Saturday, October 29, 2011

Origin Energy AGM (2008)


Company: Origin Energy
Type: Annual General Meeting
Date: 15 October 2008
Chairman: Kevin McCann (independent)
CEO: Grant King

This was my first (and to date only) AGM which I was paid to go to. I went while working as an auditor at KPMG, in case we needed to audit the count of the votes by shareholders at the AGM. We didn't need to in the end.

Questions and Voting
I didn't ask anything, as I was there in a professional capacity. (Crazy old) Jack Tillburn was there, and he went on a couple of his usual rants. It was entertaining, but probably because Origin had performed well and so questions were few.

I went back to work at the office!

This probably doesn't count, but I wanted to document it anyway.

David Jones AGM (2006)

Company: David Jones
Type: Annual General Meeting
Date: 1 December 2006
Chairman: Robert Savage (independent)
CEO: Mark McInnes

It had been a while since my last AGM. In fact, I'm not even sure of the date of this AGM (as I'm writing this in 2011 - which also means everything is highly paraphrased), it might have been in 2006 or it might have been in 2007. I think it was in 2006. That made it 12 months since my last AGM, and 18 months since my an AGM where I had asked a question.

David Jones had been performing quite well, so I really had no qualms to raise and planned to mainly give my praise to the board. Though I did have one question ready on expansion plans.

Questions and Voting

Me: Most of Australia's great companies are ones that have expanded overseas to become global companies: Newscorp, BHP, etc. Yet David Jones has remained almost entirely a domestic company. Why hasn't the company considered international expansion?

Robert Savage: The problem for David Jones in doing that is that we rely heavily on our brand. If we were to expand into another market, the local consumers would not trust our brand as much as the local ones. Perhaps it could work if done in partnership, but those sorts of opportunities are hard to come by.

Voting: I have no idea how I voted. Probably for everything, I guess.


One of the David Jones Senior managers came to chat to me after the AGM about my question. He expanded on what Robert Savage had said and I was happy with both responses. It was also nice to get that extra attention.

Sunday, December 25, 2005

St George AGM (2005)

Company: St George
Type: AGM
Date: 16 December 2005
Chairman: ??
CEO: Gail Kelly


I had arranged to go to the St George AGM with a friend, who owned shares in St George. I did absolutely no research on the company and, having no proxy, was unable to ask any questions.

Like most bank AGMs for the past decade, I wasn't expecting anything major. Results have been good and there haven't been any significant black marks on it. But I had nothing else to do, and figured that the free lunch would be nice.


I had one minor gripe with the presentation. The poxy vote numbers that were provided showed the for and against votes, but not the split for chairman's proxys. It is my understanding that the company must present to the AGM the number of for and against votes for each resolution as well as the proxy votes for the chair along with which way those are voted (providing a split between open and non-open votes).

However, the proxy votes were provided after debate but before the actual vote. That was good, I liked that.

Also at the AGM I saw Greg Dooley, General Manager of Computershare NSW, outside at the registry desk. I went up to him and said hi.

The previous day I had been to an Australian Shareholders Association seminar on share registries, and Greg had been the speaker. He spoke for about an hour about how share resitries were, explained the difference between HINs vs SRNs, issuer sponsored vs broker sponsored and answered general questions. It was quite a bit for me to explain here, but if you go to their website and have a look around you might be able to learn a thing or two. I found it very useful and have fallen in love with the Computershare website, it makes managing your portfolio, giving them your bank account/TFN details and doing your tax much much easier. So if you're interested I should have a link to both the Computershare and Shareholders Association websites on the set of links on the right.

So at the AGM I maade sure to tell Greg how much I enjoyed his talk, that I'll certainly be using the Computershare website from now on and that it really will help to save me a lot of time. So a bit of a shameless plus for the guys at Computershare, I really recomend their services for all shareholders out there.

Monday, July 25, 2005

Rinker AGM (2005)

Company: Rinker
Type: Annual General Meeting
Date: 18 July 2005
Chairman: John Morschel (independent)
CEO: David Clarke

Rinker is the model of a good company. Good results, good corporate governance, good company. There really wasn't a lot for me to critisise the board for, which was a bit disappointing because I haven't been to an AGM for a while and I'm getting a little rusty.

I went through the Annual Report (other than the remuneration report which I found to be too confusing even for me, and I just didn't have the time to go through it with a fine comb) and puts ticks all over it. Perfect attendance record for board and committee meetings - tick. Five out of six directors are independent - tick. The only executive director (CEO) is on no committees - tick. Two directors have a legal background - tick. The directors are not on a lot of other boards - tick.

At the end of all that my only concerns were the finance and material industry experience of the directors, a lack of geographic segmentation in the financial report and a lack of women on the board. To be honest I'm not too concerned about the last one, but I like to ask questions and it's an easy question to ask.

So I got up to to ask questions and gave the board my congratulations for having such a good company and making my job of asking tough questions difficult. I comended Rinker on not making any political donations, pointing out that if shareholder want to support a political party then they will do it themselves rather than having the company do it.

Questions and Voting
Me: A board of directors needs atleast one director with each of legal, accounting/finance and relevant industry experience. I've noticed that the Annual Report mentions that some directors have accounting/finance or relevant building/material industry experience but that's all it says. Could you please expand on the relevant experience of the directors?

John Morschel: (Heavily paraphrased) John Arthur has industry experience, Walter Revell has industry experience, John Ingram has fiancial experience through his work in Lend Lease, etc.

Me: The financial report has operational segmentation but not geographic segmentation. Given that Rinker operates in many different geographical regions, different states in the US and Australia, why doesn't the Annual Report have a breakdown of the financial results by geographic location?

John Morschel: There is no legal requirement for the company to provide a geographic segmentation. If you do want to see the geographic segmentation then you can come and see the CFO here at the end of the meeting.

Me: Will the company rotate the auditor after a certain number of years in order to stop any compromise of, not so much actual independence but apparent independence?

John Morschel: Having been a publically listed company for only the past 2 years, the Rinker board has not been looking at auditor rotation. We do ensure that the relevant partner rotates atleast every five years. But we will look at this issue more closely in the future.

Me: There are 6 men on the board, but you are all men, there are no women. That to me indicates that maybe, maybe you are overlooking someone. At the very least it could make the board prettier, not to say that you are not handsome men, you're all quite striking. But has the board considered any women for it's board?

John Morschel: We do not take gender into account when determining members of the board. If there is a good candidate then we will look to get them on the board, regardless of whether they are amle of female. I would also like to point out that this is a small board and increasing its size by one would be a potential burden.

ASA Rep (I forget his name): Why are executives rewarded with bonuses if the company does not beat the market?

John Morschel: Rinker operates in the US where it is customary to have some bonuses vest when the company beats 25% of other companies, rather than the 50% that is the standard in Australia. As we have to compete with these companies for our executives we need to provide a similar remuneration package. There is a problem here of conflict between Australia and the US, where there are usually no restrictions on vesting of bonuses.

Voting: As per the board recomendations. Nothing controversial, Rinker has done an outstanding job in almost every respect.

Few people asked questions. Maybe 5 or 6 at most. The ASA Rep asked 2 sets of questions, most of the others just got up to say how they approved of how the company was doing. It's to be expected, when a company does well the shareholders tend to be apathetic. It's only after the poo hits the fan that they are willing to take action. However in the case of Rinker I really do think that it's a case of if it ain't broke don't fix it.

Monday, July 04, 2005

News Corporation EGM (2005)

Company: News Corporation
Type: Extraordinary General Meeting
Date: 1 July 2005
Chairman: Rupert Mudoch (executive)
CEO: Rupert Murdoch

I wasn't able to attend this meeting, mainly because it was held in New York, but I thought I might voice my opinion on it anyway. Rupert Murdoch likes holding his AGMs in places where it is hard for most shareholders to go. Up until last year all of the AGMs were held in Adelaide, not exactly the investor capital of Australia (or second, or third...). The Herald had an article on it here. Interesting to note that only one person got up to ask a question, just one.

Let me say, before I blast Rupert Murdoch, that in my opinion he is the greatest, most successful businessman Australia has ever produced. As far as powerful people go, he's up there at the top, and that's of the world, not just Australia. Sure, world leaders are more powerful, but they are positions, not people. Rupert Murdoch is not limited to 2 4 year terms as head of News Corp, he's been there for decades. He has almost single handedly created one of the largest media groups in the world.

But, like many owner-chairmen-CEOs, he treats the company like its all his. He owns about 30% of the voting stock, but his Newscorp shares are only worth about 10% of the total value of News Corp when you take the non-voting stock into account. So he is able to control the company, despite only owning 10% of its shares. And boy does he control it! These options that he is giving to his executives - and he is giving them to his executive, they are in the money, all they have to do is keep the share price at its current price and BANG, juicy profits.

And being the owner of about half of Australias newspapers and a significant shareholder in Foxtel and Sky News Australia, there is not a whole lot of critisism of him in the media. I read the Australian on the same day as the SMH article, News Corp didn't even get a mention in its business section. Good work Rupert!

But, as long as you're as successful as he is, you can get away with a certain amount while only sustaining mild critisism. And with only one person asking him questions at the AGM, mild critisism is all he will get.

Monday, June 27, 2005

Westfield EGM (2004)

Company: Westfield Holdings Limited
Type: Extraordinary General Meeting
Date: 25 June 2004
Chairman: Frank Lowy (executive)
CEO: Stephen Lowy and Peter Lowy

This was the meeting to merge the three Westfield companies (Westfield Holdings, Westfield Trust and Westfield America Trust) into one "stapled security". It was essentially reversing what had been done over a decade earlier when Westfield was split up into these 3 companies for tax reasons, which were now redundant because of the dividend imputation system.

As usual with these sorts of meetings, I got a small phonebook size report to wade through. I had quite a lot of difficulty understanding this report, as would I assume most shareholders. As mentioned in my previous Westfield report, Frank Lowy is quite a dominating chairman, I personally still don't have the confidence to stand up and have a long argument with him on the floor of the meeting. So I came up with the only question that I knew I could back up almost 100%, however it was also a question that I expected to get a "yes" answer to (i.e. I was just checking someting which for whatever reason, was omited from the report).

Questions and Voting
Me: I didn't see this in the report so I was hoping you could clarify this for me. Will the audit committee of the newly formed company be comprised entirely of non-executive directors?

Frank Lowy: Yes, I think so. (One of the other directors leans over to speak with him). I've just been told that I was misinformed. The audit committee will have one executive director, but the rest are non-executive directors.

WHAT??!! Now I admit that after hearing that all I did was thank him for his question and sat down. Not because I accepted it, but because I did not expect it. Like I said before, I asked that question expecting an unequivocal yes response. To not have an audit committee comprised entirely of non-executive directors goes against virtually all the academic research for an effective audit committee. If you need to ask the management team something, call them in and ask them, but don't put one of them on the committee. I repeat, do not put one of them on the committee. You cannot expect the other members of the committee to freely express themselves if there is an executive there.

That was completely unexpected to me. Couple that with Frank Lowy's intimidating personality and I was unwilling to get up and ask a follow up question.

It's definitely the last time I'm asking a textbook question without considering that there will not be a textbook answer. If I had my time again I would have kept up my questioning on him. Frank Lowy would have disagreed, and he would have his way. But that is a blatant disregard for what should be obvious corporate practice. You don't put executives on the audit committee!!

Voting: For the merger. It was a good proposal. Some people who purchased their shares prior to 1986 would lose CGT-free status (including Frank Lowy himself), but as that didn't include me I wasn't really too concerned.

Going into the meeting I was stopped by one of the security guards who asked me what my business here was. I said that I was a shareholder and was coming to vote my shares. He reluctantly let me in. Haven't you ever seen a shareholder who wears a hooded jumper with jeans, sneakers and a big backpack? :)

Saturday, June 25, 2005

Commonwealth Bank AGM (2003)

Company: Commonwealth Bank Limited
Type: Annual General Meeting
Date: 31 October 2002
Chairman: John Ralph (independent)
CEO: David Murray

If you go to the Commonwealth Bank website you can still see a webcast of the AGM. Go up to 1 hour 50 minutes and 48 seconds then you can see my stellar performance!

Questions and Voting
Me:I noticed that there was no way of lodging proxies online. Will the bank be introducing one?

David Murray:Online proxies don’t have full legal support from the advice I have received. Will investigate the option.

Me:The Commonwealth Bank has had Ernst & Young as its auditor for the past 7 years. That to me would indicate that there’s been a compromising of their independence, either actual or apparent. Why has the bank kept the same auditor for the past 7 years and will it introduce a rotation of auditors, say, every 5 years?

John Ralph:Audit partners are required to rotate on a 5-year basis so that they are not prejudicing the independence of the auditor. There are processes in place to test the independence of the auditor and the audit firm in relation to the work they do for the bank.

John Schubert (Audit Committee Chairman):The important thing is to make sure that the same people aren’t involved for unduly long in the audit so that relationships can be formed that would be regarded in certain circumstances or at least perceived as impacting on independence. In relation to the firm, there is no requirement to change the firm. It is something the audit committee looks at in so far as there is an advantage in so doing. There’s always the question of what is in the overall interest bank, whether we are convinced that we can have the best people doing the work, the best firm doing the work for the bank at the time and ensuring that there is the required independence. The audit committee is absolutely convinced that we do have a fully independent audit process.

Voting:As per the board recommendations, nothing controversial here.

I left half way through because I had a class at uni to go to. There were some people who asked questions about the bank manager who had stolen a large amount of money from a bank branch, some unionists who were upset about branch closures, an explanation of some technical financial definitions and one man who critisised John Ralph for saying the American "bathroom" rather than the Australian "toilet".

Friday, June 24, 2005

AMP AGM (2003)

Company: AMP Limited
Type: Annual General Meeting
Date: 15 May 2003
Chairman: Peter Wilcox (independent)
CEO: Andrew Mohl

My second AGM, also the most heated I have been to. This was at the height of the scandals at AMP and there were some heated debates on the floor. Some 800 people attended, from memory, but many left during the meeting and only 200-300 were left at the end (which was about 5 hours later). I saw some faces which looked familiar: Peter Morgan from 452 Capital as well as Ali Moore and Ross Greenwood from Business Sunday.

Questions and Voting
I was planning on asking 2 questions, but did not. One was on the renumerations package, which was pulled before the meeting. The other was in relation to why the chairman had decided to vote all open proxies against Stephen Mayne, which he explained during his chairman's address. So I didn't end up asking any questions this time round.

Stephen Mayne was running for election to the board of directors, he was unsuccessful and gained only 11% of the vote. However, even if he had received 51% of the vote he still wouldn't have made it as he needed to get a higher percentage than another candidate and the two candidates with the lowest vote were Lord Killearn (80%) and Richard Grellman (82%).

Voting: I voted for Stephen Mayne, against Richard Grellman and against Lord Killearn. I have a lot of respect for Stephen Mayne and he had stated that voting against these two (who were the chairmen of the finance committee and audit committee during the crisis and should have gone) was the best way to get him onto the board. So I did.

I got to meet Stephen Mayne - how exciting! I also had a bit of a talk to Justin McMurray, who had replaced Neil Woolrich as Crikey's business reporter following Neil Woolrich's move to the ABC. I mentioned how it's scary having to get up in front of everyone to ask questions and he agreed, pointing out that he had to gather up the courage to do so every time he did it.

Anyway, this still holds the record for the longest and most "lively" AGM I've been to.

Thursday, June 23, 2005

Westfield AGM (2002)

Company: Westfield Holdings Limited
Type: Annual General Meeting
Date: 13 November 2002
Chairman: Frank Lowy (executive)
CEO: Stephen Lowy and Peter Lowy

This was my first corporate AGM, and Frank Lowy is scary chairman if you annoy him (and disagreeing with him seems to do that pretty easily). Neil Woolrich (see below for his report) from Crikey (now an ABC journalist) and Giles Edwards from the ASA were also there and they asked most of the questions. It took a lot confidence for me to put my hand up in the air to ask a question.

Questions and Voting
Me: I don’t see anything in the executive remunerations package that links the bonuses to the industry or market shareholder returns. It doesn’t make sense to reward someone for increasing profit when everyone else is making bigger profits nor is it fair to punish someone who sees a fall in profit if it fell at a slower pace than everyone else. Would the board consider linking the executive bonuses to the shareholder returns of an ASX index?

Frank Lowy: The options package is designed so that the exercise price is always at a 10% premium to the share price when they are issued, so executives need to grow the company before they make any money on their options.

Neil Woolrich and the Giles Edwards both supported my question and did not accept Frank Lowys rationalle, but I got no further than his response. Neil Woolrich even included my question in his report when he said (sarcastically):

There's no point in repeating them all here because I was so patently wrong, as was the shareholder who stupidly backed up my assertion that there were no realistic performance hurdles on executive options.

Frank put this punter in his place by saying that they're issued at a premium to market price - that's the hurdle.

So there!

Voting: I voted against Fred Hilmer for re-election as director. He is a CEO, a full time position and he missed 3 out of the 11 board meetings. Lowy said that Hilmer was sick (or something else, that it was a fair reason is all I remember) for 1-2 meetings, but that meant that he still missed 1-2 meetings.

I got to talk a bit to Neil Woolrich, he said I asked a good question. I told him that this was my first AGM and he said that as far as chairmen go, you can't go past Frank Lowy, if you can get through him you can get through anyone.

Westfield has a massive amount of corporate governance failings. Standard textbook concepts that are taught in every university corporate governance course. Perhaps the best way to understand this is to read Neil Woolrich's AGM report for Crikey, which appeared in the 13 November 2002 daily newsletter. It's a large report, so I've included it as a comment to this post (click on comments to read it).

However, Westfield has also been one of the best performing companies on the ASX with consistent shareholder returns of 20-40% over the medium term for the past 40 years. In fact, $10,000 invested in 1960, with all dividends reinvested, would be worth over $100 million today! So I guess a lot of people are willing to overlook some "minor" imperfections.

Corporate Governance Check List

I've wrote up a list of 12 criteria, later expanded to 22, on which I will be basing most of my questions at the AGMs which I attend. I created them out of a number of sources inlcuding what I've learned at uni (accounting and corporate law subjects), the Australian Shareholders Association website and Stephen Mayne from Crikey. So, in no particular order:
Board of directors
  1. A majority of directors should be independent non-executive directors.
  2. The chairman should be an independent non-executive director. They should definitely not be the CEO.
  3. No director should sit on more than 5 boards of publicly listed companies. A chairmanship counts as 3 directorships.
  4. Directors should have a very high or perfect attendance record.
  5. The board should have at least 1 director with knowledge of the company's industry and at least 1 director with financial/accounting knowledge.
  6. Executives of unrelated companies should not be directors.
  1. The company should have, at minimum, an Audit Committee, a Remuneration Committee and a Nominations Committee.
  2. All committes should be comprised of a majority of independent non-executive directors, the audit committee should be comprised entirely of independent non-executive directors.
  3. The chairman of each committee should be an independent non-executive director.
  4. Members of committees should have a very high or perfect attendance record.
Non-executive director remuneration
  1. Non-executive directors should receive a flat fee. They should not be given performance bonus.
  2. Non -executive directors should not be given ‘golden handcuffs’ (retirement benefits after serving on the board for a certain number of years).
Executive remuneration
  1. Perfomance bonuses should pass performance hurdles that are set beforehand.
  2. Any options must be issued at a premium to the market (i.e. no in the money options).
  3. The company must perform better than the market/industry/sector.
  4. Short term performance should be determined by EPS growth or ROE.
  5. Long term performance should be determined by total shareholder return (TSR).
  6. There should be a good balance of short term (12 months) and long term (3-5 years) performance bonuses.
External auditor
  1. The external auditor must not provide any non-audit services to the company.
  2. Former auditors should not be appointed directors while the company is still being audited by the ex-partner's former firm.
  3. The audit partner/firm should be rotated every 5 years at most.
Political donations
  1. No political donations should be made. It is up to individual shareholders to make that decision.

Just found out how to do headings

*So that's how you do headings!
Just set up my account. There might be some changes while I work out what works best. Here is a list of what I plan to do over the coming weeks:
  1. Put up a list of links (ASX, ASA, Crikey, etc).
  2. Put up my corporate governance check list, covering things from the board and committees to the external auditor.
  3. Do my best to write up AGM reports for my precious AGMs. I've been to 4 (Westfield 2002, AMP 2003, Commonwealth Bank 2003 and Westfield 2004). I don't have all the details of these AGMs, so they won't be the best, but atleast it will add some content.
  4. Write up a pre-AGM report for Rinker. I'll be attending their AGM on the 18th of July.
Seeing as I'm mainly procrastinating (I've got an exam tomorrow), I'll probably leave it at that for now. I might make another post next week when my exams are over.

* I've done a bit of editing. Just experimenting at the moment