23/11/2004 - 21:00

Thorny issue of value and AGMs

23/11/2004 - 21:00

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The AGM season is upon us and that perennial issue of their value is again being debated. The issue has been discussed nationally, but it is as local as ever – just check out the response (page 12) of Australian Shareholders’ Association WA branch pres

The AGM season is upon us and that perennial issue of their value is again being debated.

The issue has been discussed nationally, but it is as local as ever – just check out the response (page 12) of Australian Shareholders’ Association WA branch president Anne Pryor to criticism from Tim Treadgold’s Briefcase column last week.

Briefcase has pursued a line of investigation about what sorts of issues are being debated at AGMs and what agendas are behind them.

In recent years, the biggest local examples of how AGMs can lose focus are Wesfarmers, which endured forest protests, and WA Newspapers, with a lot of questions about the print size in The West.

Both are valid issues for management to deal with but have little to do with enhancing the value of shareholder meetings for investors.

Nationally, we have seen unions hijack AGMs over employee pay rates – using the public opportunity offered by the meeting to convey a message intended for well beyond shareholders.

It’s not to say that some companies don’t deserve this kind of treatment – especially one former asbestos group – but too often a handful of shares buys the right to upstage the chairman and management of very well run businesses.

The situation is so bad that some leading lights have advocated the abolition of the AGM.

None of us would like to see that. Few companies in their histories don’t have a period where the board and management need to face the music on their decisions.

It’s amazing how the discomfort of a public airing will reconcile people with their poor performances.

But, as I see it, a two-tier system is being developed.

Big companies which make national news and, mainly, have good corporate governance are having their AGMs hijacked by a whole bunch of special interest groups or, ironically, shareholders who simply have agendas other than business performance.

These companies are constantly in the public eye and rarely move without media attention and close analysis of their actions.

Abolishing annual meetings for these companies, whose national shareholder bases preclude the opportunity for many investors to attend anyway, may make sense.

But below them is the vast majority of stocks that barely rate a headline from one year to the next.

These small to medium companies are simply off the public radar, yet their executives often have pay packets that would rival the managers of much bigger entities. Many don’t bother with investor communications and keep their information to the bare minimum

The AGM is, for many investors, the only time to ask questions of these companies and to allow some public exposure of their actions.

For all the pain experienced by some, abandoning the annual meeting would be a mistake.

Rating contribution

I was interested to note that a WA parliamentary inquiry had recently concluded that the State Government had to compensate regional councils for the money they were missing out on because many mining companies were not obliged to pay council rates.

At WA Business News we have reported previously on this growing issue.

No-one is going to suggest that councils don’t need the funds, but there sometimes seems to be a lack of awareness about the role of miners in this State.

Even the examples of disparity between rates paid by miners and retailers in some regions seemed naive in my view.

For instance, it was pointed out that Wesfarmers Premier Coal paid $387 while an unnamed retailer paid $34,000, despite both employing local people and using local infrastructure.

Without the mine the local retailer probably wouldn’t exist.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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