AFIC AGM special

The old JB Were created no less than six listed investment companies before its merger with Wall Street powerhouse Goldman Sachs three years ago. Whilst the House of Were has changed quite dramatically, there has been very little movement inside the clubby world of the listed funds.

It was widely thought that former JB Were chairman Bruce Teele used the funds as a way of providing office space and sinecures to various establishment figures across corporate Melbourne. These chaps then gave the House of Were various corporate gigs that worked in a virtuous circle for the club members, but didn't necessarily reward talent or build accountability.

Across the portfolio, the Weres funds boast directors such as ANZ chairman Charles Goode, Bluescope Steel chairman Graeme Kraehe, BHP-Billiton chairman Don Argus and former AMP and Coles chairman Stan Wallis. All hailed from blue chip companies that had JB Were as the house broker.

The luminaries were really on show at AFIC today when no less than Teele, Argus and Wallis all faced re-election.

AFIC has more than 83,000 shareholders and no major institutions hold meaningful stakes in the company. This enhances the collective power of the small shareholders who really gave the board some stick over the remuneration report and the increase in pay for the non-executive directors.

The proposal to lift the cap for non-executive directors from $600,000 to $1 million really copped some stick. The proxies on the day showed 62.7 million shares in favour, 20.63 million against and 30.83 million at the proxies discretion, with chairman Teele holding 20.6 million of these.

Having a chairman score 18.1% of the voted stock as open proxies is an indictment on the system which sees the chairman pick up these votes as the default mechanism. If you sign the form and send it back, this goes straight to the chairman. It would be a bit like a voter who registered on polling day but then failed to tick box being deemed to have given their vote to whoever John Howard wanted.

The poll results demonstrated the unusual phenomenon of lots of wealthy shareholders actually voting on the day because the against vote on the NED pay rise went up to 31.85 million in the poll. Most of this came from the Australian Shareholders' Association because they were armed with 10 million undirected proxies - about 8% of all votes cast on the day.

The John Fletcher question

Don Argus gave a little speech talking up his credentials when it came to his re-election but then Bruce Teele completely shielded him from answering any questions.

For instance, AFIC has partly missed the resources super cycle by having no shares at all in the likes of Zinifex, Fortescue Metals, Newcrest and Oxiana. They've also missed the booming infrastructure companies like Worley Parsons, United Group and Transfield Services.

I asked whether Don didn't believe in the super-cycle or whether he was rolled on the AFIC investment committee but Bruce answered by claiming AFIC was long resources courtesy of the big positions in BHP which, after tonight's record close, comprises $654 million worth of a $6 billion portfolio.

The big question for Don Argus was whether or not he advised Stan Wallis to hire John Fletcher as Coles Myer CEO in 2001. This is the extract from a letter Solly Lew wrote to Wallis in 2002 that was leaked to The AFR earlier this year:

"When we discussed the appointment of John Fletcher you told the board that you had had discussions with Don Argus, John Fletcher's former chairman (at Brambles). I have known Don Argus for many years. As a director concerned about the appointment of a non-retailer to the position of CEO of Coles Myer, I felt I needed to know a little more about John Fletcher. I called Don Argus and he told me that he had never had a discussion with you regarding John Fletcher . . . What sorts of games have been going on?"

I asked the BHP-Billiton chairman to clear this issue up once and for all but once again, Teele protected Argus by refusing to let him answer the question, even though I said it would effect how some shareholders would vote on his re-election.

"I'm not going to ask Don that, it's not the business of the meeting. If anyone wants to make their decision based on those rumors then that is there business," Teele said.

Bruce even had the cheek to declare that if Wallis hadn't asked Argus about Fletcher across the AFIC board table "it would prove that we have very good corporate governance".

Teele and Terry Campbell then launched a spirited defence of Stan's record.

"In my opinion, Stan probably did more to rescue and turn AMP around than anybody ever knows," was the Teele offering whilst Campbell declared that Stan "had an excellent business career".

Wallis was a no show, despite being up for re-election, but at least I persuaded a handful of shareholders to vote against him. The final proxies were 87.38 million in favour and a disappointing 3.636 million against.

I've done a video today getting stuck into Stan Wallis and the lively direct exchanges with Teele and Campbell have been edited down to this 17 minute MP3 file.

Copyright © 2022 The Mayne Report. All rights reserved

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