Gerrymander, or unexpected surprise?

At the 2016 AGM, Chairman O'Connor voted over 160 MILLION proxies in favour of all resolutions, which swamped all other votes. The Australian Financial Review has just published an article by Joe Aston that shows what happened.

It turns out that the Depositary Agreement covering American Depositary Receipts was revised in the middle of 2016 - without being put to shareholders - to allocate any votes to the chairman if not otherwise exercised by the beneficial holder. In other words, if ADR holders did NOT vote their shares, the chairman could vote them all as he saw fit - with no reference to the holder. In practical terms, the expected volume of undirected US proxies would make all other votes irrelevant.

I have recommended to the Company that it cancel the agreement and submit directors to the will of shareholders, based on their performance. There is a glimmer of hope. In the AFR article, Mr O’Connor is quoted as saying: “We didn't set out to seek [the proxies] as an objective; it was an inclusion that came with the updated agreement”.

If the Company argues that the agreement is technically legal and will be retained, I think this would be a serious mistake. Shareholders may well see this as a bald-faced attempt to entrench the Board in power.

Let’s see what happens.