ASX 2001 AGM transcript

Stephen Mayne: Chairman, Stephen Mayne, I'm a proxy holder. Just two quick questions, the first one is just on the regulatory environment, do you see the...

Chairman Maurice Newman: Does this bear on the financial reports?

Stephen Mayne: I think it could affect the results, so you don't want general questions on this resolution?

Maurice Newman: No, we were dealing with a specific agenda item, financial reports.

Stephen Mayne: Okay, so when will there be general questions?

Maurice Newman: There will be an opportunity for general questions later.

Stephen Mayne: Right, after all the resolutions?

Maurice Newman: No, no, there will be the ...

Stephen Mayne: Because most companies do it on the financial accounts, that's all.

Maurice Newman: If the question bears on the financial results and the report, I'm happy to accept the question, if it's a general matter relating to regulation or something else, there will be an opportunity I think around Item 3 where this may ...

Stephen Mayne: All right, I'll ask one. Do you think there'll be any impact on the financial reports that the ASX will record in the future if there is a change of government? You've got we're very dependant on the regulatory environment and I think the Labor Party's policy does seem a bit more hard hitting in terms of regulation and what they're going to require, is there any chance do you think that our financial results could suffer if we haven't got the friendly government in Canberra that we've got at the moment.

Maurice Newman: Well as I mentioned in my formal remarks, we have been fortunate, and I think Australia is fortunate, to have broad bi-partisan support for the sorts of reforms that have taken place which not only are of benefit to ASX but are also of benefit to Australian companies in the Australian market. So I don't see this as being a political issue, I think this is sensible policy making good economics and that is understood by both parties.

Stephen Mayne: Okay, thanks Chairman. Just a question on the regulatory side, I'd like to quote from Listing Rule 10.11 which states that a “listed entity must not issue equity securities to a Director without the approval of the holders of ordinary securities”. Now during the year the ASX granted a waiver to Santos, which allowed them to issue their new CEO, John Ellis Flint, with the equivalent of $8 million worth of free shares, which was the largest single sign on in Australian corporate history, and you granted a waiver so that it didn't go to shareholders.

So it was a direct breach of the listing rules and it wasn't a small thing. It was the biggest ever sign on fee. I've got a bit of a concern that the ASX is letting its regulatory role slip and is less vigilant and I think this is probably the worst example of that during the year. I mean the listing rules say you can't issue shares to Directors without approval of the shareholders, and we've had an $8 million freebie here which you guys have specifically approved, why did you do that and are we going to see any more such examples, because now any company can turn around and issue $20 million worth of free shares to a Director because you've set a terrible precedent in this example.

Maurice Newman: Yes, I'll ask the Managing Director to answer that.

Richard Humphry: If I could ask a question if I may Mr Chairman, Mr Mayne, you're actually incorrect, we did not issue a waiver. The issue is only appropriate if a company issues shares to an existing Director, if they do issues shares to an existing Director, then they must go to shareholders and they in this instance, this individual was not a Director. So there was no waiver issued. I think you made this comment in the past and you've also suggested that it was a secret waiver. All of our waivers are on the public record and you would be able to test that. If you have an issue over the question of how Santos has behaved, I suggest you do take that up with the Australian Securities Investment Commission.

Maurice Newman: Or with Santos.

Stephen Mayne: I think my point is we did take it up with Santos and Santos said well the Stock Exchange let us do it because they did a slight of hand by saying well technically he didn't join the Board until December 13, we issued the shares on December 10, or whatever, therefore we didn't have to do it. But I mean clearly it was just an absolute slight of hand and a triviality, they'd announced that this guy was joining the Board and the issue of $8 million worth of free shares three days before he formally joins, and you let them do that and I would say this is a very sneaky tactic and it's exactly the sort of thing which you should be stamping out and not hand passing onto ASIC or the company, because it's in the listing rules and they've used an absolute triviality about there was a three day gap before he joined the Board. That means that any company who wants to issue $20 million worth of free shares can turn around and say well he joined the Board on Tuesday, but we issued the shares on Monday. I mean surely you see that that's just not an acceptable practice.

Richard Humphry: My point Mr Mayne, is that you were suggesting that we'd issued a secret waiver, we had not. Now on that issue of whether the company has behaved, you're looking for the Australian Stock Exchange to suitably supervise listed companies in areas that fall at the moment outside of our regulatory framework. I understand the point you're raising but – and it's a matter which in fact we have taken up with and discussed with the Australian Securities Investment Commission, but I'm suggesting that you, if you do have a complaint, should also take it up with them.

Maurice Newman: And finally, I invite Stephen Mayne to address the meeting.

Stephen Mayne: Thanks Chairman. I appreciate the opportunity. For those who weren't in Sydney last year, I stood for the Board last year and got I think about 12% of the vote compared with the incumbents getting in the usual high 90s, so I'm not very confident but I'm standing basically on a platform that the ASX needs to look after its customers better and also be more vigilant on the regulatory corporate governance side.

Now I guess you're all shareholders in one what's probably the most lucrative and profitable monopoly going in Australia. The original investors who put $25,000 in, such as Clive and the 606 other brokers, now hold an investment worth about $1.5 million, so it's been a 70 or 80 fold return. It's been a magnificent return. Now that's come from somewhere and it's come from the customers basically, and as a small shareholder who has held more than a 100 stocks over the years, every time I buy a share, the ASX clicks a ticket and makes a very tidy profit.

And I guess I'm very strongly of the view that the ASX needs to provide more information to the markets, have a fully informed market. That we shouldn't have the sale of market data being a profit for the ASX. So when I was an HIH and a One-Tel shareholder, I'd love to have been able to go back and look at the Stock Exchange announcements they've made over the years, but to get access to that material, you have to pay the ASX per announcement. I think that's unfair, and I think if you're a QBE shareholder and you're watching the share price plunge after September 11, it's unfair if you're sitting at home that you've got to wait 20 minutes, or you've got to pay for the right to get that information in a timely manner.

So Maurice has mentioned that the sale of information to retail investors is less than 1% of the $33 million that they raise from market data sales each year, so it's a very small revenue figure. So I guess my platform is not going to send the ASX share price tumbling if you provide ten years' worth of free company announcements to have a full informed market, and you make announcements live, not without a 20 minute delay.

I guess the other arm to why I'm standing is the regulatory side. I've already mentioned Santos, that the ASX as a profit making monopoly, has dropped the ball on its regulatory regime. It's letting companies get away with too much. I don't think BHP Billeton should have been able to get away with not having an independent expert's report on their merger. The same with the Brambles GKN deal, and I just think that if they had provided, forced the companies to do that, not let Santos issue $8 million worth of free shares, it would be better for the market, but they're not focused on that.

When the tech wreck happened in 99/2000, the number of referrals from the ASX to ASIC was only 17 that year. It was the lowest in five years because they're so focused on their money making activities.

I guess in terms of my background, I had ten years as a business journalist working with the Herald Sun as Business Editor, the Daily Telegraph in Sydney as Business Editor, worked on their Fin Review doing their rear window gossip column for a while, so I have a lot of experience dealing with business. The last two years I've been a shareholder activist and an internet publisher, and I've attended about 200 meetings as an activist trying to ask questions, trying to help create a culture of shareholder pressure, and I think I've got quite a good body of information and knowledge now about corporate governance, who is on which Board, and corporate democracy, because I've also run for 10 boards unsuccessfully, as I'm sure will be the case today.

But you learn a lot about things, like corporate democracy is a very tilted playing field. Why should the ASX Board tell you the shareholders, that there's no vacancy for me on the Board today? Their Constitution says that they can have a maximum of 15 Directors, yet they've come out and said oh no we're happy with our current level of nine or ten. That should be a decision for you, the shareholder, to decide. For me to get on the Board today, to break into the club, I'm going to have to get 99% of the vote to knock off the poorest performer of the incumbents who might get 98.9%. Now that is patently unfair and it's an affront to shareholders' rights, and that's why I'm asking for a vote for me today will send them a message about corporate democracy.

Now I would normally recommend a vote against a certain Director, but the ASX Board is actually a very good performing Board and none of the people standing today actually have any skeletons in the closet from other directorships, so I'm not going to recommend against anyone, but I just ask that you abstain against one of them and vote for me, just to get a message to the Board about 1) the way corporate elections are conducted; 2) that you want more information out in a timely manner to the market; and 3) that you want a greater emphasis on the regulatory and governance roles of the ASX rather than just focusing on being a full profit monopoly that's made a 90 fold return to its original investors. Thanks very much.

Maurice Newman: Thank you Mr Mayne. I hesitate to say anything in relation to some of the comments you made, but silence means consent and I think there does need to be some clarification on the one side of the issue that you raised. As far as ASX charges are concerned, we charge for hard copies of information at 44c a page, as I understand it. If you want to access it through the website, and there are some 1,000 Australian companies that are linked to our website from which information can be gathered, there are also many other avenues where information is freely available, such as stockbrokers and so on, so I think we need to get the other side of that story and I can say to you that as someone who was a practising security analyst for something like 20 years of my life, it's very rare that you need to go back for ten years in search of information. What ASX does make freely available is information for three years, and that is in fact increasing as the bank increases.

The other point which I think is important to address is this issue that this is virtually an unregulated monopoly. The fact of the matter is, and I just came back from an International Stock Exchange Federation meeting in Madrid where the world stock exchanges met, to some extent in an atmosphere of tension because it wasn't quite clear whether or not we were going to be ourselves the target for some attack. But I have to say to you, one of the most important messages which I took away from that is that all stock exchanges are in competition with one another in some form or another, not necessarily explicitly from another exchange, but from the companies that list on those exchanges which are freely able to move to other markets as we have seen. And one of the important messages that came from Lester Thurrow, who is a world recognised economist and who I think was a senior adviser to one of the US administrations, was that the challenge for global markets isn't so much competition, is that it will over time simply ignore you and I think that to be ignored as a market or as a country is a bigger threat than even competition.

And that's what we are fighting against, it is why we continue to keep our prices down. For your information Mr Mayne, last year when you spoke to us about making information available to shareholders, we had a price of 70c a page, that has now been reduced to 44c, it is simply a cost recovery and it would be very marginal at best at 44c. It's not just putting the paper through the machine, it's actually having people out there who are able to do that.

So I just wanted to set the record straight on a couple of issues which I thought received only one side of an argument and to put plainly the facts.

Now in relation to the resolution dealing with the re-election of Mike Shepherd, I advise that the total number of valid proxy votes exercisable in respect of this item of business is 19,452,631. Of these, 13,674,431 have been directed to vote for the resolution, 244,820 against, 933,329 are to abstain and 4,600,051 allow the proxy to exercise his or her discretion. Now do I have a proposer for this resolution?

Thank you. Thank you.

Female: Well maybe I'm not speaking into it, maybe it's my fault. Okay, now with regard to Directors, I think there are too many doing too little and getting too much and I noticed on page, I think it was 31, or maybe 34, it said the Board had to pop along for three years and then they get their fee plus one year as well extra. If the Board member is there for six years, he gets two spare free years of salary, which is very nice for them, but I do suggest that it is not very good for the shareholders' hip pocket nerve, which is suffering madly at the moment, very painful. Now I think perhaps it would be advisable to have people like Mr Mayne, who are articulate, clearly interested in the shareholders' welfare and many of us are unfortunately self-funded retirees and I feel many, much of the money which the companies gather are given and distributed freely amongst the Directors and senior staff.

Now with regard to the number, I've noticed in my smaller Boards, I'm not on a Board but I do go to a lot of meetings, that the ones where there are five or seven, the shareholders get more consideration, greater money, a few bonuses here and there and special dividends right, left and centre. I haven't noticed any from the major Boards.

Now with regard – back to the number, I would suggest that five would be enough, possibly information and technology, securities, company law, accountant, Mr Kennedy seems to be doing extremely well, congratulations Mr Kennedy, and a Chairman, our Chairman seems to be more than adequate, he's quite charming. However, however he gets a huge salary so that's the downside. Now ...

Maurice Newman: I assure you I'd be just as charming with a smaller salary.

Female: But we would consider it a good idea, an excellent – so those in favour? Now with regard to one of Mr Mayne's comments, that the cost of information is high, it is, and the market by the way is very jittery. I belong to several little shareholders' groups and all of us are extremely jittery about the reception of information given to the small shareholder as against the institutions. I would like to comment that institutions, while they're doing a wonderful job, I do think they should bear in mind that there is a certain amount of discontent amongst small shareholders. Now ...

Maurice Newman: Is this going to the election of the four candidates?

Female: This is, this is ...

Maurice Newman: Because there is another item on the agenda where this may be more relevant, which is the question of the cap, or Directors' fees.

Female: I think the cap is most important, well you have to – if they're all elected, what – it's a foregone conclusion, it's a railroaded item, so you have to mention what you wish to mention now before they're elected I would suggest.

So I do think there is – it would be a good idea to have a cap and I do think it's time that there were new blood and the next thing which we discussed at our little meetings is there are too many Directors with too many Boards, some of them have to be in two places at once, it's not quite possible even with our excellent transport system. I do urge people, all of us, to check up the number of the Boards that your Directors are on and I suggest there should be a cap on Boards. No more than three would be I think adequate, and thank you for listening, but I do urge you to think about it.

Maurice Newman: Thank you. This Board, as you will be aware, has sunk, has shrunk considerably since the time of the mutual when we had 15 members on our Board, and in fact since we became a public company, we have become, we've gone from 15 as the mutual to nine. We believe that is a good sized Board. The odd number helps to keep the balance right in terms of if we ever get to a vote, which we generally don't because we argue things to the point where there is unanimous decision, but I think that you would be incorrect to argue that from the ASX point of view, shareholders haven't done well, either by way of special dividends, capital repayments. Now I acknowledge it depends on when you became a shareholder, but certainly I don't think one could argue that the size of the Board at nine is top heavy or that it is standing in the way of shareholder benefits.

But as I said, I think in a way what you've said, and I understand the logic as to why you wanted to raise it now, I think that discussion is perhaps best saved for the next item, which is the question of Directors' fees, and the cap.

So we have a proposer and a seconder for Mr Shepherd. In relation to the resolution dealing with the re-election of Clive Batrouney, and I'd ask you in relation to each of them that, the election of Directors, if we could now confine discussion to each of those Directors, in relation to the resolution dealing with the re-election of Clive Batrouney, I'm advised that the total number of valid proxy votes exercisable in respect of this item is 19,535,283. Of these, 13,220,319 have been directed to vote for the resolution, 609,848 against, 1,097,070 are to abstain and 4,608,046 allow the proxy to exercise his or her discretion.

Do I have a proposer for this resolution? Thank you. Do I have a seconder? Thank you. Is there any discussion on this motion?

In relation to the, sorry, in relation to – could those in favour please raise, sorry I move on.

In relation to the resolution dealing with the re-election of Jim Kennedy I advise that the total number of valid proxy votes exercisable in respect of this item of business is 19,538,127. Of these, 13,188,767 have been directed to vote for the resolution, 697,261 against, 1,012,135 are to abstain and 4,639,964 allow the proxy to exercise his or her discretion.

Do I have a proposer for this resolution? Thank you. A seconder? Thank you. Is there any discussion on this resolution?

In relation to the resolution dealing with the election of Mr Stephen Mayne I advise that the total number of valid proxy votes exercisable in respect of this item of business is 18,954,358. Of these, 1,530,130 have been directed to vote for the resolution, 12,780,708 against, 272,450 are to abstain and 4,371,070 allow the proxy to exercise his or her discretion.
Do I have a proposer for this resolution? Thank you. Is there a seconder? Thank you. Is there any discussion on this resolution? On this motion?

Stephen Mayne: Chairman, just one point. With the proxies, there's about four point – well for me there's 4.37, for the others about 4.6, which are open. Can you please break down between those that are in your back pocket as undirected proxies, and those that are like ones that I hold, which are here on the floor of the meeting, and given that I'm 13%, 14% again, I'd like you to consider following the precedent set by the National Australia Bank last year where they committed not to vote the undirected proxies that were held by the Chairman as what they said was a matter of good corporate governance because about one third of the people who sent the reply paid envelopes back don't fill in any name and the default mechanism goes to the Chairman, and that is one thing that is a further tilting of the playing field in corporate elections. So I'm just, I guess, begging you not to send me down into worse single digit figures with all those undirected proxies in your back pocket.

Maurice Newman: Thank you Mr Mayne. I don't have the answer to your question, but the registrar will. Well as explained in the Notice of Meeting, there are four candidates and only three vacancies.

Stephen Mayne: Chairman, are the retirement payouts, the three years, six years, nine years, are they included in the non-executive Director fees, so that the proposal that was approved in 1998, three days after you listed, where you created a retirement scheme where if you'd served nine years on the Board you got a three year payout, do those payouts fall within the $900,000 because clearly if they do you wouldn't be able to make those payouts at the moment because you're currently paying $780,000 odd, and that's just in ongoing Directors' fees?

Maurice Newman: Well these fees have not been paid and they of course only become actionable in the event of Directors serving three years.

Stephen Mayne: That's what I'm saying, but if someone – say Clive's been on the Board since 1990, if he retires tomorrow, he gets a three year payout.

Maurice Newman: Yes.

Stephen Mayne: Which is $300,000, but that would blow over your current –

Maurice Newman: No, no, it's one year.

Stephen Mayne: Well it's three years payout for more than nine years of service.

Maurice Newman: No, no, but it didn't come into effect until the shareholders approved it in 1998.

Stephen Mayne: Right, so it's since then, okay. Well my question remains the same, so does it fall within Directors' fees, so if Clive goes tomorrow and gets a one year payout, does that fall within the shareholder approved Directors' fees?

Maurice Newman: Yes, it will.

Stephen Mayne: Right, so if we don't approve this deal today, you can't meet your obligations in terms of retirement benefits to the existing Board? So that's probably the real motivation rather than possibilities of mergers with New Zealand.

Maurice Newman: No, I don't think that necessarily follows, I think we're below.

Stephen Mayne: You currently...

Maurice Newman: That isn't the reason why we're asking for the increase in the cap.

Stephen Mayne: Right, all I'm saying is you can't meet your retirement obligations at the moment within the existing –

Maurice Newman: I'm not sure that's right is it? We'll have to lift the limit not this year, but in future years if everybody was to retire all at the one time.

Stephen Mayne: Right, but you've just said that you're also planning to increase the annual payments to Directors.

Maurice Newman: I didn't say that.

Stephen Mayne: In 2002, you're reviewing it in 2002.

Maurice Newman: I didn't say we had agreed to increase it, I said we were reviewing it.

Stephen Mayne: Right, that means you'll be reviewing it with a possibility of going down.

Maurice Newman: Well I notice that some companies actually have reduced –

Stephen Mayne: Well Channel 7 on Friday did a magnificent example and all announced a 20% cut in Board fees, which was terrific.

Maurice Newman: But I think the important thing Mr Mayne is for you to understand that these are not changes in the compensation to Directors that we take unilaterally. We seek external professional advice from a number of advisers and based on that advice and in comparison to the peer group with whom we compare ourselves and with other companies, we want to make sure, as we do with executive salaries, that we are in line with existing practice. So we have no preconceived views as to whether they will increase, that will be dependent upon the independent advice we receive.

Stephen Mayne: Okay, my last point is I heard Steven Conroy, the main who might soon be our Minister, speaking in Sydney a couple of months ago and he said he could not for the life of him work out why non-executive Directors get superannuation, and the Fin Review, on the back page last week had a very cogently argued piece that non-executive Directors should not have what effectively is a good behaviour bond with a balloon payment sitting right at the end , if they behave themselves and stay on the Board. A non-executive Director, if he's going, he or she is going to perform their watchdog role appropriately, needs to get all of their cash on a week to month basis and not have any incentive not to rock the boat and to hang around. They need to have a clear run at resigning on a matter of principle.

So I'm objecting to this whole existence of a retirement scheme in the first place, and I'm saying it would be appropriate in the future if you could have all benefits paid to non-executive Directors paid in the year that they accrue with no balloon payments at the end, because Steven Conroy is right when he says that non-executive Directors should not get superannuation and it reduces your ability to perform that watchdog role and to resign on points of principle if necessary.

Maurice Newman: That's certainly a point of view. I would make the point that ASX shareholders approved this scheme, and in addition to that, ASX Directors do not receive or participate in any form of options or share entitlement, which many other companies do which supplement the actual cash payment of Directors' fees. I've just been advised on reference to the Constitution, that the retirement fees are not included in the cap because they were the subject of separate approval. So it's whatever happens in relation to this particular motion will not affect the payment of those retirement fees. Is there any further discussion?

If not, I put the motion to approve the increase in cap on non-executive Directors' fees.

Those in favour of the resolution please raise your yellow card. Those against? This is on behalf of the proxies. Those against. Thank you. I declare the motion carried.
Here is an edited transcript of our exchanges at the 2001 ASX AGM.

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Ladies and gentlemen, the time is 1.50 and the meeting is now reconvened. If I could have your attention, I think everybody is now seated, I will now announce the results of the poll in relation to resolutions 5 and 6, but before I do that, I would like to address the point made by Mr Mayne in respect of abstaining to vote the Chairman's open proxies regarding the resolution to elect Mr Mayne as a Director.

The total number of open proxies given to me either as Chairman of the meeting or Chairman of ASX were 3,830,510. Mr Mayne has suggested that in the interests of corporate governance, I should abstain from casting these votes rather than vote them against the resolution. In the Notice of Meeting, it is stated that I would exercise my discretion over open proxies to vote in favour of all the resolutions, except the resolution dealing with the election of Mr Mayne, which I stated that I would vote against. I feel that to change that position now and not vote the open proxies would in fact reflect poorly on ASX's corporate governance and the trust which those shareholders who asked me to vote as their proxy, have placed in me. Accordingly, I have cast these votes against Mr Mayne as was stated in the Notice of Meeting.

So in relation to resolution 5, the election of Directors, I advise as follows; in relation to resolution 5A, the re-election of Mr Mike Shepherd, the results of the poll are for the resolution 21,094,903 votes, representing 98.82% of the votes cast, against the resolution 250,870, representing 1.18% of the votes cast, abstentions 933,329 votes.

In relation to resolution 5B, the re-election of Mr Clive Batrouney, the results of the poll are for the resolution 20,645,056, representing 97.12% of the votes cast, against the resolution 612,143 votes, representing 2.88% of the votes cast, abstain the resolution 1,097,070 votes.

In relation to resolution 5C, the re-election of Mr Jim Kennedy, the results of the poll are for the resolution 20,650,877 votes, representing 96.71% of the votes cast, against the resolution 702,001 votes, representing 3.29% of the votes cast, abstain the resolution 1,012,135 votes.

In relation to resolution 5D, the re-election of Mr Stephen Mayne, the results of the poll are for the resolution 1,549,219 votes, representing 7.28% of the votes cast, against the resolution 19,717,784 votes , representing 92.72% of the votes cast, abstain the resolution 272,450 votes.

The number of votes for the resolution in items 5A, B and C exceeded the number of votes against the resolution and accordingly the Directors to be re-elected to the Board are Mr Mike Shepherd, Mr Clive Batrouney and Mr Jim Kennedy. Congratulations to each of Mr Shepherd, Batrouney and Kennedy.

I will now announce the result of the poll in relation to Item 6. In relation to resolution 6, amendment of the Company's Constitution, the results of the poll are; for the resolution 20,439,526 votes, representing 99.19% of the votes cast. Against the resolution, 174,925 votes, representing 0.81% of the votes cast. Abstain the resolution, 1,190,377 votes. I therefore declare the resolution carried.

And ladies and gentlemen, it's now just before I close the meeting, an opportunity to say if there is any other business to be brought before this meeting as permitted by the Constitution, or if shareholders have any other questions they wish to ask, please do so now.

There being no further business ladies and gentlemen, I declare this Annual General Meeting of Australian Stock Exchange Limited closed and I want to thank you all for your attendance today. Thank you.

Go here for a full chronological list of edited AGM transcripts available from the past decade of shareholder activism.

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