When is a Strike Not a Strike?

On a number of occasions over the last few years, companies who were clearly facing a strike based on proxy votes prior to the Annual General Meeting did not actually record a strike.

This was due to the companies’ using a show of hands for the vote, which gives one vote to one hand at the meeting, regardless of how many shares the owner of the hand holds.
Although this method of voting is legal and is the default method of determining the success of a resolution, it is not considered to be fair, as it treats shareholders unequally. It also often leads to resolutions being passed that would otherwise have failed.

In situations where the proxy votes that have been received indicate a resolution may not be passed or in the case of the vote on the remuneration report where a strike may be incurred, most investors now expect the chairman to call for a poll. Legal experts note that failure to do so would mean that Directors had breached their duties.

Over the last decade, most companies have moved to poll voting, as shown in the figure below from the Australian Council of Superannuation Investors (ACSI).

Show of hands 2

Some companies do still continue to use a show of hands, however. The ACSI this month published a statement noting that it had taken part in an initiative to convince companies to use poll voting rather than a show of hands.

The initiative (including AXA investment managers, Australian Super, Colonial First State Global Asset Management and Hostplus) contacted 38 Australian companies that had used a “show of hands” during the 2014 voting season, of which 2/3rds changed their behaviour by increasing their use of poll voting for resolutions.

According to the ACSI, companies that persist with “arcane voting practices” are becoming “increasingly isolated”. Egan Associates agrees that companies should record the true result of voting on resolutions, utilising poll voting if required.

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