Australian Wool Innovation (AWI) has been forced to defend its position on the disclosure of proxy votes, amid ongoing pressure to overhaul its election process.
The peak industry body came under heavy scrutiny at Senate estimates today (Tuesday) after CEO Stuart McCullough suggested five of the 82 Ernst and Young (EY) recommendations in the review of performance (ROP) would be dependent on a shareholders vote at an extraordinary general meeting in March 2019.
The revelation came after the Federal Agriculture Minister labeled AWI’s implementation plan “short on detail” and “vague”. Read the Minister’s response here.
Mr McCullough said the AWI board felt the shareholders of the company had a right to vote on implementing those five recommendations.
Other recommendations dependent on a shareholder vote include defining the independence of directors, scrapping the need for 100 signatures for every board nomination, adopting a 10-year cap on its board directors and reviewing the board nomination committee.
It was these recommendations that were at the heart of the government initiated independent review, according to Nationals Senator Barry O’Sullivan.
His heated questions led to AWI secretary Jim Story reneging on the proxy position and accepting the recommendation to amend the constitution to include disclosure of proxy votes.
“Part of the review was instigated by this committee on very specific issues relating to matters that had been dealt with at estimates,” Senator O’Sullivan said.
“It wasn’t just a ‘tickety toc’ review that just happens every three years. It included quite specific terms of reference developed by this committee.”
The Queensland Senator also asked if proxy votes came in to the chairman’s possession as directed votes or undirected.
Mr McCullough said they were working on proxies being disclosed at the start of any general meeting.
Mr Story argued that the proxy voting system didn’t need to be placed in front of shareholders for voting.
“I think we are getting a tad confused here,” Mr Story said.
“That recommendation finds its way into a constitutional change because it arises as one of the so called rules put in by reference.
“AWI doesn’t seriously contest those and the proposal is that it would be dealt with by an announcement at the general meeting at an appropriate spot about details of those proxies held in a way that listed companies are required to do.”
Senator O’Sullivan twice asked if AWI were going to embed the proxy changes into the constitution before Mr Story finally declared a ‘yes’ response.
“It seems to me that there is some conflict between what you want to do and the recommendation of EY – is that a fair comment?” Senator O’Sullivan said.
“EY wanted you to embed this in the constitution and what you’re telling us is ‘look, we don’t think that’s necessary’ we can deal with it procedurally’ – is that what you re telling me?”
Mr Story defended AWI’s position on the matter saying it wasn’t a controversial recommendation.
Independence
On the matter of independence, Western Australian Senator, Slade Brockman, asked was there a precise question AWI would be taking to their members.
Mr Story said they were still working on this point.
“The ASX corporate government principles, which are the standards with which we must comply, has a regime, a test for independence, or not, of directors,” Mr Story said.
“Our position is that all of our directors meet the test.”
The EY report states that the majority of directors are wool levy payers and active players in the wool industry creating an inherent conflict of interest when assessed against the ASX corporate governance principles. In particular the nature of the interests, their materiality, their shareholding, voting entitlement and length of service were an issue, the EY report found.
The report also noted EY had found that the majority of the directors are unable to fully satisfy the criteria for independence as currently required by the funding agreement.
But according to Mr Story the statement is problematic.
“We are a rurally focused entity, not for profit, acting in the interest of woolgrowers, it is set up as a public company under law and the shareholders are the woolgrowers,” he said.
“If you apply the test put forward by EY in their report it seems to us that that might make the position of grower director bodies on the board quite problematic.
“The shareholding in AWI is very wide and there are actually no shareholders, never mind board members, who have never had what would be considered, at law, a substantial shareholding or substantial voting power, but under this, a question mark whether they are independent or not, we just think it has got ahead of the law.”
Senator Brockman queried if he had interpreted Mr Story correctly.
“Effectively, being a woolgrower is making you non independent?” Mr Brockman said.
“I can understand where you are coming from but do you have any idea the question you are going to put to shareholders?”
Mr McCullough said they had received some independent preliminary legal advice which Senator O’Sullivan requested to be tabled.
The hearing coincided with a public letter released by Agriculture Minister David Littleproud who demanded all 82 recommendations of the EY review be fully implemented.
