ASA leads as small shareholders tackle boards
January 15, 2008
This article by Graeme James appeared in The Courier Mail on March 28, 2001.
Companies that are poor profit performers this year have been warned armies of small shareholders are getting set to ask some tough questions.
National chairman of the Australian Shareholders' Association Ted Rofe says a list of poor performers is being compiled following the latest interim profit reporting season.
He says the pressure being put on companies to perform is a reflection of the increasing numbers of better educated small investors, many of whom are first-time shareholders.
"What particularly irks shareholders is that not only may there be inadequate dividend payments or a falling share price, but that they are often accompanied by increases in chairmen's salaries and executives' remuneration,'' Mr Rofe says.
The ASA's list this year will be based on a ``shareholder rate of return'' calculation which includes such issues as poor dividends or falling profits over a period of time. "We are currently worried about the increase in the number of profit downgrades,'' Mr Rofe says.
Stephen Mayne, a leading shareholder activist, says research shows that less than 1 per cent of all shareholders bother to attend annual meetings.
"They should always attend meetings and always ask questions. If not, they should vote their shares by proxy but never leave their proxies for the chairman to vote,'' Mr Mayne says.
Both the ASA and the Australian Securities and Investments Commission are also urging all shareholders to exercise their basic rights to attend annual meetings and vote their shares.
Shareholders also have the right to submit written questions to the boards of companies at annual meetings as well as asking questions from the floor of a meeting or writing to companies on issues affecting them as shareholders.
Mr Rofe says the ASA's 6000-plus membership, which has quadrupled in the last five years, has a vital role to play in changing company boards' entrenched attitudes. "I think by attending annual general meetings, asking questions and exercising voting rights that shareholders in the longer term can achieve change,'' he says.
The ASA, already successful in campaigns against companies such as Coles Myer, AMP and NRMA, has written to the APRA insurance industry regulator as well as ASIC to inquire about their roles in the downfall of the HIH insurance group.
Mr Rofe says small shareholders should not be discouraged by having resolutions defeated by a show of hands at annual meetings, only to be overturned later by the weight of proxy votes from the big shareholders. ``I don't think that matters. It is the influence being exerted on company boards in the long run that is the issue,'' he says.
Bob Andrew, chairman of the Queensland-based Australian Investors Association, says shareholders should always be concerned about what is being discussed at annual meetings.
"They should worry very much about what goes on at AGMs,'' Mr Andrew says.
He says the AIA is broad-based in its approach to shareholder power, with an emphasis on the education of investors.
Former top corporate regulator Henry Bosch says shareholders should intensify efforts to make companies sit up and take notice of them.
Mr Bosch, author of a newly released book Shareholders' Rights, says there is much more shareholders can do.
"Many shareholders really fail to understand what the potentials are,'' Mr Bosch says.
There are several ways for shareholders to exercise their rights, he says:
* Make sure the board knows it is being watched.
* If information being provided to shareholders is inadequate, ask questions, insist on answers and embarrass companies that do not provide enough information.
* Challenge directors nominated for election to a board and the selection process.
* Take an interest in auditors' reports. If auditors feel they are under scrutiny and likely to be asked questions, the outcome can only be positive.
Mr Bosch says one major Australian company CEO says he now spends 20 per cent of his time talking to shareholders.
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