Angry farmers tip wheat on shareholder activist after historic AWB vote
September 4, 2008
Dear Mayne Reporters,
one of the worst corporate governance structures in Australia was finally cleaned up today when 77% of farmer shareholders in AWB Ltd voted for constitutional reform that will see the seven grower directors disappear from the board in a few weeks, including chairman Brendan Stewart.
After running an intensive campaign following the controversial adjournment of voting at the original EGM two weeks ago, the board majority managed to round up enough extra votes to win the day. Here's how the numbers actually stacked up:
Before the adjournment
For: 10,346
Against: 3,968
Open: 1,485
The vast majority of open votes were held by the chairman but this still fell agonisingly short with 74.7% in favour. Proxies continued to pour in and this is what the proxy situation was before final voting at the meeting in Melbourne on September 3:
For: 17,154 (70%)
Against: 5,587 (22.8%)
Open: 1770 (7.2%)
This meant that the for vote increased by 6,008 votes or 58% and the against vote rose by 1,619 or just 40.8%, whilst the open votes jumped by 285 or 19.2%. The overall turnout increased from 27.1% to a record 44.3% in terms of shareholders and from 32.2% to 50% in terms of votes cast.
The meeting started off with another strong speech from chairman Stewart. We then had about 20 minutes of debate, which included these sprays from Cold War warriors Jock Munro and Bob Iffla who simply pursued process arguments and personal attacks such as labelling chairman Brendan Stewart the greatest "Judas" of all time. Only a handul of the 100-plus people in the room on the 19th floor of AWB's Latrobe St headquarters opposed the proposal to adopt a normal board and governance structure with one vote one value rather than a farmer gerrymander.
The four dissident directors opposing reform were asked to resign if the proposal got up and they all gave these bland answers about following the constitution, after which chairman Stewart declared it would be "immoral and unethical" to continue if shareholders rejected their position.
The final poll
We then had a 10 minute break for the poll to be conducted by Computershare, after which the chairman returned and declared the resolution passed with the numbers as follows:
For: 18,898 (77%)
Against: 5,644 (23%)
Check out the ASX announcement.
Clearly it was the open proxies that saved the day, something that I have often complained about in corporate elections. This vote will long be remembered for being extremely close and controversial, especially after the adjournment when it originally fell just short. It was very interesting to read this opinion piece by Dean Paatsch from Risk Metrics in The AFR last week which questioned the integrity of the Australian corporate voting process.
At least the AWB board appointed Ernst & Young to provide some extra oversight of the Computershare count, but the big problem with Australia's paper-reliant corporate voting system is the lack of an electronic audit trail. That said, it is clear that an overwhelming majority of all AWB A and B class shareholders wanted this reform and there isn't a single expert who opposed it. It was a no brainer, so there is no point complaining about the voting process when the right result was achieved this time.
What happens now?
Brendan Stewart and managing director Gordon Davis had a 25-minute press conference after the meeting and, after not being able to speak at the meeting which was for A class farmer shareholders only, I lobbed a couple of questions in the tiny room with about 10 other reporters.
Stewart repeated his call for the gang of four to quit for "ethical and moral" reasons and he's right that it is utterly inappropriate they pocket another $50,000-plus in board fees from the very same shareholders who have completely rejected their position.
The process now will see another EGM called for October which will adopt a new constitution that imposes a 10% shareholder cap for three years, the pursuit of grain trading and the presence of two growers on the board into the future. It is as that point that the seven farmers disappear, leaving just four commercial non-executive directors and managing director Gordon Davis.
Deputy chairman Peter Polson, who has his hands full as chairman of Challenger Financial Group, is expected to step up to the plate and become chairman but the search is now on for another 2-4 directors who will be voted on at next year's AGM. The new constitution will set a maximim of 9 directors and Brendan Stewart said the current number of 12 was too large.
Abuse from the Cold War warriors
The Cold War warriors are unlikely to launch a legal challenge because Jock Munro told me after the meeting that they don't have the dough and will be sent broke by the new wheat trading system.
I'd printed out pictures of Stalin, Brezhnev and Kruschev for the meeting but decided not to antagonise the situation.
Alas, they were still waiting out the front of the AWB headquarters when I emerged 30 minutes after the meeting and a group of them approached aggressively before Jock Munro tipped some grain over my boots.
They demanded to know how many AWB shares I owned, another very aggressively declared I was a "disgrace" and they were all clearly very upset with the two contributions I made at the original meeting, which can be watched by checking out this subscriber edition.
The wonderful wife, barrister and RACV director Paula Piccinini came along to watch today's proceedings and after feeding the meter had de-camped to the cafe across the road, where a flat white was waiting.
I suggested we get the hell out of there, so the coffee was tipped into a takeaway cup and we exited just as the angry mob was coming into the cafe, presumably to resume hostilities.
Finally, watch this video of AWB Chairman Brendan Stewart declaring victory at the EGM and subsequent press conference.
All up, it was pretty dramatic stuff but also a very important triumph in the battle for better Australian corporate governance today.
AWB paid almost $300 million in kick-backs to Saddam Hussein's regime and now the appalling governance structure which enabled this to happen has gone. The ASX should never have tolerated such a breach of its listing rules in the first place, but now the company will be free to get on with business without the distraction of being a political football for agri-politics. No wonder the stock was up 2.5% today in a falling market.
Do ya best, Stephen Mayne
one of the worst corporate governance structures in Australia was finally cleaned up today when 77% of farmer shareholders in AWB Ltd voted for constitutional reform that will see the seven grower directors disappear from the board in a few weeks, including chairman Brendan Stewart.
After running an intensive campaign following the controversial adjournment of voting at the original EGM two weeks ago, the board majority managed to round up enough extra votes to win the day. Here's how the numbers actually stacked up:
Before the adjournment
For: 10,346
Against: 3,968
Open: 1,485
The vast majority of open votes were held by the chairman but this still fell agonisingly short with 74.7% in favour. Proxies continued to pour in and this is what the proxy situation was before final voting at the meeting in Melbourne on September 3:
For: 17,154 (70%)
Against: 5,587 (22.8%)
Open: 1770 (7.2%)
This meant that the for vote increased by 6,008 votes or 58% and the against vote rose by 1,619 or just 40.8%, whilst the open votes jumped by 285 or 19.2%. The overall turnout increased from 27.1% to a record 44.3% in terms of shareholders and from 32.2% to 50% in terms of votes cast.
The meeting started off with another strong speech from chairman Stewart. We then had about 20 minutes of debate, which included these sprays from Cold War warriors Jock Munro and Bob Iffla who simply pursued process arguments and personal attacks such as labelling chairman Brendan Stewart the greatest "Judas" of all time. Only a handul of the 100-plus people in the room on the 19th floor of AWB's Latrobe St headquarters opposed the proposal to adopt a normal board and governance structure with one vote one value rather than a farmer gerrymander.
The four dissident directors opposing reform were asked to resign if the proposal got up and they all gave these bland answers about following the constitution, after which chairman Stewart declared it would be "immoral and unethical" to continue if shareholders rejected their position.
The final poll
We then had a 10 minute break for the poll to be conducted by Computershare, after which the chairman returned and declared the resolution passed with the numbers as follows:
For: 18,898 (77%)
Against: 5,644 (23%)
Check out the ASX announcement.
Clearly it was the open proxies that saved the day, something that I have often complained about in corporate elections. This vote will long be remembered for being extremely close and controversial, especially after the adjournment when it originally fell just short. It was very interesting to read this opinion piece by Dean Paatsch from Risk Metrics in The AFR last week which questioned the integrity of the Australian corporate voting process.
At least the AWB board appointed Ernst & Young to provide some extra oversight of the Computershare count, but the big problem with Australia's paper-reliant corporate voting system is the lack of an electronic audit trail. That said, it is clear that an overwhelming majority of all AWB A and B class shareholders wanted this reform and there isn't a single expert who opposed it. It was a no brainer, so there is no point complaining about the voting process when the right result was achieved this time.
What happens now?
Brendan Stewart and managing director Gordon Davis had a 25-minute press conference after the meeting and, after not being able to speak at the meeting which was for A class farmer shareholders only, I lobbed a couple of questions in the tiny room with about 10 other reporters.
Stewart repeated his call for the gang of four to quit for "ethical and moral" reasons and he's right that it is utterly inappropriate they pocket another $50,000-plus in board fees from the very same shareholders who have completely rejected their position.
The process now will see another EGM called for October which will adopt a new constitution that imposes a 10% shareholder cap for three years, the pursuit of grain trading and the presence of two growers on the board into the future. It is as that point that the seven farmers disappear, leaving just four commercial non-executive directors and managing director Gordon Davis.
Deputy chairman Peter Polson, who has his hands full as chairman of Challenger Financial Group, is expected to step up to the plate and become chairman but the search is now on for another 2-4 directors who will be voted on at next year's AGM. The new constitution will set a maximim of 9 directors and Brendan Stewart said the current number of 12 was too large.
Abuse from the Cold War warriors
The Cold War warriors are unlikely to launch a legal challenge because Jock Munro told me after the meeting that they don't have the dough and will be sent broke by the new wheat trading system.
I'd printed out pictures of Stalin, Brezhnev and Kruschev for the meeting but decided not to antagonise the situation.
Alas, they were still waiting out the front of the AWB headquarters when I emerged 30 minutes after the meeting and a group of them approached aggressively before Jock Munro tipped some grain over my boots.
They demanded to know how many AWB shares I owned, another very aggressively declared I was a "disgrace" and they were all clearly very upset with the two contributions I made at the original meeting, which can be watched by checking out this subscriber edition.
The wonderful wife, barrister and RACV director Paula Piccinini came along to watch today's proceedings and after feeding the meter had de-camped to the cafe across the road, where a flat white was waiting.
I suggested we get the hell out of there, so the coffee was tipped into a takeaway cup and we exited just as the angry mob was coming into the cafe, presumably to resume hostilities.
Finally, watch this video of AWB Chairman Brendan Stewart declaring victory at the EGM and subsequent press conference.
All up, it was pretty dramatic stuff but also a very important triumph in the battle for better Australian corporate governance today.
AWB paid almost $300 million in kick-backs to Saddam Hussein's regime and now the appalling governance structure which enabled this to happen has gone. The ASX should never have tolerated such a breach of its listing rules in the first place, but now the company will be free to get on with business without the distraction of being a political football for agri-politics. No wonder the stock was up 2.5% today in a falling market.
Do ya best, Stephen Mayne