Nail the board with questions

If you're looking for reasons not to front up to the annual general meeting for one of your companies, there are plenty – they can be intimidating, hijacked by nutters or just plain boring.

There is, though, one good reason to go: you own the company and the board of directors is answerable to you.
But turn up to an average AGM and you'd be forgiven for thinking the board and their coterie of executives and lawyers were unaware of this fact.

Often the board can be found on an elevated platform, their suited eminences lit by spotlights while the shareholders sit below in the dark.
The board's voice is amplified by microphones and order is maintained by the chairman, while shareholders make do with a couple of microphones on stands, usually down the front, lit by more glaring spotlights and turned on and off at will by the chairman.

The company secretary, that loyal servant of the board and its chairman, is responsible for staging the event, and works with the company's public relations people and professional event managers to get the right effects.

Shareholder activist Stephen Mayne says the feeling of most AGMs can be captured in one word: intimidating.

"You have the directors raised and you have the floor dark and you have the bright lights on the people on the stage, so it's really intimidating to confront it,'' he says.

Mayne has attended hundreds of AGMs and, after running and failing 18 times for election to various company boards, has become an expert on the punter's perceptions of the big day.

To combat the jitters of the mums and dads who want to ask some reasonable questions about their company, Mayne recommends a little preparation.

"Give yourself an hour to check the share price, do a Google search, check the stock exchange announcements (on the ASX website) and maybe read through the annual report at the meeting,'' he says.

And once you're ready to ask a couple of questions, don't try to wing it.

"I suggest people do their preparation before the meeting and work up three or four questions which they write down and which they can refine at the meeting,'' he says. "Don't speak for more than two minutes. Just get up and make a brief comment and ask a specific question. Take the meeting where it hasn't been before. Go into areas (that) need to have more sunlight placed on them. Don't just rehash stuff that everyone already knows.''

The companies about to hold annual general meetings are those that use the calendar year as their accounting period. Among them are insurance and financial services giant AMP, gas producers Woodside and Santos, French insurer Axa and troubled pokie maker Aristocrat.
Mayne intends casting some light on the recent poor performance of AMP.

He is lobbying institutional investors of AMP to support his bid to replace director Richard Grellman at the AGM on May 15. As chairman of the audit committee, he is culpable for the disastrous performance of AMP's UK insurance operations, Mayne charges.

The demutualisation of AMP in June 1998 gave many Australians their first experience of share ownership, and they have watched as the share price has fallen from $11.80 at issue to below $8.

Mayne's platform for election resembles his wider aims of fostering an engaged shareholder community, but by his own description he faces huge challenges. ``Its a self-perpetuating system dominated by a well connected old-boys network and an apathetic shareholder base. The bottom line is there's no culture of shareholder pressure in Australia.''

Challenging boards to account for poor performance is also on the agenda of the Australian Shareholders Association, which has compiled a hit-list of companies that can expect some uncomfortable questions at upcoming AGMs.

At the top of the list, next to AMP, sits Aristocrat, which holds its AGM on Tuesday – two directors will stand for re-election to the company's board.

The ASA is opposing the re-election of non-executive director Peter Draney for "failing to detect'' the breakdown in financial reporting from Aristocrat's American business. This allegedly led to a profit downgrade in February, an ASIC investigation into the company's disclosure practices and a steep slide in share price.

Ahead of the meeting the ASA has asked for shareholders' proxy votes to be directed to its representative, who will cast the votes against the board's motion to re-elect Draney.

Major shareholder Paul Ainsworth, who will not attend the meeting because of a wedding in Melbourne, has been very critical of the board and its chairman John Ducker, and he urges Aristocrat shareholders to attend.

"It will give shareholders the chance to address the board first hand, to express their true feelings in a public forum without being fobbed off with a glib letter or a phone call,'' Ainsworth says.

Corporate Governance International advises institutional investors on how to vote at AGMs, in accordance with the latest thinking on governance standards.

CGI principal Sandy Easterbrook says about 20 per cent of all resolutions at AGMs are controversial – relating to directors' perceived conflicts of interest or executive payments that are not related to performance.

He says boards are becoming more accountable at AGMs as more institutional investors exercise their voting rights, rather than directing their proxies to the chairman and thus supporting the board's resolutions.

This is an indirect way that mum and dad investors will gain more influence – through the choices made by the managers of super funds with sizeable stakes in companies, he says.

But he says there are always ways for chairmen to structure their holdings in various companies to become virtually impervious to takeover – like cross-holdings between companies.

An example of this is the cross-holding between east coast brickmaker Brickworks and coal and telco conglomerate Soul Pattinson, which each have a stake of more than 40 per cent in the other.

Easterbrook calls the arrangement ``anathema to good governance'' and ``a leftover from the 1980s''.
The chairman of both companies is Robert Millner.

At a Brickworks AGM several years ago a shareholder with a 10 per cent stake in the company openly challenged the cross-holding. The challenge failed and Millner learned much about how to handle tough, well-informed questions from the floor.

Copyright © 2022 The Mayne Report. All rights reserved

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