Mortgage Choice (ASX:MOC) chairman, Peter Ritchie, has resigned abruptly, raging at proxy advisors for “damaging Australian business” after another bruising shareholder revolt at last week’s AGM.
Close to 80% of the Australian firm’s independent shareholders voted against the remuneration report, the third such vote, leading Ritchie to blame the outcome on analysts.
The key issues were standard red flag issues for institutional investors: 100% bonus payments over a number of years and dividends paid on un-vested shares. The Commonwealth Bank holds a 20.1 per cent stake in Mortgage Choice, and Fidelity International owns about 12 per cent of shares. However, rather than addressing the opinions and choices of shareholders, Ritchie used his chairman’s address to lay the blame at the feet of proxy advisors and “cookie cutter type of approach and quite fixed views on most things.”
AGM speech slates governance standards
Regarding the CEO package under review, Ritchie expressed his view that: “As a Chairman I know it is important to establish goals for the organisation which are a ‘stretch’, but I think people are most inspired if they are ‘succeeding’. The ‘easy fix’ would be to make the goals just unachievable, which would satisfy the proxy advisors, but just failing to get there each year is not where I want my CEO.” (note, not ‘our’ CEO)
Ritchie, who was set to be replaced by early 2017, was particularly critical in respect of the large votes against two non-executive directors at the company, Rodney Higgins and Deborah Ralston – who received against votes of 27% and 15% respectively. Ritchie said that recommendations based on time-based independence were “doing the worst damage because if the argument was that they had to be independent from the CEO and management this had to be seen in the context that a new CEO had been appointed in the last 18 months while the structure and the membership of the management team had changed.”
In respect of board independence Ritchie said: “So they are recommending that we throw off our board the most senior of our founding partners (who knows the business from the grassroots up and is close friends with many of our older franchisees) and Dr. Ralston who is one of the most respected women in the finance industry in Australia! Is anybody doing any thinking here!”
“And here’s how they are hurting Australia – It’s those sort of thoughtless recommendations which are resulting in boards who as so independent they don’t know what business they are in! How did Woolworths get to the point where they have no retailers on the board? Or BHP finding themselves without a miner to have so much influence in the Australian business community?”
Where were the shareholders?
Despite much searching Manifest could not find any discussion of chairman/shareholder engagement either in the run up to this meeting or after their prior negative votes. Paul Taylor, fund manager at Fidelity International speaking to Australian Financial Review made it clear that they vote according to their principles adding: “The company are paying dividends to executives regardless of performance. That practice has been eradicated from the market and we have been arguing against it but the company just wont budge, you saw the result.”
Given the invective, we’ll leave it up to leading Australian newspaper, The Age to sum up:
The Trump plan, and Commonwealth Bank joins fight for social justice
Poxy advisers (no, that’s not a spelling mistake)
While we’re on the subject of justice, spare a thought for the poor old directors who once again find themselves in the crosshairs of pesky proxy advisers this annual general meeting season.
Mortgage Choice chairman Peter Ritchie, for one, has had enough. He used his last chairman’s address to the company’s AGM on Tuesday to take a swipe at proxy advisers, saying they are a pox on corporate Australia, issuing “thoughtless recommendations”.
He devoted an entire page of his two-page speech to the diatribe.
Proxy advisers, railed Ritchie, were “remote”, “close-minded” and “hurting Australia” no less!
What did they want him to do – set impossible targets for his chief executive John Flavell? He was not about to do that.
The advisers were also recommending votes against two directors on the basis they’d been on the board too long to maintain independence.
“Hang on, independent from what?” roared Ritchie, noting one director was a founder with great experience and the other, Deborah Ralston, was “one of the most respected women in the finance industry”.
Ritchie remonstrated: why were there no retailers on the Woolworths board? (There are, by the way.) Why were there no miners on the BHP board? (There are two miners and three oil men.)
“Is anybody doing any thinking here!”
Yes, he used an exclamation point rather than a question mark, but that was kind of in the spirit of the address, so CBD (Central Business District) will let it slide … just like Richie … out the door.
Source: The Age, October 18 2016
The business of standards
Meanwhile over at the weekend edition of Australian Financial Review, Stephen Walmsley, managing director of board advisory 3 Degrees, Stephen Walmsley, joined in warning that “Anybody can be a proxy adviser and there are no rules or codes of conduct as to how they conduct their research,”
We are grateful to Patrick Durkin, AFR’s Melbourne Bureau Chief for their re-tweets:
Last Updated: 22 October 2016Board advisor (with no code of conduct) calls for code of conduct for analysts who already have a code. https://t.co/xLg187ViEc #corpgov
— Manifest (@manifestproxy) October 21, 2016