AUSTRALIAN Wool Innovation chairman Wal Merriman is alleged to have withheld information from shareholders on the number of proxy votes received and how the proxy votes were cast at previous board elections.
Shareholders have raised questions about the chairman’s decision to not disclose proxy votes, which some say have resulted in the surprise ousting of former board member George Falkiner, the failed election bid of Will Roberts and the surprise appointment of current board member Paul Cocking, in 2013.
In response to questions to AWI about whether Mr Merriman informed shareholders of the number of proxy votes received and how they were cast, media manager Marius Cuming said “the answer is no”.
According to the Corporations Act, before a vote the chairman should inform the meeting whether any proxy votes had been received and how the proxy votes were to be cast.
Current board nominee Don MacDonald, Macdonald and Co Woolbrokers, said woolgrowers questioned the transparency of the AWI elections.
“Shareholders should have the final say in how the election is decided, not the chairman,” Mr MacDonald said.
“I question this practice given it is an organisation where shareholders cannot opt-out if they don’t like the performance of the board or chairman, unlike an ASX-listed company where disgruntled shareholders can sell their shares.
“This is a compulsory levy-funded research and development corporation that receives government funding, holding them up against an ASX company is not comparing apples with apples – AWI must require greater transparency because their shareholders are locked in.”
With the approach of this year’s board election to be held on November 17, a national debate has flared about the fairness of “tracking and stacking” votes at board elections after it was reported Mr Merriman had access to voting data while the election process was ongoing from independent share registry, Link Market Services.
Mr Cuming said access to voting and proxies was standard operating procedure for corporations.
The power to track an election before ballots close and the influence of a chairman’s proxy vote has industry groups questioning the fairness and trust in the voting system of levy funded organisations.
WAFarmers livestock vice president Steve McGuire, who is also WAFarmers WoolProducers Australia director, questioned whether it was ethical to access to this insider intelligence.
“We hold concerns for this behaviour as it could be a way for a board to gain an unfair advantage over voters and actively alter the outcome of an election by stacking votes for or against a nominee,” Mr McGuire said.
“Should all members be able to seek how voting is progressing before voting closes, this would not be an issue as all stakeholders involved would be on an even playing field, but it is only when one person in a position of influence has access to this information that this could be considered unethical.
“If members of an organisation and board nominees were to discover the outcome of an election was directly altered under influence from a chairperson, it would have the potential to shatter industry’s confidence in fair voting processes and the organisation itself.”
Shareholders who do not attend a meeting in person are eligible to vote by proxy, either by selecting the voting direction or lodge a blank proxy, known as an undirected proxy.
Chairpersons are typically selected as the default proxy holder.
“By giving an undirected proxy to a chairman you’re giving them a blank cheque,” corporate governance expert Daniel Smith, of CGI Glass Lewis, said.
“If a shareholder has a strong view about voting on an issue at the company, they should cast their vote.”
Mr Smith said it was common practice at ASX-listed companies to monitor votes prior to the chairman casting proxies.
“It basically gives the board intelligence and allows the board to lobby shareholders to change their mind if they disagree with the board recommendations,” he said.
“It does not mean companies are behaving badly.
“They’re not breaking the law by doing so – it is not a question of ethics – any reasonable board would want to secure a favourable outcome.”
However, Mr Smith said this voting power could be exploited if there was a dispute in regard to a shareholder vote.
“If you have a group of shareholders who want to remove a director, then they would be at a disadvantage to influence undecided shareholders relative to the incumbent board,” he said.
“Is it fair? It is a tool to ensure the stability of the status quo.
“This is a tool for persuasion. It doesn’t give board the power to change votes, it gives intelligence on who to contact to convince them to change their mind.”