Ray, you did us Proudley at AGL

January 16, 2008

In a stunning result, Crikey candidate Ray Proudley received a 58 per cent yes vote for his board platform to repeal the ridiculous 5 per cent shareholder limit at AGL. We're absolutely stoked but old boys club rules kept him off the board. This was published in Crikey on October 15, 2000.

And we also had great fun wearing the 7-foot Crikey foam suit and handing out flyers for 20 minutes before the meeting which was held at Melbourne's venerable Regent Theatre in Collins St.

Explaining the Crikey tilt at AGL

In an ideal world www.shareowner.com.au will be able to back other candidates running for boards rather than being the candidates ourselves and we're delighted that Ray Proudley has stood up to be counted in the case of energy giant AGL.

It is one of the great anachronisms that listed public companies can be protected from takeover by laws passed in state parliaments. AGL was afforded that luxury when Sir Ron Brierley had a tilt at them back in the 1980s.

But the world has changed dramatically since then and we're trying to drag AGL into the 21st century by standing for their board on a platform supporting the removal of the ridiculous 5 per cent shareholder limit.

At last year's AGM, I asked chairman John Phillips why foreign giants weren't given the chance to offer the same silly prices for AGL as they were offering for Victorian gas utilities.

You see Mr Phillips spent much of the meeting explaining that AGL had missed out buying one of the three Victorian gas companies sold by the Kennett government because foreign companies had offered stupid prices.

Surely the shareholders of AGL would like to receive a stupid offer of say $15 for their shares which are currently trading around the $10.50 mark.

The way that Santos shares have taken off since it flagged the removal of a 15 per cent shareholder limit has helped put a rocket under its share price. We reckon the same thing would happen to AGL.

Those good guys at Perpetual Funds Management fired off a letter to the AGL board late last year calling for the company to remove the 5 per cent shareholder limit.

Moving at glacial speed, the board announced a review and now chief executive Len Bleasal has flagged that any action will be revealed at the AGM.

Hopefully the candidacy of Ray Proudley has sped up the process and the board will announce an immediate proposal to remove the 5 per cent limit at the meeting on October 17.

Both AGL and the NSW government are strangely non-committal whenever you ask them about it. Each infers that it is up to the other to take action.

With the dollar at record lows, a $15 a share offer for AGL would still represent great value for a company like Texas Utilities so let's hope the board does not drag the chain and announce a proposal over some sort of deferred time table. We want it lifted straight away so that a greater takeover premium is immediately built into the share price.

For this reason you should vote for Ray Proudley to send the board a message. Ray worked for many years at Victoria's Gas and Fuel Corporation which AGL tried to take over. It is just not fair that AGL can bid for other companies but no-one can bid for AGL.

Enough is enough. This is an absolute no-brainer and Ray's candidacy is designed to give you a vehicle through which you can send the board a clear message to act now.


Now, this is the flyer the man wearing the Crikey suit delivered to shareholders before the meeting.


Crikey is Australia's first shareholder activist website and we are running a number of campaigns during the 2000 AGM season.

In relation to AGL, we believe that shareholders would benefit from a higher share price if the board acted immediately to remove the 5 per cent shareholder limit which protects the company from takeover.

Crikey is backing board candidate Ray Proudley who has 20 years experience working in the gas industry and believes the takeover protection should go. A vote for Ray would remind the board that we want AGL to no longer be protected from takeover - something which makes the board and management complacent.

"If AGL can take over other companies it is only fair that rivals can bid for it in an open market place," Mr Proudley said.

AGL has arguably the most outdated constitution of any Australian company. Shareholders are called proprietors and only fellow proprietors can be appointed as proxies. Lifting the 5 per cent shareholder limit should be part of package of reforms to bring the company into the 21st century.

Other campaigns that we are running this year include a push for the ASX to separate out its commercial and regulatory operations to avoid a fundamental conflict of interest.

We are also running for the board of companies still paying Alan Jones or John Laws in cash for comment arrangements. This includes NRMA Insurance Group Ltd and the Commonwealth Bank.

Similarly, our number one goal is to help create a greater culture of shareholder pressure in Australia. To this end we are pressuring institutions to become more activist in managing funds for their clients, thereby keeping directors and management more accountable.


Now, what happened inside the Regent Theatre

Inside the meeting, chairman John Phillips "revealed" that the board was in discussions with the NSW government to have the shareholder limit removed. There was no timetable given and no update on how the discussions were going.

This is exactly what he said:

"I told you last year that we would also be looking at the 5 % limit on share holdings in the company. Historically, that restriction has been associated with the ownership of the infrastructure assets and the company's monopoly in supplying gas to many parts of New South Wales. As we are moving to restructure our infrastructure business, and the old monopoly has gone with the move to open access and competition in all sections of the gas market, we have commenced discussions with the New South Wales government with the objective of having the restriction removed."

When it came to the election of directors, I spoke for about three minutes in support of Ray and pointed out that shareholders should vote against Sir Ron Brierley because he'd only attended 6 of the 10 board meetings and 1 of the 6 special board meetings.

The board had the typical protection in place such that there were only two vacancies for their preferred candidates. Even if all three had got 95 per cent, only two were allowed on. This is an affront to democracy and is a tactic adopted by many boards to keep them the exclusive domain of the old boys network.

Our cause wasn't helped by the fact that Ray was on a riverboat on the Murray and we were defeated about 75%-25% on a show of hands. On elderly shareholder actually got some applause pointing out that Ray hadn't shown up and that "if it ain't broke don't fix it".

On reflection, maybe the Crikey man create an image of trouble which does not appeal to older investors.

However, pointing out Sir Ron's abysmal attendance record forced him to a 75%-25% victory whilst the other director Graeme Reaney got up virtually unanimously. Sadly, the chairman did not agree to my request that Sir Ron explain his appalling attendance record and simply said he was pulling his weight.

It was very odd that the chairman did not display the proxy votes so I got up during the next resolution about director's pay and asked to see them.

Surprise, surprise, it turned out that Ray Proudley actually got a majority of the votes cast (58 per cent) either for or against, although there was a huge chunk that abstained.

A very healthy 675 million shares were voted yes for Ray whereas only 473 million went against and 1010 million were left at the chairman's discretion.

Compare that with Sir Ron who had 1663 in favour (97 per cent) and 44 million against with 636 million left open and Mr Reaney who got 1729 million in favour (97.4%), 46 million against and had 628 million left open.

Well done Ray - you got more than $700 million worth of shares backing your tilt at the board. And well done to the institutions who followed his advice on the notice of meeting to "send a strong message to the board that they should follow the recent lead set by Santos" - that being a 30 per cent price surge after moving to repeal its 15 per cent shareholder limit.

The shareholders gave CEO Len Bleasel a suitably upbeat send-off after 10 solid years in the top job. Let's hope that the meeting early in the new year to approve a restructuring of AGL's infrastructure assets will also be the meeting which the simple amendment to the constitution is passed by proprietors clearing the way for a takeover.

It is ironic that chairman John Phillips is also head of the Foreign Investment Review Board. Crikey often laments Australia's woeful foreign investment record whereby we've named 161 foreign companies turning over more than $200 million a year in Australia but can only identify 41 Australian companies doing the same overseas.

Banning takeovers is not the solution, our companies have just got to perform better in creating wealth for Australians.

If AGL knows that predators are tracking their performance, they'll perform better and create more wealth for Australians. And a good management performance would also lead to thousands of shareholders getting seriously rich if the foreign takeover ever did materialise.