The Gunns EGM in Launceston last Friday was appallingly handled by the company but the Wilderness Society resolution went down in a screaming heap, receiving less than 0.5 per cent of the total votes.
Gunns executive chairman and 5 per cent shareholder John Gay was able to round up support from most of his major institutional shareholders such as The Commonwealth Bank, Perpetual Trustees, Deutsche Bank and AMP to deliver what must be close to the highest against vote to a resolution in Australian corporate history.
Crikey's various board tilts would feature prominently in any top ten "against" vote but The Wilderness Society managed against votes from almost 70 per cent of the 82 million shares on issue.
The pre-poll proxy votes were as follows:
Proxy's discretion: 832,781
And the post-poll final vote showed the Greens had some support on the floor of the meeting:
Despite running the most comprehensive institutional campaign by the environment movement in Australia to date, the owners of this spectacularly profitable $1 billion company could not bring themselves to jeopardise future profits by limiting where they can chop down old growth forests.
The press and visitors were banned from the meeting and the Greens had the numbers outside and inside by about 3-1. All up there would have been about 400 participants with 300 of them inside the meeting as shareholders or proxies.
Clearly the 40-seat boardroom was inadequate so we were all shuffled into a giant kiln out the back of the huge Gunns pulp plant in Launceston. The acoustics were terrible and Gunns decided not to bother with the expense of attendants or a roving microphone.
The full board didn't even bother sitting at the head table as former Tasmanian Liberal Premier and Gunns director Robin Gray put himself strategically in the audience.
When it became apparent that John Gay was going to limit debate to a few minutes, one of the Greens stood up and proposed Crikey as an appropriate independent chair of the meeting as the CEO was clearly conflicted.
Robin Gray was quickly on his feet declaring this was out of order and I wasn't going to promote concept at the meeting. However, it has to be said that John Gay's performance was pathetic and he is completely inappropriate as a chairman of a $1 billion public company with an open share register.
This bloke thought he could get away with letting one Green speak to the motion and then moving straight to a poll. He mumbled a few introductory remarks and then simply handed over to Wilderness Society campaign co-ordinator Leanne Minshull.
Minshull was a little celebratory in her tone as she declared that Gunns "can't stop the tide of the people" and was driven by "an ideology that is way out of date".
The Greens were a little disorganised because when Minshull sat down after about five minutes, no-one else leapt to their feet. Gay then started going to a poll when another Green objected on the basis of a lack of debate and then a couple more Greens got up and spoke.
John Gay appeared unable to articulate the company's position so another un-named suit got up and ran the argument about 39 per cent of Tasmania's forest being locked up, 1300 people working for the company and the RFAs going through the Federal and state parliaments with bipartisan support.
He didn't mention that the CFMEU also provides crucial support considering the Labor Premier Jim Bacon is an old BLF organiser.
After just 27 minutes of debate John Gay again tried to move to the poll as shareholders objected. It was at this point that Crikey got up and spoke for about 3 minutes.
Firstly, on procedural matters it was ridiculous to try and close down debate so quickly and we should agree to a two hour debate. Afterall, more than 50 people in the room had trekked over from the mainland. I asked that shareholders identify themselves, that we perhaps consider alternating between for and against speakers and that John Gay reveal the proxies after the debate and before the poll.
Then I asked the simple question: could both sides please explain the financial impact of passing the resolution which would preclude Gunns from logging eight specific Tasmanian forests? The Greens have claimed earnings per share would fall by 3 per cent but institutions such as AMP have questioned the rigour of this analysis.
Gunns have offered no forecast publicly and all John Gay would say is that 200-300 jobs would be lost as 50 per cent of their sawmill and veneer timber comes from these areas. He then claimed Gunns hadn't run the numbers and would only ever do so if it became a reality.
Surely this is unacceptable for a public company. Where is the financial modeling or are we all too busy slashing into the forests to work out where these record profits and market-leading share price performance is coming from. The lack of financial analysis was the main reason that BT Financial Services abstained along with others such as Unisuper and Local Authorities Super.
After a couple more Greens spoke we finally got our first pro-Gunns speaker at 10.55am. It was a feisty 50-plus chap called Harry Stackpoole who declared poor old Gunns "was a soft target for the Green movement". These outrageous Greens were trying to "usurp the power of the Parliament" and no matter what this "proud Tasmanian company" conceded, "you Greens will never be pleased".
John Gay obviously took his advice to heart when Harry concluded: "Let's get this meeting over with so we can get back and make a dollar". This followed the theme of another Gunns supporter who was demanding to know how the meeting had been called and who would pay for it. However, just as Gunns was claiming their tree-lopping is lawful, so is the calling of an EGM by 100 shareholders. And apart from the advertising and security guards, Gunns didn't spend a cent more than they had to. There was no tea, coffee, biscuits or presentations and time is clearly a precious commodity because that was also patently in short supply.
Harry was quickly followed by another Gunns supporter, Shane Morgan from JSC Group, who claimed the Tasmanian situation was "balanced" and Greens should focus their campaigns on places like Indonesia and the Solomons where there has been environmental devastation.
The Greens hit back with several more speakers including at least one American and one Pom. However, the most impressive was a suited Tasmanian and super fund trustee Michael Vaughan who eloquently declared he was no "dreadlocked looney Green" and called on Gunns to protect their resource or risk losing it. He received a standing ovation from the Greens who dominated the front of the kiln whereas the Gunns staff and supporters numbered about 50 up the back.
Vaughan got stuck into Gunns for "spending an enormous amount of money on self-promotion" and called for them actually engage with their critics: "It needs to be discussed, dealt with sensibly and passionately by this board."
After numerous attempts, John Gay over-ruled the wish of the meeting and finally got his precious poll at 11.15pm and it was all wrapped up by 11.18am - just 75 minutes after we started. However, Wilderness Society heavy Alec Marr quickly took the microphone and urged the Greens that "this is just the beginning" before John Gay motioned him away.
It was a big loss for the Greens in terms of the vote, although they will take heart from 1.53 million abstentions representing almost 2 per cent of the shares on issue. However, anyone who saw John Gay's stand-offish performance knows that this company must start to engage. He might be a ruthless CEO who brooks no internal dissent and drives his contractors and managers to the limit, but he is no public company chairman.
The institutions are not going to vote for something that materially affects profit and Robin Gray was heard telling one pro-Gunns supporter after the meeting that its share price would halve if the resolution got up. That would still leave it at $6, some 300 per cent up on the level seen 5 years ago. However, the ANZ bank would be nervous given that Gunns still owes it and other banks about $230 million.
But the institutions should demand more professional stake-holder engagement and a chairman who tolerates dissent and knows how to run a meeting. John Gay's approach of getting his lawyers Freehills to reply to Wilderness Society letters is not acceptable in the 21st century.
He brazenly refused to call a meeting when the 100 signatures were first delivered and then did not facilitate or contribute meaningfully to the debate today when the EGM was grudgingly finally called.
Based on what Crikey saw, there is still a cowboy mentality at Gunns and the problem is that John Gay, son of a sawmiller, still runs the company like it is a family business in the 1970s.
The media largely went with the vote in favour of Gunns which is understandable since so few made it into the meeting and the defeat was so comprehensive. Andrew Main and Cathy Bolt provided the most anti-Gunns coverage in The Fin Review which sparked this pig-headed response from John Gay when told that the Commonwealth Government superannuation schemes wants more dialogue: "I can't dialogue any more," John Gay said. "I have dialogued for 20 years. As soon as you finish the dialogue, you come to an agreement and they want bit more. We have finished with dialogue."
The Launceston Examiner certainly gave the company a reasonable run and based on the view of our taxi driver and the people in the net café, the company does have quite strong community support.
The Greenies milled around chatting for a good hour after the meeting finished and Leanne Minshull held a press conference and then addressed the gathered throng urging them to pressure the pro-Gunns institutions.
Neat summary of the Gunns issues
Tasmanian John Maddock follows the Gunns debate closely and this is his latest SFR newsletter ahead of today's EGM in Launceston.
After a false start earlier in the year, The Wilderness Society has managed to get Gunns Ltd, the major business in Tasmania's forestry industry, to call an Extraordinary General Meeting on Friday, 29 August 2003.
The business of the meeting will be to discuss a special resolution brought on under Section 249D of the Corporation Act. (This section allows 100 shareholders to requisition a meeting and it appears that the Federal government is being lobbied to change it to minimise abuse, since the 100 shareholders in this instance represent fewer than 250,000 shares (0.3%) of the issued capital of the company).
The resolution aims to amend the Articles of Association of Gunns Ltd (a public company whose shares are traded on the Australian Stock Exchange) to prevent the company developing, clearfelling, selectively logging or accepting any resource whatsoever from a number of areas. These are:
- The area covered by The Wilderness Society proposal for the Styx Valley of the Giants National Park.
- Proposed extensions to the Tasmanian Wilderness World Heritage Area.
- Great western Tiers.
- Eastern Tiers (reserves proposed by TWS and Tasmanian Conservation Trust).
- North East Highlands (park proposed by TCT, unlogged slopes of Mt.Maurice, Mt Barrow and Mt. Arthur)
- Proposed extensions to Ben Lomond national Park.
- Tasman Peninsular (areas proposed as extension to Tasman Peninsula National Park)
- Reedy Marsh State Forests.
According to the Letter From The Chairman which accompanies the notice of meeting, "The company has a clear position in relation to the scope for its forestry activities - that is those activities will only be undertaken in areas specifically determined by Government as appropriate for forest activity and that those activities will be conducted in accordance with regulated requirements and on a sustainable basis."
The company claims: (a) it harvests wood from areas negotiated under the Regional Forests Agreement, implemented in 1997, (b) the company's environmental management systems are accredited to ISO14001, and (c) the areas identified in the resolution yield a large amount of the logs used in the sawmilling and veneer industries in Tasmania.
The Shareholder Statement says: "While our company has environmental policies and programs designed to comply with environmental laws and protect the Company from environmental liability, we believe this compliance does not satisfy community expectations or adequately plan for possible changes to current forestry regimes. As a result, we are concerned that the economic viability of our Company - and future returns to shareholders - may be at risk."
The Statement goes on to discuss the community consultation program called Tasmania Together (instituted by our present Premier when first elected to office) and Goal 24 "To ensure our natural resources are managed in a sustainable way now and for future generations".
The target under that goal was (a) to end clear felling in areas of high conservation value old growth forest by January 1, 2003 and (b) Complete phase out of clearfelling in old growth forests by 2010.
Having backed the Tasmania Together process against some opposition in recent years, the government reneged on upholding (a). It goes on to say the the State government¹s business enterprise Forestry Tasmania is the major supplier to Gunns (SFR comment: Gunns is also FT¹s biggest customer, not a healthy economic situation) and that Senator Bob Brown has called on more then one occasion for a Royal Commission into the forestry industry.
Institutional investors based outside Tasmania have major share holdings in Gunns Ltd and the TWS has been lobbying them heavily over the past weeks, apparently with some success. The BT Financial Group issued a press release on 21 August 2003 as follows:
"BT Financial Group (BT) today announced its intention to abstain from voting on the resolution to alter the company's articles of association to develop, clearfell or selectively log defined old-growth forest areas in Tasmania at the Extraordinary General Meeting of Gunns Limited on 29 August 2003. BT recognises the sensitive nature of environmental issues, however BT's fiduciary duty is to its investors.
The decision to abstain is based on the lack of adequate data or information on the possible impacts of adopting the resolution. In making our voting intention transparent, BT expresses the hope that both the company and the proponents of the EGM resolution are able to reach an agreement to this dispute that both addresses the issues and protects the interests of investors.BT will be advising both the company and the proponents of the EGM resolution of this voting decision.BT is not a substantial shareholder in Gunns Limited."
I understand that other institutional investors including AMP, Perpetual Trustees, Commonwealth Bank, National Australia Bank and local and Federal Government superannuation funds have also been lobbied but have not announced how they will vote. TWS says that if you want to email the major shareholders of Gunns to lobby them, use the following link. I understand that the pro-logging lobby has been showing some entrepreneurial flair has been making use that link as well! The Wilderness Society
SFR comment: It is interesting to note that over the last few days the Forest Industries Association of Tasmania and Timber Communities Australia have published half page ads. in The Mercury and the Sunday Tasmanian. The points in the FIAT ad were:
- Closing down more high-yielding forest will take away the resource needed to supply our sawmill and veneer industries that add high value to our timber. SFR comment: no mention of woodchipping activities. Is it being suggested that the only products to come out of the areas proposed to be quarantined are sawn timber and veneer? The Shareholder Statement says that woodchips contributed 86% of export sales last financial year. I understand - from the usual 'reliable source' - that just over 50% of their net profit (or $5 per tonne) is from woodchip exports. At the 2002 AGM, the CEO refused to dissect the company¹s profit stream, so that figure is not official.
- 40% of our forests are already reserved - 4 times the international standard SFR comment: it is clear that some of the reserved forests were never on the loggers sheets in the first place. as an example, the maps show old growth forest on the hills behind Tinderbox, an dormitory suburb of Hobart
- mature timbers that supply our value added industries are not available in regrowth or plantation forests SFR comment: Neville Smith Timber Industries P/L has just begun construction of a $15m mill at Southwood in the Huon Valley. For the last 3 years, FT has been saying that the Southwood mill will use regrowth timber only. As I understand it, the principal product from the NSTI mill will be strip flooring for the Victorian market - a product valued at dispatch from Gunns at around $1400 per cu.m.
- less than 1% of old-growth forest has been harvested in the last 5 years. SFR comment: if this is true, then all the old growth will be gone in 500 years. Of course, it will regrow - or at least the area not converted to plantations will be ready for harvest as old growth in 500 years time. Plantations, on the other hand, according to evidence given to the Senate enquiry into plantations by an FT executive in Hobart recently, have a break-even age of 30 years. Over that, they are unprofitable because of the cost of compounding interest.
Hidden in Tasmania somewhere, there must have enormous reserves of old growth timber because Raymond Gouck, previous Huon District Manager for FT told us on a public tour in 2002 that the old growth resource in the Huon Valley would be exhausted in between 11 and 15 years depending on the cutting rate. It would seem that the lower figure is more likely, since another 'usually reliable source' tells me that the cutting rate in the Huon at the moment is running at 120%.
Even if Raymond's figures were enormously wrong, there is just a smidgen of difference between the two. Something doesn't add up here. Something else which merits closer scrutiny is the appropriateness of the company's (and FT's) adoption of ISO14001. ISO 14001, as I understand it, is a standard related to office procedures rather than operations in the field. Prof. Neill Gunningham and Research Assistant Darren Sinclair, writing in Vol. 16, #1, February 1999 of Environmental and Planning Law Journal say in their paper Environmental Management Systems, Regulation and the Pulp and Paper systems: ISO14001 in Practice the following:
- The key standard (in the ISO14000 series) is ISO14001, introduced in 1996, which sets out the basic requirements that a company must meet to have an effective EMS (environmental management system) and allows third party certification of enterprises in compliance. (p6)
- It is designed as a means of facilitating businesses in taking proactive measures with regard to their environmental performance, without contemplating any role for governments. As such, it gives the enterprise itself sole control and oversight responsibilities over an EMS, without any obligatory third party control. Companies may seek third party certification to ISO14001, but are not bound to (cf the European Standard, EMAS, which demands independent verification. (p.7).
- Many of the standard's most serious shortcomings came about because of the process and structure of decision making within the ISO, which is an essentially technical organisation responsible for the establishment of technical standards. In this context, the fact that it is neither democratic nor accountable, is not a major concern.
However, in developing the 14000 series, ISO moved de facto into public policy making, a context in which its democratic deficiencies are of considerable concern, given the domination of corporations and developed countries in its standards making process. (SFR comment: the recent development of the interim Australian Forestry Standard by a committee chaired by FT's Dr. Hans Drielsma and now published by Standards Australia also gives rise to some concern.
All the conservation groups walked out of the consultation process early on, so in my view, AS 4708, which forest industry lobbyist Kate Carnell reports Gunns' is well advanced with, gives me no confidence that the private land under Gunns' control will be managed well under AS4708).
"Indeed, as a result of compromises reached largely between the European Union, the United States, and developing countries, much of ISO14001 reads as a lowest common denominator approach - and one which American corporate interests were particularly influential in shaping."(p.9).
"In our view, it would be a serious error to base a regulatory flexibility program around ISO14001 alone, because of its substantial deficiencies noted earlier. Not least, ISO certification does not guarantee improved environmental outcomes (as distinct from processes) and as a result, it will be impossible to distinguish between a good and a desultory environmental performer on the basis of their ISO14001 certification alone." (p.18).
A similar view has been put to me by a PhD student correspondent in a position to know, who wrote in an email to me on 23 July 2003: "regarding ISO14001, it isn't really about environmental best practice, it is about being able to keep track of your environmental activities e.g. if you spill 10000L of chemical waste into a waterway, it is because you planned to, not because it was an accident. Standards Australia's own flier says "More about saving your business than saving the environment".
The most interesting observation to make here is the mind set of the forestry protagonists. Rather than modifying behaviour to include the disenfranchised community in the forestry decision making process, or indeed to listen to community concerns, great effort is made to say "shut up, we are right, you are wrong; see, we are adhering to the agreement/standard".
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