Major attack on the directors' club
February 2, 2010
Dear Mayne Reporters,
proxy voting adviser Risk Metrics has really stuck its neck out today putting out this press release ripping into the directors' club and the average 96% vote in favour that a typical board-endorsed ASX300 director receives. They made the comparison with the safest Federal seat in the country, Mar'n Ferguson's hold on Batman, where he got 76% of the two party preferred vote last November.
Risk Metrics research director Martin Lawrence noted that over the period 2004 to 2007, no director seeking board endorsement was defeated in a re-election bid at an S&P/ASX 200 company, although a handful of directors resigned immediately prior to the AGM being held.
There are also some interesting stats which suggest the gene pool is getting even shallower.
The only problem with the Risk Metrics chest beating is that they have largely failed to recommend against incumbent directors and when they do, a lot of their clients ignore the advise anyway.
The best example of this was the 2006 Transurban AGM when both Risk Metrics and CGI Glass Lewis recommended against chairman Laurie Cox, because of his screaming conflict in being an executive director of Macquarie Bank, which manages tollroad giant Macquarie Infrastructure Group, yet he was re-elected with almost 90% in favour and then resigned a few weeks later.
Risk Metrics has never recommended in favour of one of my 29 board tilts and have regularly backed old boy plodders such as Mark Rayner and Tony Daniels. Even Stan Wallis, who was surely unelectable after the fiascos of Coles Myer, AMP and Pineapplehead, was recommended at last year's AFIC AGM. Risk Metrics even reckons Rupert Murdoch's most loyal footsoldier Ken Cowley, who founded The Australian with him in the 1960s, is somehow an independent director.
And when a perfect candidate popped up at WA News, former Age and Herald Sun boss Steve Harris, Risk Metrics recommended against him and in favour of the incumbent dunderheads because he didn't return their call in time.
Whilst a lot of directors complain about the power of these proxy adviser box-tickers, I reckon they have been far too weak on the old boys network and therefore hit Martin Lawrenece with the following question at the recent ACSI corporate governance AGM in Melbourne.
Transcript of ACSI conference exchange
Stephen Mayne, failed candidate for 30 public company boards. A question for Martin. Martin the proxy advisors very much are the king makers these days in corporate voting. You are very good at recommending against REM reports or options issues, I sensed a little bit of a mea culpa, with that 96% vote in favour of directors and I guess the obvious question is why aren't you recommending against directors apart from me?
Martin Lawrence: It is a long held ambition of mine Stephen to recommend in favour of you. Part of it's visibility, it's very hard to get a line of sight on how good an individual director is. I know from talking to funds managers in New Zealand where the director pool is miniscule that they tend to have a pretty good line of sight into individual directors because they know them, and they just say "that guy is an idiot or he is really cluey, he is good we should have him on the board." The problem is the line of sight. There is only so many of them that you can meet and as general you only get to meet the chairman. You can have the list of directors who have done things that have done things that probably mean they should never be on another public company board. There are people on the Allco board who decided it was a great idea to buy Rubicon, for example. But even that's not very many. One of the things we're looking at doing is just trying to find a bottom decile of directors on total shareholder return. Directors who are on a board, and on a number of boards who consistently are on companies who don't seem to perform. But again that may be factors that it's unfair to pin a director on. Yes we can do better, I think all of us can do better and to say that we alone decided is I think the proxy advisors is something of an overstatement. I know some of our funds management clients would take quite violent exception to that description of the amount of attention that they pay to corporate governance”
Let's hope the proxy advisers don't complain about this comment. Many boards complain about their power, so it is appropriate that the blowtorch be applied to them from time to time and hopefully they'll develop some reall courage to take on the club.
For an example of their embarrassment factor, have a listen to then Tabcorp chairman Michael Robinson after he was humbled by the proxy advisers and withdrew two resolutions at the 2006 AGM.
Stephen Gerlach take a bow
We called for the Futuris CEO to be fired yesterday and chairman Stephen Gerlach gave Big Les the bullet this morning, causing a 24% surge in the share price. Given that Gerlach facilitated the departure of Santos CEO John Ellice-Flint a few weeks ago, we're seeing quite a revolution in Adelaide which has the most inbred directors' club in the country.
Gerlach himself, of course, should be considering his position at Futuris as well.
ASIC's insider trading record
Finally, we've worked up this big package on ASIC's insider trading record, breaking it down to jailings, failings and non-custodial convictions. They really should have done better and some of this will presumably be teased out on Radio National's Background Briefing program on shareholder activism at 8am this Sunday.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
proxy voting adviser Risk Metrics has really stuck its neck out today putting out this press release ripping into the directors' club and the average 96% vote in favour that a typical board-endorsed ASX300 director receives. They made the comparison with the safest Federal seat in the country, Mar'n Ferguson's hold on Batman, where he got 76% of the two party preferred vote last November.
Risk Metrics research director Martin Lawrence noted that over the period 2004 to 2007, no director seeking board endorsement was defeated in a re-election bid at an S&P/ASX 200 company, although a handful of directors resigned immediately prior to the AGM being held.
There are also some interesting stats which suggest the gene pool is getting even shallower.
The only problem with the Risk Metrics chest beating is that they have largely failed to recommend against incumbent directors and when they do, a lot of their clients ignore the advise anyway.
The best example of this was the 2006 Transurban AGM when both Risk Metrics and CGI Glass Lewis recommended against chairman Laurie Cox, because of his screaming conflict in being an executive director of Macquarie Bank, which manages tollroad giant Macquarie Infrastructure Group, yet he was re-elected with almost 90% in favour and then resigned a few weeks later.
Risk Metrics has never recommended in favour of one of my 29 board tilts and have regularly backed old boy plodders such as Mark Rayner and Tony Daniels. Even Stan Wallis, who was surely unelectable after the fiascos of Coles Myer, AMP and Pineapplehead, was recommended at last year's AFIC AGM. Risk Metrics even reckons Rupert Murdoch's most loyal footsoldier Ken Cowley, who founded The Australian with him in the 1960s, is somehow an independent director.
And when a perfect candidate popped up at WA News, former Age and Herald Sun boss Steve Harris, Risk Metrics recommended against him and in favour of the incumbent dunderheads because he didn't return their call in time.
Whilst a lot of directors complain about the power of these proxy adviser box-tickers, I reckon they have been far too weak on the old boys network and therefore hit Martin Lawrenece with the following question at the recent ACSI corporate governance AGM in Melbourne.
Transcript of ACSI conference exchange
Stephen Mayne, failed candidate for 30 public company boards. A question for Martin. Martin the proxy advisors very much are the king makers these days in corporate voting. You are very good at recommending against REM reports or options issues, I sensed a little bit of a mea culpa, with that 96% vote in favour of directors and I guess the obvious question is why aren't you recommending against directors apart from me?
Martin Lawrence: It is a long held ambition of mine Stephen to recommend in favour of you. Part of it's visibility, it's very hard to get a line of sight on how good an individual director is. I know from talking to funds managers in New Zealand where the director pool is miniscule that they tend to have a pretty good line of sight into individual directors because they know them, and they just say "that guy is an idiot or he is really cluey, he is good we should have him on the board." The problem is the line of sight. There is only so many of them that you can meet and as general you only get to meet the chairman. You can have the list of directors who have done things that have done things that probably mean they should never be on another public company board. There are people on the Allco board who decided it was a great idea to buy Rubicon, for example. But even that's not very many. One of the things we're looking at doing is just trying to find a bottom decile of directors on total shareholder return. Directors who are on a board, and on a number of boards who consistently are on companies who don't seem to perform. But again that may be factors that it's unfair to pin a director on. Yes we can do better, I think all of us can do better and to say that we alone decided is I think the proxy advisors is something of an overstatement. I know some of our funds management clients would take quite violent exception to that description of the amount of attention that they pay to corporate governance”
Let's hope the proxy advisers don't complain about this comment. Many boards complain about their power, so it is appropriate that the blowtorch be applied to them from time to time and hopefully they'll develop some reall courage to take on the club.
For an example of their embarrassment factor, have a listen to then Tabcorp chairman Michael Robinson after he was humbled by the proxy advisers and withdrew two resolutions at the 2006 AGM.
Stephen Gerlach take a bow
We called for the Futuris CEO to be fired yesterday and chairman Stephen Gerlach gave Big Les the bullet this morning, causing a 24% surge in the share price. Given that Gerlach facilitated the departure of Santos CEO John Ellice-Flint a few weeks ago, we're seeing quite a revolution in Adelaide which has the most inbred directors' club in the country.
Gerlach himself, of course, should be considering his position at Futuris as well.
ASIC's insider trading record
Finally, we've worked up this big package on ASIC's insider trading record, breaking it down to jailings, failings and non-custodial convictions. They really should have done better and some of this will presumably be teased out on Radio National's Background Briefing program on shareholder activism at 8am this Sunday.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.