23/11/2004 - 21:00

Reader Response: Focus on shareholder interest

23/11/2004 - 21:00

Bookmark

Save articles for future reference.

The Briefcase column (WA Business News, November 11) and at least one chairman about town joined in the assertion that malcontent shareholders should sell their shares. Briefcase goes so far as to label this group as ‘dim’.

Discontent by shareholders is usually focused on a specific issue, rather that the entire gambit of company performance and corporate governance.

Shareholders are often disadvantaged by the financial/legal terminology used at company meetings, and of course by the chairman’s absolute control of the microphone, and finally by the chairman’s broadside: ‘If not happy, sell’. 

Challenging any chairman is not for the faint hearted or weak kneed.

A chairman’s fundamental role is to act as the servant of the meeting and to deal with the business of the meeting, ensuring the wishes of the meeting are implemented.

Shareholders have a right, enshrined in law, to question the board of directors and the auditor and to make comment on the operation of their company. A chairman’s failure to respond effectively demonstrates his inability to deal with difficult or contentious issues in a public forum.

Shareholders should not go quietly.  Shareholders should not abdicate their moral responsibilities as owners of a company when they believe the company is doing something questionable. Nor should they acquiesce to the chairman’s response that they sell their asset. 

Indeed, perhaps it is the chairman who should depart if the company’s owners are unhappy.

The moral of this story: Shareholders who do their research and are prepared to stand out in a crowd have the ability to see further than those who do not.

• • •

Briefcase is not one to let the facts get in the way of a good story. For starters, Mincor does pay a fully-franked dividend, and is not a “non-dividend payer”, as Kerry Harmanis was quoted in the column on November 11. In addition, David Humann of Mincor is chairman of five companies and a director of one other, a bit of a difference from Briefcase’s report of Humann’s five directorships on November 18. 

Despite these facts being easily verified, Briefcase hasn’t undertaken basic research and hence is misleading his readers.

Briefcase doesn’t seem to understand the fundamentals of a company’s structure.  Shareholders, believe it or not, are the owners of a company and, as such, like to see profits in their pockets, not anyone else’s. 

Non-executive directors safeguard the owners’ equity and employees include senior executives, and executive directors. 

Owners can’t be too selfish in the overall scheme of things and need to reward their employees so they are motivated and achieve high levels of performance (i.e. profits). That means that both employees and owners benefit.

Let’s look at a very successful WA company, Wesfarmers.

Wesfarmers operates an employee share scheme and is empowered to issue loans to employees of up to 10 per cent of the issued capital of the company.

Such schemes are designed to align the interests of employees with those of the shareholders. 

If Briefcase, in his wisdom, labels this socialism, well I’m all for it. To boot, the business is based on a sustainable model and is focused on long-term wealth creation for the benefit of owners. 

Too bad if Briefcase nodded off during the Wesfarmers AGM, this owner is very interested in all activities and governance. Besides, my hip pocket nerve keeps me awake year after year.

There is far too much emphasis on rewards for directors – or, more specifically, non-executive directors.

One of their key roles is to provide the necessary checks and balances to safeguard shareholders’ equity. Non-executive directors should be paid a fair sum for their services but they have received massive rises in remuneration in recent years and these rises should not go unquestioned.

• Anne Pryor is WA branch president of the Australian Share-holders’ Association and owns a portion of shareholders’ equity in Mincor and Wesfarmers.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options