From the ever-current BNet, comes this article from Richard Northedge (July 20th, 2009 @ 2:31 am).
The RSPCA ordered the removal of the dozen lemmings brought to British Airways’ shareholders’ meeting but they had done their job of illustrating the fate the trade unions think their members face.
Boards have become used to meetings being hijacked for publicity stunts, but the practice will increase, thanks to the UK’s interpretation of the EU directive on shareholder rights.
The directive takes effect on 3 August 2009 andBritain’s Department for Business plans to make it much easier for dissident shareholders to place hostile resolutions at companies’ meetings. The current requirement to submit resolutions six weeks before the meeting will be cut to just 14 days.
That means resolutions can be added after the annual report has been sent to shareholders, requiring the company to post a new notice of meeting to all investors. Companies that dispatch the new documents promptly and then receive another resolution would have to circulate new voting papers again.
And who pays for these extra mailings? Not the disgruntled investors. The proposal is that the company foots the bill. Marks & Spencer calculates it would cost £150,000. Doing another mailing would double that figure.
There is thus no downside for the dissidents. Their resolution can be as frivolous or publicity-seeking as desired so long as the thresholds for adding it are met.
And Pirc, the long-established activist investor advisory group, has solved the quantum difficulty by forming 100 separate companies, each to hold a single share in its target. That ensures sufficient “different” shareholders support its moves and its friends at a local authority pension fund will provide the stock to meet the total holding test.
Having used this tactic to add a resolution to M&S’s annual meeting calling for the chairman’s early resignation Pirc now has a ready-made portfolio of shell companies to attack its next targets.
Activists gain whether or not their resolution receives support because it generates headlines and sows dissent ahead of the meeting. If the resolution is actually passed, that is a bonus.
But the loser is democracy. Dispatching voting papers so late disenfranchises many institutional investors because they have insufficient time to meet advisers or trustees before voting.
And the fault is not with Brussels. The EU does not say resolutions can be submitted until 14 days before a shareholders’ meeting, simply that a deadline must be specified. Whitehall has gold-plated the European Commission’s directive.
There is much wrong with shareholders’ meetings, not least because investors and directors have different views of their purpose. But banners, placards, lemmings and pigs do not dignify the occasions. There are plenty of companies that deserve to be criticised but facilitating frivolous resolutions lowers the level of debate when it should needs to be raised.
I think the best practice would be to allow shareholders to submit alternate resolutions after the annual financials come out, and before the annual report. These can be collated by the auditors or a public body, and introduced to shareholders and the company. Surely all our online experience makes this an issue that can circumvent the stupid mailing of paper, and will allow for a more efficient audit trail?
A propos nothing, I’m doing a course in which it describes the introduction of a pig (Cedric) at a British Gas meeting.