Our liveliest edition yet

May 9, 2008

Dear Mayne Reporters,

today we've got what I reckon is out best video to date asking the question: what's wrong with speaking out against Chinese government takeover?

We've also got plenty on a major push to change the way public company AGMs work after a roundtable that involved sitting in a room with ASIC chair Tony D'Aloisio, incoming ASX chair David Gonski and a range of other heavies.

But don't think we're cuddling up to the authorities. We've got another story today suggesting D'Aloisio shouldn't be leading ASIC and we've named the man who should.

Then there's the extraordinary story about the personal tax audits which the CEOs of our two biggest beer companies copped straight after running a $6 million campaign against the Howard Government. Did Peter Costello have anything to do with this?

Click through for the full edition which also includes all our latest share trades, 10 new Rich Listers, plus this list tracking all privatisations in Australia over the past 20 years.

Do ya best, Stephen Mayne

Reforming the public company AGM

Australia's biggest governance professional association, Chartered Secretaries Australia, and law firm Blake Dawson are driving a process which will hopefully inject some new life and relevance into the public company AGM.

Earlier this year they convened a roundtable of stakeholders, including yours truly, to produce this discussion paper released earlier today. Most of the key constituents - regulators, fund managers, lawyers, academics, company secretaries, media and the token shareholder activist - were in the room as this list of participants demonstrates:

• Prof Elizabeth Boros: Sir Keith Aikin Chair of Company Law, Monash University
• Tony D'Aloisio: ASIC chairman
* David Frecker: Blake Dawson partner.
• Belinda Gibson: ASIC Commissioner
• David Gonski: incoming ASX chairman and busiest director in Sydney
• Justin Grogan: GM investor and corporate affairs for Leighton Holdings
• Elizabeth Johnstone: the Blake Dawson partner who advised the NAB board during Cathy Walter battle
• Anne Keating: professional director and sister of Paul
• Stephen Mayne: token shareholder activist
• Jane McAloon: BHP Billiton company secretary
• Peter Morgan: Australia's most out-spoken fund manager
• David Potts: Personal Finance editor of The Sun-Herald
• Barbara Ward: professional director who walked from Allco Finance Group in January
• David White: Zentricity Pty Limited

The biggest change is the move to delay the closure of voting until two weeks after the AGM, thereby removing all the formalities and making it more of an information meeting.

If this system was in place at the recent Alumina AGM (see full account here) there's no way I'd have finished up with a miserable 6% of the vote after winning the debate in front of those shareholders who bothered to turn up.

At the moment an AGM is the equivalent of John Howard and Kevin Rudd having last year's television debate on the Monday after the election because the vast majority of shareholders vote by proxy and the deadline is 48 hours before the meeting begins.

The directors are keen on the change because it will mean less pressure to pass formal resolutions on the day, but they will also have to be more on their toes if the polls remain open because a shock profit warning or a belligerent performance that leads to some bad press could increase the against vote on their own re-election.

The discussion paper is non-commital on this issue, but I reckon it is vital that shareholders be given a progress report on the voting at the AGM, so that those present can be alerted to any controversial resolutions. It would therefore be better to close the polls 48 hours after the AGM.

Tumbling attendance numbers

The discussion paper has some very interesting figures on falling attendance numbers. It is staggering that 41% of the ASX200 companies failed to attract more than 300 shareholders to their 2007 AGM and only 11.1% of the top 300 companies attracted more than 300 shareholders.

At one level we're all to blame for this. The companies don't put on a good enough show and us shareholders don't collectively generate enough buzz and debate. Truth be known, there are a lot of lonely people at AGMs, many of whom are eccentric and some who can fairly be characterised as nutters.

Even the press don't show up anymore. Axa Asia Pacific is a $10 billion company with several hundred thousand shareholders and only AAP turned up to see one of the biggest Melbourne-based companies in action last month.

The ASA's position that AGMs should be held during business hours so their largely retired members can attend is now becoming part of the problem. Lend Lease and Transurban are two companies that have demonstrated far bigger turnouts for evening AGMs in the past.

Increasing shareholder resolutions

The discussion paper is also silent on the single measure that I reckon would more seriously energise AGMs - lowering the barrier to shareholder resolutions.

At the moment you need 5% or 100 signatures from shareholders to put up a resolution, which is practically impossible for anyone except unions, green groups and the ASA.

This explains why we have so few shareholder resolutions, yet the Americans have hundreds every years because any shareholder who has owned more than $US2000 worth of shares for more than 12 months can put one up.

That's what I did with News Corp last year and $5 billion worth of stock backed my resolution to end Rupert Murdoch's gerrymander.

Anyway, today's discussion paper is a good starting point and we'll see where it takes us.

Did Costello sick the tax man onto the beer barons?

The Media Entertainment & Arts Alliance puts on a fascinating conference each year about public affairs which attracts a cracking line-up of speakers and a surprisingly small number of attendees.

There was a series of interesting stories that came out of this year's two day conference in Sydney but the most amazing was the suggestion that Peter Costello was able to influence who the ATO audited and punish people he didn't like.

This all came to light during a session by well-known lobbyist Gabriel McDowell, who currently runs his own PR agency Res Publica, but was previously a major shareholder in CPR and has looked after beer giant Lion Nathan for about 15 years.

McDowell gave a fascinating presentation about how he ran the successful campaign to get federal legislation for stem cell research with nothing more than a $6000 budget.

He was asked afterwards whether the environment had got more difficult for lobbyists in Canberra since the change of government and he said not particularly, although his own dealings were much better now that Peter Costello wasn't around.

This was a reference to the fact that he ran a $6 million campaign for Lion Nathan and Foster's that successfully pressured the Howard Government into backing down on a beer excise increase when the GST was introduced.

I then asked him to expand on this Costello vendetta and he made the ironic observation in front of 50 spindoctors that it was a complete coincidence that he, Foster's CEO Ted Kunkel and Lion Nathan CEO Gordon Cairns were all hit with personal tax audits shortly after the beer excise backflip.


ASIC comes through with a strategic review

Federal corporate governance minister Nick Sherry thinks ASIC is doing a "solid" job in difficult circumstances, when many others believe the place needs a serious shake-up.

ASIC chairman Tony D'Aloisio is certainly paddling hard to prove that he's a change agent after today revealing the outcome of his strategic review, which you can read here.

Given that he was appointed a year ago, D'Aloisio hasn't exactly been setting the place on fire, but today the corporate plod has declared the new ASIC will be one that:

  • better understands the markets it regulates;
  • is more forward-looking in examining issues and assessing systemic risks;
  • better articulates why it has chosen to intervene and the behavioural changes it wants the market to make; and
  • has a clearer set of priorities (principal priorities being retail investors and insider trading, market manipulation and disclosure).
Is this an admission that ASIC doesn't understand the market, is backward looking, doesn't explain itself properly and has been really slack in areas such as protecting retail investors, insider trading, market manipulation and disclosure.

Hardly what you'd call "solid".

A director of one of our biggest financial institutions told me the other day that D'Aloisio is clearly conflicted in this whole debate about the ASX, given that he was the CEO of the place when many of these market practices deteriorated. If ASIC doesn't seem to know how to regulate the market, why is it headed by a bloke who ran the market when the rules were too slack?

There's a far better chairman of ASIC out there. His name is Dean Paatsch, he runs governance advisory outfit Risk Metrics in the Asia Pacific and produced this cracking read on executive pay rorts for The Age last Saturday.

Recent Mayne Report share trades

May 5

Metex Resources: sold 2000 at 30c
Macquarie Bank: sold 9 at $66.12
Compass Resources: sold 150 at $2.89

May 2
ABB Grain: sold 50 at $9.89
Brockman Resources: sold 200 at $2.45
Compass Resources: sold 200 at $2.937
Carnarvon Petroleum: sold 800 at 65.5c
Sydney Gas: sold 1500 at 35c
Powerlan: bought 1600 at 15c
Innamincka Petroleum: sold 600 at 70c

May 1

NKWE Platinum: bought 715 at 70c
Powerlan: bought 220 at 15c

April 30

NSX Limited: bought 2,174 at 23c

April 29

Hyro Limited: bought 18,519 at 2.7c
Origin Energy: sold 43 at $10.45

Remaining AGMs this season

The mini-AGM season for companies with December 31 balance dates is now more than half finished and the three upcoming meetings that I'm most looking forward to are all in Sydney: Macquarie Airports, Westfield and Babcock & Brown.

Westfield is always good sport and it was nice to resume relations with Frank Lowy last year after a five year break. I've been to all the Babcock meetings so far but this year's should be particularly good and Macquarie Airports on May 22 will be the first big Millionaire Factory fund AGM, so we'll be giving all the related party transactions and conflicts of interest a really good work out.

Anyway, here's the full list of other companies in the 680-strong share portfolio which are having their AGMs in May:

Straits Ltd AGM
May 8, 11am, Perth

Fermiscan Holdings Ltd
May 9, 10:30am, Sydney

HeartWare Ltd
May 9, 10:30am, Sydney

Coca Cola Amatil
May 15, 10am, City Recital Hall, Sydney

May 15, 10am State Theatre, Sydney

Adelaide Brighton Group
May 15, 11am, Adelaide

May 15, 2pm, Sheraton on the Park, Sydney

Pacifica Ltd
May 16, 11am, The Como Melbourne, 630 Chapel Street, South Yarra

Bell Financial Group
May 16, 11am, 101 Collins Street, Melbourne

STW Group Ltd
May 19, 10:30am, Sussex Street, Sydney

Hutchison Telecom
May 19, 10am, St. Leonards, NSW

Melbourne IT AGM
May 20, 11am, The Westin, Melbourne

May 21, 9am, Papua New Guinea

Portman Limited
May 21, 10:30am, Perth

Calliden Group AGM
May 22, 9am, North Sydney

May 22, 2pm, Perth

Macquarie Airports
May 22, Sydney

May 23, 10am, The Westin Sydney, Sydney

ThinkSmart AGM
May 23, 3pm Perth

Savcor AGM
May 23, 3pm Perth

May 23, 11am, Westin Hotel, Sydney

Tamaya Resources Ltd
May 28, 11am, NSW Leagues Club, NSW

Austar AGM
May 29, 10am, The Westin, Sydney

Reckon AGM
May 29, 10am, Pyrmont, NSW

Everest Babcock & Brown
May 29, 9am, Sydney

Babcock & Brown AGM
May 31, Sydney