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Chapter 8 - Disclosure of proxy voting
Listed companies should be required to disclose more information
relating to proxy votes
8.1
Section 251AA of the Corporations Law provides
that listed companies must record in the minutes the number of proxy votes
exercisable by proxies validly appointed in relation to each resolution in the
notice of meeting. Also, where voting is by a show of hands, the minutes must
record the total number of proxy votes for, against, abstaining from the
resolution and where proxies may exercise their own discretion. Where a
resolution is decided on a poll, the minutes must, in addition to the
information about proxy votes, also record the total number of votes cast in
favour, against and abstaining from the resolution. Companies required to
notify the ASX of resolutions passed at meetings, must, at the same time, pass
the information about proxy votes to the ASX. The disclosure of proxy voting
information was the fourth of the four matters which have been the subject of
complaint and/or concern expressed to the Government by the business community.
8.2
There is also an additional disclosure
requirement. New section 250J(1A) requires that, for a company that is subject
to a replaceable rule and does not provide to the contrary in its constitution,
the Chair must inform the meeting, before any vote is taken, whether any proxy
votes have been received and how the proxy votes are to be cast.
8.3
The PJSC received a range of views on the
purpose and operation of sections 251AA and 250J(1A), and other related matters
which it has set out below.
Arguments in favour of disclosure of proxy voting information
Enhancing the monitoring role of
institutional investors
8.4
The Investment & Financial Services
Association Ltd (IFSA) supported the disclosure of information relating to
proxy voting on a number of grounds, including the positive effect that such
disclosure will have on the capacity of institutional investors to fulfil their
responsibilities:
In the absence of disclosure, institutional investors are unable
to properly fulfil their monitoring role or to comply with client mandates
which require reporting on the outcomes of proxy voting activity. Disclosure of
this kind is already compulsory under the SEC legislation in the United States
and has recently been recommended for adoption in the United Kingdom by the
Hempel Committee Report.[1]
8.5
The IFSA highlighted the significance of this
issue given that voting is one of the most “potent rights” of investors,
coupled with the fact that proxy voting is the most feasible method of voting
for the majority of investors in listed companies and for institutional
investors who often vote via the custodian. According to IFSA, the show of
hands method of voting is generally unsuitable for custodians because of the
number of investors whom the custodian represents. Yet most resolutions are
passed by the show of hands method. IFSA raised the concerns that, in the
absence of satisfactory disclosure about proxy voting, the efforts of many
institutional investors to discharge their voting responsibilities are unseen
and consequently institutional investors have difficulty in reporting their
unseen efforts to the satisfaction of their clients. The disclosure of such
information will enhance the monitoring function of institutional investors and
enable them to satisfy their clients that they have properly discharged the
responsibilities entrusted to them.[2]
Transparency of all voting
8.6
The Chair of the general meeting is obliged to
ensure that decisions reflect the true will of the meeting. For this reason
proxy votes are counted and the results made available to the Chair prior to
the meeting. The Chair can then assess whether decisions taken on a show of
hands would differ if taken on a poll. If so, the Chair must call for a poll.
IFSA submitted that shareholders have a legitimate interest in knowing the
proxy voting information. Including this information in the reports to the ASX
will enable shareholders to properly monitor the Chair’s decisions in relation
to the true will of the meeting. According to IFSA, the transparency of voting
which the disclosure will facilitate will ensure that shareholders are able to
make assessments about the voting process which they were previously unable to
do.[3] For example, shareholders can
assess the relative importance of their vote, the extent of proxy voting and
its impact, and the possible relevance of that information for future votes.[4]
Policy objective needs to be
balanced
8.7
The Australian Law Reform Commission (ALRC)
applauded the policy objective behind the new provision. According to the ALRC,
the disclosure of proxy information will:
enable shareholders to know the nature of the proxies given by
major shareholders and the way in which they are determinative of particular
issues before shareholders’ meetings.[5]
8.8
The ALRC recognised that the new provision might
place too high an administrative burden on company officers in recording
precise details, particularly where detailed breakdowns were not necessary. The
ALRC was of the view that any administrative difficulties that do arise need to
be carefully weighed against the policy objective so that compliance costs did
not outweigh the benefits of disclosure.[6]
Disclosure would reveal the true
picture of company control
8.9
The PJSC was told that before the disclosure
requirement was introduced it was difficult to obtain information relating to
proxy voting to enable an assessment of the extent to which voting by
institutional investors is exercised by proxy and the extent of control
exercised by major shareholders over a company.[7]
On the basis of the limited information that was available, Corporate
Governance International Pty Ltd (CGI) found that the average level of proxy
voting in the group of 100 major listed companies was 32%. In some cases it was
as low as 15-20% of the total available voting shares. It also advised that in
one case the number of shares held by a few custodians but not voted by them by
proxy, exceeded the total number of shares voted by proxy. In theory at least,
it was possible that the resolution may not have been passed if the shares not
voted had been voted. Given that institutional investors own or manage around
60% of Australian equities, CGI concluded that a substantially large number of
votes on shares managed or owned by those institutions is not being exercised
by proxy.[8]
CGI submitted that:
This has implications not only for the investment management
industry and their clients and beneficiaries but even potentially for the
control of a listed company and the test whether it is a subsidiary of another
company. For example, if, say, 70% of the voting capital of a listed company is
owned or managed by institutional or other public investors but only 25% is
ever voted by proxy, what does that say for the ability in practice of a 30% major
shareholder to control the composition of the board? It is, therefore,
important to extend the number of companies whose proxy voting statistics are
disclosed so that the results summarised above of the sample can be tested.[9]
8.10
A case in point is the disclosure of the BHP
proxy voting information following its 1998 AGM and the influence of the proxy
vote of the Beswick holding:
BHP is a very good example. Very interesting because it actually
owns 17 per cent of itself under the Beswick holding which is now actually
being removed. It is being done away with. When one looked at the voting last
year by BHP, which was the first time it had to be disclosed, effectively that
17 per cent called the shots. That made the decision as to what would happen.[10]
8.11
In the period since the introduction of the
disclosure requirement, CGI noted that the disclosure of proxy voting
statistics has been made by companies which previously withheld this
information.[11]
Disclosure will assist in
increasing institutional investor voting levels
8.12
The PJSC was told of current initiatives in the
UK to encourage institutions and funds managers to make positive use of their
voting rights in enhancing company performance.[12] The 1998 UK Hampel Report
noted that there had been no significant rise in institutional investor voting
which remained at 40%. The July 1999 report of the Committee of Inquiry into UK
Vote Execution found a similar low voting figure which partly reflected
conscious decisions by institutional investors not to vote on routine matters
of corporate business but also a complex and antiquated voting system.
Referring to the Committee’s report, Mr Sandy Easterbrook, Director of
Corporate Governance International Pty Ltd observed that:
The average voting level in widely held top 100 companies was 32
per cent compared with the 45 per cent to 50 per cent in the UK. The UK
Secretary of State is saying, ‘This has got to go up.’ It has to. The report,
which has been done by a committee of inquiry, came out in July in the UK
saying that it has to go to 60 per cent. If it does not go to 60 per cent, the
government is going to have to do something about it. If you contrast the UK
figure with the Australian figure, it is just mind-boggling.[13]
8.13
It was submitted to the PJSC that the only
economical and effective way for institutions to exercise their voting rights
is by proxy.[14]
The disclosure of proxy voting information enhanced the transparency of all
voting and assisted institutional investors in fulfilling their
responsibilities.[15]
Corporate governance disclosure
8.14
The Accounting Bodies supported the disclosure
requirement as it was in keeping with the standards of corporate governance
disclosures. The Accounting Bodies noted also that the disclosure of proxy
voting results was consistent with the recommendation of the UK Hampel report.
The Hampel report recommended that once a resolution had been decided on a show
of hands, the total proxy votes for and against the resolution should be
announced.[16]
Qualified support
8.15
A number of submissions gave qualified support
for the disclosure requirement noting that:
- Disclosure should extend not only to the total number received on
each specific motion but also to the for/against split of proxy votes given to
the Chair as ‘open cheques’ for the Chair to cast as the Chair sees fit;[17]
- Disclosure should be limited to poll voting, otherwise it would
impose an onerous corporate administrative requirement on companies. Poll
voting is generally of greatest interest;[18]
- Administrative problems may arise if last minute authorities by
corporate shareholders are tendered in instead proxies being lodged.[19]
Arguments against disclosure of proxy voting information
Section 251AA leads to the
recording of meaningless information
8.16
The principal argument raised against the
disclosure requirement in section 251AA is that it adds no value and is
“misconceived”:
It has the hallmarks of something dreamed up by someone
concerned with the recording of useless and irrelevant statistics merely for
the sake of recording useless and irrelevant statistics.[20]
8.17
The PJSC was told that the application of the
requirement to situations where a resolution is disposed of by a show of hands
is “at best anomalous and at worst meaningless”.[21] Voting will be by a show of
hands only when it is clear that the result on the show of hands represents the
wishes of the membership and that there is no real point in proceeding to a
poll. The meeting’s capacity to make that finding is assisted by the compulsory
advance notification of proxies under section 250J(1A). Section 250L provides
that a poll can be demanded by at least 5 members entitled to vote on the
resolution or by members with at least 5% of the votes or by the Chair. The
argument follows then that:
In these circumstances, the compulsory recording under section 251AA(1)(a)
in relation to a determination reached by show of hands of information about
what would (or, more accurately, might) have happened had the matter been
decided by a poll serves no purpose whatsoever. Recording of idle speculation
is not something usually compelled by statute. And here it is entirely
pointless. [22]
8.18
Similarly the Chartered Institute of Company
Secretaries advised that section 251AA(1)(a) was misconceived. It requires the
minutes of the meeting to record proxy votes that, on a show of hands, have no
bearing of the determination of the resolution. The Institute was concerned
that such disclosure could be seen to question the validity of a decision
reached on a show of hands where that did not coincide with the proxy votes.[23]
8.19
Mr Barrett also queried what section 251AA(1)(b)
was intended to achieve. In Mr Barrett’s experience, although a person might
lodge directions as to voting in a proxy form with the company, there is no
guarantee that the appointor’s votes will be cast in accordance with that
direction. Mr Barrett referred to instances where persons are appointed as
proxy without their knowledge and never exercise the votes of the appointors,
where proxies have failed to attend meetings and where appointors have changed
their voting directions to proxies without informing the company. In these
circumstances, Mr Barrett submitted that “nothing” is achieved by recording all
of the information required under section 251AA(b).
8.20
Mr Barrett also pointed out that voting by proxy
represents only one method of voting by an agent. Shareholder corporations can
also appoint a representative under new section 250D. Institutional investors
often prefer that method of representation. These appointments will not be
taken into account when statistics concerning proxies are recorded under
section 251AA. This further detracts from any relevance that the disclosure
requirement might have.[24]
In summary, Mr Barrett concluded that section 251AA “serves no intelligible
purpose and should be repealed”.[25]
8.21
The West Australia Joint Legislative Review
Committee of the Australian Society of CPA, the Institute of Chartered
Accountants and the Chartered Institute of Company Secretaries commented in
similar terms:
There does not seem to be any benefit to be gained from minuting
the proxies lodged with the company, other than a comparison between those
figures and the votes actually cast. However, even if there is a discrepancy
between the two (which is common) there is no conclusion that can be drawn from
such a result. The proxy leaving the meeting before the vote is taken would
cause this outcome and it is not the duty of the chair to ensure that other
proxies meet their obligations. We do not have a firm position on this section.[26]
Misleading statistics
8.22
Rio Tinto Ltd submitted that information on
proxy voting intentions required to be disclosed under section 251AA(1)(a)
served no useful purpose other than to confuse.[27] When voting is by show of
hands, that is when votes are not cast, proxy intentions play no part in the
determination of the resolution. The same applies where the vote is taken by
poll. In the latter case, some shareholders who have lodged a proxy attend the
meeting and vote and revoke the proxy appointment. Further, some corporate
representatives attend the meeting and vote instead of lodging a proxy. It was
argued, therefore, that “the statistics of voting intentions, other than being
superfluous, are also misleading.”[28]
A target level for institutional
investor voting is irrelevant
8.23
The PJSC was told that there was no “ideal” or
target level of voting that would encourage a rise in institutions to register
their votes or one that was indicative of corporate best practice. In a report,
Voting at Shareholder Meetings, Rio Tinto Ltd summarised the results of
shareholder participation since 1993 and concluded that “the level of
shareholder participation increases with the importance of the resolution and
vice versa.”[29]
Shareholders Lodging Votes
Proxies
|
|
Number
|
% of Total Shareholders
|
Number (m)
|
% of Total Issued Shares
|
AGM
|
April 1994
|
416
|
1.2
|
39
|
12.8
|
AGM
|
April 1995
|
314
|
0.9
|
32
|
10.5
|
EGM
|
December 1995
|
13,507
|
33.8
|
192
|
62.8
|
AGM
|
May 1996
|
3,577
|
8.8
|
92
|
28.0
|
AGM
|
May 1997
|
2,583
|
6.5
|
86
|
26.2
|
EGM
|
February 1998
|
4,024
|
10.0
|
117
|
35.6
|
AGM
|
May 1998
|
2,714
|
6.8
|
104
|
31.7
|
AGM
|
May 1999
|
2,444
|
6.0
|
84
|
27.2
|
All items of business
covered at the meeting shown above were passed with a “for” vote in excess of
98% of the total votes.[30]
8.2
The report found that the level of voting for
“routine” corporate business at AGMs was lower than that for the more important
matters covered at the EGMs. The EGM in December 1995 sought shareholder
approval for the Dual Listed Company merger with Rio Tinto plc, while the EGM
in February 1998 was held to consider the introduction of a share buy back program.
8.3
In addition, Rio Tinto Ltd submitted that the
disclosure requirement has had no effect on increasing the level of shareholder
voting. In fact the level of voting had fallen from 31.7% at the May 1998 AGM
to 27.2% at the May 1999 AGM. The report noted that:
...S251AA has not led to higher shareholder participation which
seems to have been, at best, part of the logic which led to its introduction.
If indeed there is a desire to increase the level of voting, it would seem
preferable to target the shareholders rather than the companies (through
additional questionable mandatory disclosures) to encourage greater voting. It
also seems logical for those groups which seek higher levels of voting to
communicate this with their membership (institutions) and perhaps require their
members to report on proxies lodged and voting rather than mandate it for the
companies in which they invest.[31]
Disclosure is irrelevant where
business is formal
8.4
The Henry Walker Group Ltd described the use of
proxy voting by institutional investors as “extensive”. In these circumstances,
the Group queried the relevance of disclosing how proxies have voted especially
on a show of hands and at annual general meetings when the nature of business
is in most cases a formality.[32]
8.5
Several other submissions opposed the
requirement for companies to disclose more information about proxy votes on the
following grounds:
- There is sufficient information provided already on entitlements
and requirement of proxy voting;[33]
- Section 251AA is difficult to comply with logistically,
especially at a large meeting where votes are on a show of hands;[34]
- Logistical difficulties are compounded if different classes of
shares are involved;[35]
- The disclosure of information required by section 251AA
duplicates what is included in the minutes under section 250J(1A);[36]
- The announcement of proxy intentions might save meeting time but
will lose the goodwill of small shareholders.[37]
Additional disclosure requirement –
new section 250J(1A)
8.6
Freehill Hollingdale and Page addressed the disclosure
requirement in new section 250J(1A) that before a vote is taken the Chair must
inform the meeting whether any proxy votes have been received and how the proxy
votes are to be cast. Freehill Hollingdale and Page commented that:
- Section 250J(1A) is ambiguous about the details the Chair should
provide to comply with the section and whether the Chair has to disclose proxy
votes in favour of the Chair or all proxy votes received. If the intention is
for disclosure to be limited to proxy votes given to the Chair, the wording in
section 250J(1A) should be clarified;
- The disclosure requirement in section 250J(1A) fails to take into
account that meetings may involve thousands of proxy votes, many of which are
revoked at the meeting, and it is often impossible to determine how many
proxies there are; and
- It is impractical to require the details about proxy votes to be
disclosed prior to the meeting.[38]
8.7
The Chartered Institute of Company Secretaries
told the PJSC that section 250J(1A) would discourage attendances at general
meetings and drive away genuine individual shareholders:
Section 250J(1A) reinstates a procedure that was commonplace at
shareholders’ meetings for many years, but was discontinued in the face of
strong shareholder dissent. It was not unusual for shareholders to state that
“If that was the attitude of the Chairman (ie. to present the meeting with a
fait accompli by announcing the proxy voting intentions in advance), what was
the value for small shareholders in attending the meeting at all?”[39]
8.8
Similarly Arnold Bloch Leibler opposed the
disclosure requirement in section 250J(1A) noting that it placed voters at the
meeting in a different position from those that voted by proxy.[40] In the past, the practice of
announcing the number of proxy votes received prior to a vote being taken at a
meeting was criticised by shareholder representatives on the basis that it was
used as a tactic to stifle pre-vote discussion.[41]
8.9
The West Australia Joint Legislative Review
Committee drew attention to possible inconsistencies regarding section 250J. As
noted above, that section requires the Chair to disclose the number proxy votes
received and how these are to cast before a vote is taken. This is misleading
because section 250A(4) provides that proxies do not have to vote on either a
show of hands or a poll. Therefore, there is potential for discrepancy between
the pre-vote position announced by the Chair prior to the vote and the actual
vote.
8.10
The Review Committee also pointed out that the
wording in section 250J is open to differing interpretation. The words in
section 250J(1A) “how they are to be cast” could be taken to refer to the
method used in casting their votes rather than the anticipated number of votes.[42]
Inconsistency between sections 250J
and 251AA
8.11
Several submissions advised that there is an
inconsistency between sections 250J and 251AA.[43]
Arnold Bloch Leibler noted that section 251AA requires the company to record in
its minutes how proxy votes are cast. This provision is at odds with section
250J(2) which, in part, provides that “neither the chair nor the minutes need
state the number or proportion of the votes recorded in favour or against”.[44]
Related Matters
Exemption from provisions relating
to proxies
8.12
The Grains Council of Australia Inc submitted
that decisions regarding the restructure of the Australian Wheat Board and the
company structure of the Australian Wheat Board Limited (AWB Ltd) may be in
conflict with provisions of the Company Law Review Act 1998. The AWB Ltd
was established following negotiations with grower organisations and an
independent review of the Australian Wheat Board. To reflect grower control and
ownership of the AWB Ltd, the Grains Council drafted into the constitution of
the AWB Ltd and its Nominated Companies specific requirements relating to:
- The number of Directors elected from a region, which is based on
the “weighted” voting system of A and B Class shareholders;
- The definition of a grower; and
- A restriction on the number of open proxy votes to be held by the
Chairman and Directors of AWB Ltd and the nominated companies.
8.13
To prevent the disenfranchisement of Class A
shareholders, who represent all wheat growers, due to the disaggregation of the
shareholding the Grains Council resolved to restrict the number of open proxies
to be held by the Chairman and/or Directors of AWB Ltd.[45] It was also resolved that the
Chairman and/or Directors of the company should not exercise more than 5 open
proxies in relation to any resolution.[46]
The PJSC was told that the Senate Rural and Regional Affairs Legislation
Committee had examined the company structure of the AWB Ltd and recommended
that it should be exempted from any of the unintended consequences of the
Company Law Review Act that may impact on the system of proxy voting.[47] The Grains Council argued that
the structure of the new company was unique and derived from the old statutory
authority:
Mr Fisher-...the grains industry believes that we are slightly different from
all of the companies which will now be treated under the Company Law Review Act
because, as you are probably aware, the new company AWB Ltd is a transfer from
an old statutory authority into a new private company. Growers have had a two
per cent compulsory levy deducted from their proceeds since 1989 and the
government, supported by the opposition, made a decision that those deductions
would be compulsorily transferred into shares and growers would have those
shares allotted to them.
The debate about
the AWB restructure has been very emotive and very passionate on a regional
basis and on an individual basis. We believe that there is a strong case in the
interim to allow the AWB to be treated slightly differently from normal
companies, given the history of the AWB and its transfer from, as I said, a
statutory authority which started in 1949-over 50 years ago-to
where it is today.
In particular,
grain growers will be shareholders. There are approximately 40,000 to 50,000
grain growers out there who are on individual properties and they are a very
disaggregated and dispersed group of shareholders. We believe it is important
that there be mechanisms allowed under the constitution of AWB Ltd to empower
those shareholders to give them a sense of ownership and also a sense of duty
to their new company.
Currently, the determination by the government
is that the constitutions of AWB Ltd should reflect the Company Law Review Act
1998, and we believe that that is not consistent with empowering our
shareholders...We have proposed that directors be allowed to hold only five open
proxies for the election of directors. We have no view on how many closed
proxies they hold-that does not interest us-but because of our
disparate shareholding we believe that the worst thing that could happen to
AWB, as it launches into its private life, would be for a group of shareholders
to travel to an AGM in order to elect their directors to their new AWB, only to
find that the current directors were holding open proxies and that they had the
capacity to outvote the growers who had actually made the effort to attend the
AGM.[48]
Revocation of an earlier proxy
appointment
8.14
Computershare Registry Services submitted that
section 250A(7) in respect of the appointment of a proxy was flawed. Section
250A(7), which reads “A later appointment revokes and earlier one if both
appointments could not be validly exercised at the meeting” made little sense,
unless the word ‘could’ is substituted for the words ‘could not’.[49]
Whether an abstention is counted as
a vote
8.15
Section 251AA requires listed companies to
record the number of proxy votes validly appointed in relation to each
resolution in the notice of meeting. Where voting is by show of hands, the
minutes must record the total number of proxy votes “For”, “Against”,
“Abstaining from the resolution” and “May vote at the proxy’s discretion”.[50] Where a resolution is decided
on a poll, in addition to the information about proxy votes, the minutes must
record the total number of votes cast “In favour of the resolution”, “Against
the resolution”, “Abstaining from the resolution”.[51]
8.16
The PJSC was told that section 251AA(1)(b) as it
stands could be interpreted to mean that an abstention is a vote cast and may
be counted in the total number of votes cast, whereas an abstention is a vote
not cast.[52]
As Mr Ian L Falconer, Chairman of the Legislation Review Committee of the
Chartered Institute of Company Secretaries explained to the PJSC:
The way that is set out in the section is contrary to the common
law approach to an abstention, in which we feel an abstention is not a vote,
whereas the Corporations Law talks in terms of an abstention being a vote and
having to report the number of abstentions. Our submission quoted what we feel
is the leading authority on this-Horsley’s Law and Procedure of Meetings.
Clearly, their view and the common law approach is that the abstention is not a
vote.[53]
8.17
The practical effect of counting abstentions as
votes cast is to increase the total number of votes in determining the
percentage of votes cast in favour of a resolution.[54] In addition, there is the
practice described by Rio Tinto Ltd for some institutions to use the abstain
box to record those shares where no voting instructions have been received in
order to balance the number of shares on the proxy form with the total
shareholding of the institution.[55]
Conclusions
8.18
The PJSC accepts that the rationale for
disclosing proxy voting information is to encourage institutions to exercise
their voting assets. Notwithstanding this rationale, however, the PJSC agrees
with Rio Tinto Ltd that the promotion of shareholder voting is not achieved by
mandatory disclosures of this kind. To date, there is no evidence to suggest
there is a step change in the way shareholders or institutions use their voting
rights as a result of the requirement for additional information. In the case
of Rio Tinto voting this has led to a fall in shares actually voted. Further,
the evidence before the PJSC suggests that shareholders do not vote on routine
items of business.
8.19
The PJSC was told that a high proportion of
Australian equities are now held by institutional investors, although these
shares are held on behalf of individuals, as members of superannuation funds
and holders of insurance policies. This places a particular responsibility on
institutions to promote a transparent relationship with the company and to be prepared
to reveal to clients what their voting records are. The PJSC believes that as a
first step institutions should have voting policies for the way in which they
exercise their voting assets. Institutions should be able to explain their
voting policies and volunteer to their clients information on how they voted.[56]
8.20
The PJSC received considerable evidence on the
need for transparency in the voting process and for both small and large
shareholders to have confidence in the meeting and the way in which the meeting
is conducted. Records should be maintained and open for inspection so that
there is an accurate and faithful record of how that voting was exercised. That
is not in doubt. However, witnesses told the PJSC that sections 251AA and
250J(1A) are inconsistent and may lead to confusion and unnecessary
administrative difficulties. The reporting of proxy voting intentions may also
be misleading as the Corporations Law does not reflect accurately the nature of
a voting direction to an agent either with or without voting instructions. The
PJSC notes that the Companies and Securities Advisory Committee (CASAC) has
examined the operation of section 251AA in a recent discussion paper and
concluded:
The Advisory Committee considers that the existing requirements
regarding disclosure of proxy voting details are unworkable. It considers that
the minutes should only be required to record the outcome of the show of hands
or the poll, not the additional information required by the current provision.
Also, because the proxy information to be included under the current
requirement concerning voting by show of hands takes no account of shareholders
present in person or by corporate representative, it provides no reliable
guidance on the extent of shareholder participation in meetings. [57]
8.21
The PJSC endorses the findings of CASAC on this
matter.
8.22
As a proxy appointment lodged with the company
is not required to disclose voting intentions, it is difficult to see how the
reporting requirement can be accurately met. The PJSC accepts that there is no
reason for the minuting of proxy intentions where these have not been exercised
when a resolution is disposed of on a show of hands or when a vote is taken by
poll. Accordingly the PJSC concludes that section 251AA should be amended to remove
the unnecessary requirement in subsection 1(a). The PJSC also concludes that
section 250J(1A) should be replaced with a provision that requires the minuting
of proxy votes “For” and “Against” the resolution when a resolution has been
decided on a show of hands.
8.23
The PJSC believes that in respect of the
treatment of abstentions from voting or refraining from voting on a resolution
the Corporations Law should reflect the position at common law. The authority
on the procedure, law and practice of meetings, Horsley’s Law and Procedure
of Meetings states that under common law principles “...every person who is
present at a meeting and entitled to vote has one vote. At his discretion he
may exercise that vote or refrain from voting. The decision on each motion is arrived
at by those persons who do vote, on the basis that its is carried if more votes
are cast for the motion than against it and it is lost if the reverse is the
case. Persons who refrain from voting do not effect the result.”[58] An abstention therefore is
neither a vote cast nor an intention to vote. The latter construction has been
used by institutions in balancing the number of shares on the proxy form with
their total shareholding. The PJSC is concerned that this practice could lead
to a situation where an institutional investor is required by the courts to
disclose whether or not it received instructions from the beneficial holder
before marking the abstain box on the proxy form. Clearly this situation is
undesirable. The PJSC concludes that subsection 251AA(1)(b) about votes cast
abstaining on the resolution should be removed.
8.24
In the view of the PJSC the issue raised in
respect of appointing a proxy does not relate to the exercise of a dual proxy
or whether two appointments are mutually exclusive, but rather which
appointment should take precedence if more than one appointment can be
exercised at the meeting. The PJSC agrees with Mr Cantrick-Brooks that there is
a presumption that a later appointment reflects a person’s current thinking.
The PJSC concludes that section 250A(7) should be drafted to reflect this.
Recommendation
8.25
The PJSC recommends that the Corporations Law
should be amended as follows:
- section 251AA(1)(a) should be repealed;
- section 250J(1A) should be repealed and replaced
with a provision that requires the minuting of proxy votes “For” and “Against” the resolution when a resolution has been decided on a show of hands;
- section 251AA(1)(b)(iii) should be repealed;
- section 250A(7) should be amended to correct
what appears to be a drafting oversight.
- the AWB Ltd should be granted exemption from the
provisions of the Law relating to proxy appointments.
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