Shareholders making the board more accountable
January 14, 2008
This Gillian Bullock story appeared in Fairfax Media's NSW Sunday paper, The Sun-Herald, on November 21, 1999.
The days of freeloading directors are numbered as small shareholders are finally getting the courage to speak out at annual meetings.
The two Telstra floats have produced a sea change in share ownership in Australia, with the potential to unleash a financial probing that will leave many boards uncomfortable.
An estimated 43 per cent of adults own shares themselves or indirectly through their super funds.
As the population ages, these shareholders will also have more time on their hands to delve into the accounts, read annual reports and set a day aside for the meeting.
Some companies are already experiencing their longest annual meetings on record.
News Corporation in normally sleepy Adelaide, and Boral and Westfield Holdings in Sydney two weeks ago are just some examples of meetings where shareholders have bombarded the board with questions ranging from ethical and environmental to corporate matters.
Like most other large corporations, the Coles Myer board was under fire last week for the "obscene" salaries of executives.
The Australian Shareholders Association, journalist Stephen Mayne, Jack Tilburn and NRMA dissident director Richard Talbot are the more vocal of those now willing to take a stand, but plenty more are starting to voice their opinions.
Australian Institute of Company Directors chief executive Ian Dunlop said this greater shareholder interest and willingness to ask questions was a worldwide phenomenon.
"Individuals are gaining more and more control over their own pension arrangements which has led to greater interest in the results and performance of that investment," Mr Dunlop said.
"Historically there has been a stand-off between directors and small shareholders but a sea change is now taking place.
"Boards should be encouraged as it provides them with feedback. The more shareholders have a greater voice, the more constructive the dialogue."
But it takes a lot of courage to stand up at annual meetings.
On his website jeffed.com, Mr Mayne, who admitted to still getting nervous, related a recent experience at the Tabcorp annual meeting in Melbourne.
"Ted, my best mate's dad, was sitting next to me. Now Ted is a retired school principal used to lecturing recalcitrant teenagers in rough government schools. But Ted was an AGM virgin and was reluctant to get up and ask questions."
Richard Talbot, who supported the greenie attack on Boral against logging old-growth forests, said the increasing number of small shareholders will lead to a growing scrutiny of company operations.
Companies which were involved in environmentally unsustainable or community unfriendly activities would be questioned by this growing group of shareholders, Mr Talbot said.
"While this emerging scenario might be hard to swallow for some old-boy establishment boards which have gone unchallenged for years, the more progressive and ultimately successful companies will embrace community values in determining their operations," he said.
He also hit out at directors who sit on a number of boards.
Mr Talbot said: "I only serve on the NRMA board and I'm flat out on that.
"These people in a conga line of board appointments must be Einstein or never sleep or not be across the issue."
In the future, Mr Talbot believed, companies such as Telstra could feel the wrath of shareholders if they tried to cut back services to rural areas while resources companies could also come under attack on environmental issues.
The Australian Shareholders Association NSW chairman Ted Rofe welcomed the voice of the people but cautioned against confusing lobby groups with shareholders.
"Because you're a shareholder it doesn't mean you can't be an environmentalist. But you need to distinguish between a shareholder with environmental views and those who prescribe to a certain view and buy 100 shares just to have a voice."
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