Dear Mayne Reporters, sorry to hit you with two editions in less than 24 hours but it has all been happening.
The Rio Tinto AGM was a cracker here in Brisbane but we'll get to that later as we've first got a big story in the wake of yesterday's historic WA News proxy fight.
The rorting that is Australian corporate elections has finally been laid bare after the WA News board distorted the figures presented at the start of yesterday's EGM and then saved their chairman's neck by using a huge chunk of undirected proxies.
As I've said on countless occasions, undirected proxies are the rort that sees the votes on any resolution that a participating shareholder fails to vote on default to the chairman.
It averages almost 10% on all resolutions, but yesterday was the first time it has been used to shape a board. The Rudd Government and ASIC need to have a thorough review into the WA News voting process and the solution is blindingly obvious – shareholders must tick a specific box on each resolution which says “chairman's discretion”, rather than it being the default option.
Most boards refuse to reveal proxies early in a meeting on the grounds that it might stifle debate. The exception is usually when the board is happy with the outcome, such as when Rupert Murdoch received overwhelming support for News Corp's move to Delaware in 2004 and opened the EGM by announcing the figures.
Rio Tinto didn't reveal any proxies at today's AGM in Brisbane but the WA News board flashed up some figures at the start of yesterday's EGM which purported to show that the incumbents were back and Kerry Stokes had been comfortably defeated.
I immediately asked chairman Peter Mansell to provide all the candidates with printed copies of the proxies, including a line which specifically broke out the undirected proxies with the chairman.
About half an hour later we got a 28-page document which did the same thing as those figures flashed on the screen – grouped the directed proxies with the undirected proxies held by the chairman. This is normally only done after a poll.
The document we got included a handwritten figure for the chairman's proxies in the category “Against/Open – board” which still hasn't been released to the ASX but was clearly material to the outcome.
In the case of the resolution to remove chairman Peter Mansell, the scrawled undirected proxies figure was 10.7 million and this turned out to be decisive.
As you can see from the correct pre-meeting proxies that were released to the market
this morning, Mansell went into the EGM in a cliff-hanger position as follows, although we've broken down the undirecteds based on the scrawled figure provided to candidates: Sack him:
65.61 millionSave him:
64.94 millionUndirected proxies:
11.56 million (10.7 million for chairman and 960,000 with others including Seven)
The final figures after the poll were as follows:Sack Mansell:
66.06 million (up only 450,000 votes on the proxies)Save Mansell:
77.37 million (up 12.43 million on the proxies, 10.7 million of which was undirected proxies)
It seems that Seven only picked up 450,000 votes against Mansell at the meeting, whereas 1.73 million neutral shares backed Mansell in the poll after the debate.
The rumour doing the rounds is that a couple of institutional shareholders have cut a late deal to get some much-needed board and strategy reform in exchange for saving a majority of the incumbents, although this doesn't include Mansell.
Whilst Stokes and his best friend Peter Gammell finished well off the pace, the big story surrounds the two Seven-backed independent challengers, Peter Abery and Margaret Seares.
The figures flashed up about Abery were as follows:Against/Open – Board:
73.9 million (including an undisclosed 16.3 million of undirected proxies)For/Open – Seven:
58.04 millionOpen – others:
The correct proxy figures for Avery that were released to the ASX
this morning and should have been flashed up on the screen were another line-ball outcome as follows:For:
This huge undirected tally included the 16.3 million that was with the chairman, meaning there was an additional 8.834 undirected proxies sitting in the room. This appears to have been an institutional investor who decided to play kingmaker whilst the meeting was actually in progress.
The final poll result on Abery was as follows:For:
66.098 million (up 8.42 million on the proxies)Against:
75.46 million (up a whopping 17.78 million, including 16.3 million undirected proxies)
In the end, Mansell fended off Avery with a net positive of 11.3 million shares versus a net negative of 9.36 million shares for Avery.
However, this apparent 20.66 million net advantage to Mansell over Avery relied on the application of 27 million undirected proxies, which is a first in Australian corporate elections.
The big institution sitting on the floor would have got Avery into positive territory, but for the use of these undirected proxies.
All of this will probably be academic because the whisper is that Mansell will quit in some sort of peace deal with the institutions that will see Peter Abery come on as the new chairman.
However, what happened in yesterday's voting will be talked about for a very long time and should be thoroughly investigated by regulators and participants alike.
Do ya best, Stephen Mayne
PS. Kerry Stokes rang a short while ago to colourfully set me straight on this editorial independence issue that we argued about yesterday. Very lively stuff.* The Mayne Report is a multi-media governance website published by
Stephen Mayne with occasional email editions. To unsubscribe from the
emails click here.