By James Thomson
Geoff Wilson is furious. For the second year running, the founder of the Wilson Asset Management finds himself fighting against the prospect of virtual annual general meetings becoming a permanent part of Australian capital markets.
“I’m appalled that this could happen in a democratic society – the rights of shareholders are going to be stripped from them. For me, this is a very, very sad day for the capital markets in Australia.”
While virtual-only meetings have provided a good way of ensuring the governance wheels of the listed market could keep turning over the past 18 months of the pandemic, and bigger companies have worked hard to make this format as efficient as possible, the inherent problems with the format remain.
They’re more stilted than in-person AGMs. They’re less interactive than in-person AGMs. And most of all they are less transparent than in-person AGMs, where the business of the meeting plays out under the gaze of investors – and not at the other end of the video link.
Wilson is among a growing number of fund managers and proxy advisers urging investors to vote down resolutions that have or will be put by ASX companies asking shareholders to give them the ability to hold virtual-only AGMs well beyond the pandemic.
The resolutions follow an announcement by Treasurer Josh Frydenberg that the government would extend temporary measures allowing virtual-only AGMs during the pandemic and then introduce legislation to allow hybrid AGMs, where an in-person meeting is complemented by online broadcast.
But the draft legislation controversially allows for companies to have online-only meetings if it is “expressly permitted by the entity’s constitution”.
This has led to more than 20 ASX firms putting resolutions to their AGMs seeking to change their constitutions to allow virtual meetings. Such resolutions require 75 per cent support.
Wilson says he is perplexed as to why the government left the door open to virtual-only meetings. “If one gets up, that’s one too many.”
Wilson’s views are shared by several other fund managers and advisers, including Sandon Capital’s Gabriel Radzyminski, Ownership Matters and The Australian Council of Superannuation Investors.
Merlon Capital recently voted against a virtual meeting resolution at health insurer NIB, which was defeated with a 32 per cent vote against.
Rebecca El-Khoury, manager of ESG and sustainability at the contrarian small cap investor, says the fund was pleased to see Qantas and Bendigo & Adelaide Bank withdraw their virtual AGM resolutions after shareholder feedback.
For Merlon, the quality of an AGM and the ability for investors of all shapes and sizes is diminished by the format of virtual meetings.
“This is their one opportunity to really face those directors and to be able to ask them some maybe uncomfortable, but I think really important questions.”
Merlon portfolio manager Neil Margolis says he has growing governance concerns about the way boards handle acquisitions and incentives also need to be ventilated in a public forum. “Directors should be accountable in those public settings.”
It’s hard not to see the government’s reform here as yet another example of chipping away at shareholder rights, following the changes to the continuous disclosure regime introduced earlier this year.
Once again, the director’s club has one out over investors. And while the vast majority of companies will do the right thing on both disclosure and hybrid AGMs, there will be some directors who seek to use these changes to make it harder for investors to hold firms accountable.
As Sandon’s Gabriel Radzyminski says, surely being required to turn up once a year to meet shareholders face-to-face is an acceptable trade-off for companies being able to tap public capital markets.
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