Is it the end for voting on a show of hands?
Given the importance of ensuring that all shareholders are provided with the opportunity to vote on resolutions, it is advisable for votes not to be held on a show of hands, say key stakeholders, given that the shareholders present at the AGM represent a tiny portion of the total shareholders.
The regulator, ASIC, has expressed concerns about chairs going to a vote on a show of hands rather than a poll after both the 2014 and 2015 AGM seasons. Regulator interest arose because some companies held the vote on the remuneration report on a show of hands and the resolution passed, but the proxy voting position disclosed to ASX showed that there was more than 25 per cent of votes cast against the remuneration report. If the vote had been taken on a poll, the companies would have received a first strike.
Governance Institute of Australia has been advocating for some years for the Corporations Act to be amended to mandate voting by poll on all resolutions at the AGM. The Institute points out that a poll reflects the wishes of shareholders present at the meeting as well as those shareholders who have lodged proxies. Only a very small percentage of shareholders, by number and value, generally attend the AGM. Shareholder attendance at the AGMs of ASX200 companies has been declining for years — only 0.17% of shareholders attended these AGMs in 2014 and 2013, according to research undertaken separately by both Governance Institute and Computershare.
And now US financial services company TIAA-CREF with engagement support from the Australian Council of Superannuation Investors (ACSI) has called on companies to adopt voting on a poll, with ACSI reporting that around three quarters of the ASX200 companies are now using poll voting for all resolutions (compared to around a quarter in 2010).
With the majority of those in attendance at AGMS being retail shareholders, for many years the Australian Shareholders’ Association expressed a strong preference for voting on a show of hands so that ‘the temperature of the room’ could be taken, but the ASA has also shifted its position and now formally supports voting by poll on all resolutions in its policy guidelines.
Deciding the vote on resolutions by poll is advisable in the interests of transparency and preserving the integrity of the voting, note stakeholders, because the voting results should reflect the will of all those eligible to vote. The Australian Supreme Court has set a precedent that the outcome of a shareholder vote must be truly representative of the collective will of shareholders. Companies that engage the show of hands method risk neglecting this principle in instances where the proxies indicate the directed votes of shareholders are inconsistent with the result on a show of hands.
Companies note that voting on a show of hands can expedite a meeting, particularly when resolutions are non-contentious and it is clear the proxies are overwhelmingly in favour. They comment that expediting a meeting in this way when the resolution is not contentious is intended as a courtesy to shareholders, who are not asked to wait while the poll is taken. Those in favour of reform note that the advent of hand-held electronic voting devices has speeded up the process of voting by poll. Hand-held electronic voting devices on the floor of the meeting add the votes to the proxies received and already tallied.
While recognising that the use of such devices is expensive and therefore a cost to shareholders, and not all companies will be able to utilise them, the stakeholders calling for law reform say that companies that cannot justify the expense of electronic voting devices can nonetheless point to the good governance outcome of ascertaining and recognising the will of all shareholders on all resolutions when they explain to the shareholders in attendance at the AGM why the voting is being conducted on a poll, given that shareholder may have to wait during the conduct of the poll.