The AGM gets a new lease on life

by | Oct 20, 2012 | Business

He and his small band of researchers once jiggled their tins on the streets of Melbourne, asking for donations from the passers-by as Channel Ten held a telethon.

Things were harder before that. Graeme Clark used to speak at Lions Clubs, Apex and Rotary luncheons in the 1970s to raise a few hundred dollars from those impassioned by his vision.

The other scientists said he couldn’t do it. The national grants bodies didn’t deem his project worthy of funding.

But Clark persevered. He had wanted to find a cure for deafness since he was a child of 10 trying to talk to his deaf father.

A vital breakthrough came in 1978. Clark and a colleague, Brian Pyman, had placed their first multiple-electrode implantable bionic ear in a patient, Rod Saunders.

Thanks to this first Cochlear device, Saunders, who had lost his hearing in a car accident at 46, was able to hear. The device has helped thousands of profoundly deaf people around the world to hear again.

Things have come a long way since then. Professor Clark now works on his bionic eye project as young scientists behold him with awe in the halls of Melbourne University, and Cochlear is now a $4 billion company.

At its annual meeting on Tuesday, directors were a little hard of hearing at first when voices from the floor informed them how shareholders felt about the multimillion-dollar executive pay packets.

While Cochlear’s share price was hammered by a global product recall and net profit sank from $180 million to $57 million, the AGM was the chance for the chief executive, Chris Roberts, to collect his annual swag of $1 million in options.

Roberts, who already has $50 million worth of shares, collected nearly double the number of options he had received last year. What caught the eye of shareholders though was that they were already worth more than $1.5 million on the day of the meeting.

Share options are meant to deliver value if the shares go up and Cochlear, which had been on a run since the annual results, made clear that the worst of the product recall was behind it.

However the AGM also revealed that the top dogs were in line for a supercharged benefit because more options were issued this year, courtesy of a favourable valuation that arose from tweaking the inputs to the calculations.

As the chairman, Rick Holliday-Smith, and Roberts were excoriated by Stephen Mayne – who is prosecuting for the Australian Shareholders’ Association – they kept trying to move the meeting along.

Who wanted to hear about the intricacies of a Black Scholes options valuation model anyway?

Mayne persisted though, and by the end of it, the board appeared to be hearing loud and clear. Cochlear’s remuneration report was struck down with a thud.

Now in its second year, the government’s “two-strikes” policy on executive pay is working. Executives are terrified of the reputational repercussions of shareholders rejecting their ”rem reports”, and so it is that the outrage over executive pay may recede slightly in this season of annual general meetings. Boards are listening.

And so the AGM is not dead. This is the one day in the year when directors have to face their owners in the flesh.

Even so, real shareholder revolutions bubble away months before the meeting, as was the case with BHP this year.

BHP holds its meeting next week and many will make the pilgrimage to genuflect at the altar of its mountainous heap of cash.

But BHP’s capitulation to shareholder pressure – from big global institutional shareholders, that is – came months before as it jettisoned its $80 billion expansion program.

Olympic Dam and the likes were put on hold as the board and its chief, Marius Kloppers, pledged greater attention to returning shareholder capital.

Sadly for other companies, though, the Berlin Wall of corporate governance is still yet to crumble.

Hard on the heels of the Cochlear meeting this week, there was News Corporation on Wednesday. Like any good Stalinist committee meeting, the result had been determined beforehand. The apparatchiks on the independent board had faithfully goose-stepped into line.

Although the Great Leader commanded just 14 per cent of the votes in an economic sense, the good of the party (and the Great Leader’s domination of the Class B voting stock) ensured that all party motions were passed. All non-party motions were courteously appreciated then promptly rejected.

Out here in the windswept and desolate wilds of shareholder Siberia, any ragtag Australians would only merit half a vote anyway. Thanks to US broadcasting regulations, we have been purged. The News politburo had been forced to suspend half the voting rights of non US residents.

Such efficiency must have warmed the heart of another leader of 50-year tenure, Fidel Castro, although Fidel was always more of a Brezhnev man than a Stalinist.

There is much to appreciate in a committee meeting that only runs for 81 minutes with a minimum of fuss. And so there will be no glastnost in Delaware. There will be no perestroika.

We look forward, bright eyed, to another glorious year.


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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