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Shareholder power.

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Tuesday 11 November 2003

Senator Stephen Conroy

Shareholder Power  

With the annual general meeting season in full swing it’s an appropriate time to discuss the governance of Australian listed companies.  


It’s important that shareholders - both large and small - take an active interest in how Australian companies are being governed because the retirement incomes of all Australians depend upon well-managed companies.  


For this reason, I believe that institutional shareholders (such as trustees of super funds and funds managers) have a responsibility to take an active role in Australian companies.  


In years gone by, if investors didn’t like the way a company was being run they would sell out.  


However, the old response of simply selling out - known as the “Wall Street walk” - is the easy way out. Only dinosaurs like the Business Council of Australia (BCA) believe that selling out is the appropriate course of action in 2003.  


Today, trustees of super funds (and other institutional investors) need to take an active interest in the companies that they invest in. Why? Because your retirement depends on it.  


I believe in empowering shareholders.  


By this I mean we need to ensure that institutional shareholders have the legal authority and the collective will to stand up to companies who put the interests of the board above the interests of the shareholder.  


It is after all, the shareholders who own the company.  


Harvey Norman 


Recently institutional shareholders have begun to take a more active approach in the companies in which they invest.  


The show down over Harvey Norman’s options policy in July is one example.  


Gerry Harvey proposed to reprice options which were significantly “out-of-the-money”. However, due to pressure applied by shareholders, he was forced to withdraw the offending resolutions.  


Shareholders simply would not wear a windfall to Harvey Norman executives valued at $6-$8million. 


News Corp 


Another example of institutional investors taking a stand is in relation to News Corp.  


It’s not everyday that Rupert Murdoch gets rolled but he was at the News Corp AGM in October.  


Institutional investors forced Rupert to withdraw a proposal to issue more than 3 million share options to News Corp executives including Rupert himself.  


Rupert’s resolutions were opposed because News Corp failed to provide any explanation of company policy on options and failed to include any performance hurdles.  


One institutional investor said that voting for such a resolution would be akin to “writing a blank cheque”.  




The Boral AGM in October is one example where institutional investors failed to take a stand. This issue was not an issue to do with executive remuneration.  


Instead, Boral proposed a resolution which launched a direct attack on shareholders rights.  


I attended the Boral AGM’s to stand up for the rights of small shareholders.  


I obtained a proxy (from a Boral owner-driver who is also a member of the Transport Workers Union, the same union of which I am a member) and I gave a speech which outlined the importance of protecting shareholders rights.  


The reason I was there was to oppose a Boral resolution which directly attacked the rights of small shareholders.  


The Boral resolution which I opposed, scraps the ability of 100 shareholders to propose certain resolutions (that is special resolutions relating to the company’s constitution) for debate at the general meeting.  


Now that the resolution has been passed, Boral shareholders will need to have 5% of the capital (or about $160 million worth of Boral shares) or Board approval in order to propose this type of resolution.  


Boral has effectively denied each Boral shareholder the right to join with 99 other shareholders and propose this type of resolution for debate at the company meeting.  


The ability of shareholders to propose resolutions for debate is a key aspect of shareholder democracy that should be protected.  


Boral’s resolution encroaches on the ability of shareholders to raise certain issues for debate and therefore their ability to hold boards accountable.  


In my view, this is a direct attack on shareholders’ rights. Accordingly, the Corporations Act must be amended to ensure that Boral does not set a precedent for other companies to circumvent the spirit of the Act.  


Guests on this program:

Stephen Conroy  

Senator Conroy is Deputy Leader of the Opposition in the Senate and Shadow Minister for Trade, Corporate Governance, Financial Services and Small Business