The same applies to the Australian Shareholders Association, though they wield far less influence in terms of voting numbers.
PREACH TO THE CONVERTED
As we noted in the lead-up to the AGM season, the importance of presenting an update on the company’s activities was laid bare.
On the occasions where this didn’t happen, the Q&A session following the formal part of the meeting was often dominated by a small number of shareholders with specific grumbles or pet issues.
The majority of investors don’t ask questions but attend in the hope of building their understanding of the company.
Instead, all they witness is the Board responding to criticism and may leave with an unnecessary negative feeling towards the company.
A presentation with a controlled message and specific insight into the business should be core to every AGM.
BEST IN SHOW
It would be remiss of any 2014 AGM wrap to leave out the Wesfarmers (ASX: WES) event to commemorate the 100th anniversary of the business.
Having such a large balance sheet and retail offering presents a vast array of shareholder-pleasing opportunities and the iconic Western Australian company took full advantage, rolling out cooking demonstrations, fashion shows, live music and giveaways.
While Bob Every and Richard Goyder are unlikely to see any retail protest votes for the next little while, there’s probably not much your average ASX-listed company in Perth can apply from this to their own AGM.
