As Prime Minister Anthony Albanese is discovering with the Indigenous Voice to Parliament, constitutional reform can be very difficult.
The conservative position is usually never to change a foundational governing document unless the proposal is uncontroversial and endorsed by all key stakeholders.
ASX-listed companies have discovered this the hard way over the past two years. When COVID struck, public companies got used to holding entirely virtual annual general meetings, after temporary relief was provided by ASIC in 2020 and 2021.
Many public companies fret about the logistics of their physical AGMs, fearing protesters will turn up and give them a hard time or small shareholders will berate them for poor financial performance. Therefore, many of them concluded they’d like the option of holding a fully virtual meeting with no online questions every year.
The Australian Institute of Company Directors (AICD) lobbied both ASIC and then-treasurer Josh Frydenberg to legislate away compulsory physical AGMs. But after strong and broad opposition, the federal government settled on giving companies the virtual AGM option, provided it was allowed for in their constitution.
Alas, the vast majority of public company constitutions required a physical AGM, and so began a long procession of public companies running the gauntlet of constitutional reform.
Constitutional tear-ups
The Corporations Act 2001 requires 75% approval from voted stock to amend a public company constitution, but with the average turnout in the ASX200 being about 70%, the practical reality is that the change will be defeated if more than 15% of issued capital is motivated to vote against.
And that is what has happened… time after time after time.
The Australian covered the issue in October 2021 and pointed out several big companies that had come a cropper: “following shareholder resistance companies including Qantas, Brambles, and Bendigo and Adelaide Bank have torn up proposed amendments to their constitutions to allow virtual AGMs”.
So why would anyone try again when a clear message has been sent? Corporate voting is not secret and most votes are lodged 48 hours before the meeting, so it is very rare to see a formally defeated resolution as opposed to a withdrawn one.
But as this list shows, formal defeats on constitutional pushes for virtual AGMs have indeed been recorded by mid-sized companies such as Kogan, Estia Health and Nickel Mines. How embarrassing! However, even with more than 10 formal defeats or withdrawn resolutions by the end of 2022, still they come.
Brisbane-based mineral testing giant ALS — a significant company worth $5.3 billion that has more than 10,000 shareholders — only this week abandoned its attempt to amend its constitution to allow virtual-only AGMs.
It was a faster-than-usual climb down as, on June 21, ALS proposed a range of constitutional amendments in its notice of meeting for the July 26 hybrid AGM, but then withdrew the proposal on Monday, almost four weeks before the meeting.
It has been added to this growing list of companies that have failed to read the room, attempting to reduce AGM scrutiny by giving directors an out from facing shareholders once a year at a physical location.
Talk-back radio
Virtual AGMs are fine with honest companies that don’t censor questions; the likes of Hansen Technology, Wisetech and Pact Group offered them last year thanks to their existing constitutional flexibility.
However, then you get examples like Sports Entertainment Ltd, which simply called a Zoom meeting for its AGM last year, ignored my seven written questions, and treated the exercise like a talk-back radio show where no callers were put to air.
It has been clear for two years now that major institutional shareholders and proxy advisers will not countenance constitutional amendments to allow virtual AGMs. Why needlessly give up a governance power that delivers shareholder access and greater accountability for boards and management?
Therefore, if one more company tries this on and then backs down ahead of the AGM or faces constitutional amendment defeat, the lawyers who advised on the move shouldn’t get paid.
I participated in a record 130 AGMs last year, primarily hybrid or virtual meetings, and an emerging problem appears to be that organisations don’t appreciate this online engagement and are now reverting to physical-only AGMs to avoid scrutiny.
In 2022-23, this included big companies such as Fortescue Metals, Seven West Media, BHP, Santos, CBA and Origin Energy. A sensible reform for ASX300 companies would be mandating hybrid AGMs to maximise participation and scrutiny.
RSL Victoria
Public company AGM practice is generally better than the not-for-profit sector. For an example of the contrast, look no further than next Saturday’s RSL Victoria AGM, which is being held at Sandown Race Course.
Crikey readers might remember this write-up of the 2019 RSL Victoria AGM, which was held at another gambling venue, Caulfield Race Course, and was a masterclass in control freakery from the top table.
Controversially, there is a motion from the board to abandon the requirement for individual sub-branches to get their accounts audited. This is likely to be resisted on governance grounds.
The circa 250 Victorian RSL sub-branches have net assets estimated at around $1 billion, much of which is related to its 50 pokies venues draining more than $200 million a year from gamblers. Strangely, the RSL Victoria board has produced a strategic plan for debate, which barely mentions either property or gambling.
Unlike more democratic RSL divisions such as New South Wales, South Australia and Tasmania, which have embraced one service member per vote for elections, RSL Victoria is sticking with the political-style delegate system.
President Rob Webster, a pro-pokies Vietnam conscript who has been on the board since 1989, has proposed a modest tweak this year. Depending on their size, some sub-branches will have as many as four delegates, but delegates will be voting on their phones at Sandown and it will be the president who controls the votes of all delegates from his sub-branch.
This tweak will reduce the incentive for individual delegates to turn up and vote, further reducing the size and scope of what should be the most important governance meeting of the year.
Correction: an earlier version of this article mistakenly said the Victorian RSL AGM was tomorrow, July 8. The AGM is July 15. This article has been updated to reflect this.
