News

AWI board can make director term cap and board committee changes

Terry Sim, August 1, 2018

WoolProducers senior vice president Ed Storey

AUSTRALIAN Wool Innovation directors can implement a 10-year term cap, restructure the board nomination committee and make proxy declaration changes without a shareholder vote, peak wool grower body WoolProducers Australia said yesterday.

The changes were key suggestions among the 82 recommendations from the recent independent AWI performance and governance review that reviewer EY suggested be implemented before AWI’s 2018 annual general meeting on November 23.

However, despite having had two board meetings since the review report was released, the AWI board has given no indication that any of the review’s recommendation will be implemented before the annual general meeting.

The review recommended that AWI incorporate into its constitution a 10-year director term cap and minimum two-year roll-off period before the next election cycle and make its board nomination committee structure more independent. It also recommended the board increase the transparency of open proxy use, with the chair disclosing how many directed or undirected proxies were held and how she or she intends to vote them.

The 509-page review report found current AWI chairman Wal Merriman had “substantial influence” over the membership of the AWI board nomination committee. Referring to Mr Merriman’s refusal to declare how many open proxies he held and how they were to be voted in director elections, the review report stated:

“The lack of transparency in how proxies are used, particularly for the election of directors, has led to an amount of stakeholder distrust and is not in line with good governance behaviours.”

AWI has sought legal counsel on the review’s recommendations, but yesterday refused to comment on a request from WoolProducers Australia for that advice to be released to its shareholders.

WPA has called on AWI to implement all review recommendations and WPA senior vice president Ed Storey rejected AWI chief executive officer McCullough’s assessment that this could cost wool grower millions of dollars. Any costs associated are due to the board not keeping abreast of good governance practices, Mr Storey said.

At the Australian Sheep and Wool Show in Bendigo, Mr McCullough told Sheep Central the board had identified a range of “things” that will need to go to a constitutional vote and at the Midstate Merino Field Day in Dubbo last week, Mr Merriman told ABC Radio the board cannot make changes that are “contrary to shareholders’ rights”.

“We’ll go to the AGM,” he said.

During an ABC NSW Country Hour interview, Mr Merriman said the review’s 10-year director term recommendation was a constitutional issue for shareholders to decide. He indicated that if the recommendation was adopted the board would “lose half our corporate knowledge in one swipe and Colette Garnsey would be the next one to go…”

“I think growers need to be able… well, growers will be able to vote on that.”

The tenures of the current directors by the 2018 annual general meeting will be Wal Merriman, 14 years; David Webster, 10 years; Meredith Sheil, 10 years, Colette Garnsey, 7 years; James Morgan, 5 years; Jock Laurie, 3 years; Don Macdonald, 1 year.

Mr Merriman suggested that the proposed changes to the AWI board nomination process would mean only three positions could go to growers – “that’s the MLA model”. He said he respected the shareholders’ wishes, “that’s the main thing with me.”

Mr Merriman also cast doubt on whether the proposed recommendations could be addressed by the 2018 AGM on November 23, because it was be too close to the AWI levy vote at WoolPoll 2018. WoolPoll voting packs will be sent to eligible growers towards the end of September 2018, with votes to be returned by November 2.

AWI board can make changes now – WPA

However, Mr Storey said AWI board already had the capacity to include a 10-year director term cap in its charter.

“And if that required constitutional change down the track, well, that can be addressed, but the board could adopt that in their board charter now.”

Mr Storey said the proposed changes to the board nomination process can also be adopted by the board and included in its BNC charter, without a vote by shareholders.

“The (AWI) constitution does not talk about any (term) limits at the moment, but it does talk about how often directors must face elections.

“So if it requires constitutional change down the track, be that at this AGM, then it can be addressed then,” he said.

“The board owns their charters and they aren’t signed off on by AWI’s members, they are signed off on by the board.

“Putting it in their own charter could show great intent to implement the key recommendations.”

Mr Storey said he hoped that AWI board was not trying to get shareholders to vote on governance and election issues at the 2018 AGM under a structure the AWI review identified as being inadequate.

“There was some (Merriman) commentary yesterday and it may look that way.

“And a 75 percent (approval) vote is not easy to get to change a constitution,” he said, which could be perceived to suit the interests of a board status quo.

“But I’ve got great confidence that the board will take on these recommendations and implement them as outlined in the review.”

Mr Storey said the AWI board could incorporate the review’s recommended BNC structure in its BNC charter and implement it without going to a shareholder vote.

The review recommended AWI”s BNC committee consist of a chair independent of the wool industry appointed by the Department of Agriculture and Water Resources secretary; a non-executive director of AWI, other than the chair; an experienced wool industry person nominated by the National Farmers Federation president, and; a senior executive from an international executive search firm nominated by the AWI CEO and subject to approval of the independent chair. It was also recommended that BNC members should not nominate to be an AWI director until at least three years after their BNC membership ceases.

“There are no director elections this year, so they can show leadership on this and implement that on their BNC and it there is any constitutional change required they could put that up at the AGM.”

Mr Storey said the review’s proposed proxy declaration changes did not require constitutional change and could be immediately implemented to be in force for the 2018 AGM.

“There is no need for any rules or regulatory change there.”

He said it was the usual practice for chairs of various companies to declare in the notice of AGM how unallocated proxies will be allocated. Mr Merriman’s non-declaration of proxy allocation was disappointing and “a long way short of best practice.”

Mr Storey said the AWI board had a lot of opportunities to implement the 82 recommendation of the review prior to going to shareholders.

“A lot of these things are just modernising the company and getting it up to best practice.”

WoolProducers calls for AWI legal advice to be released

WoolProducers said although there is ambiguity around how some recommendations are implemented, AWI has indicated that it had sought legal advice on how best to implement these. As this legal advice has been funded by wool growers, WoolProducers are calling for this advice to be made public.

“We’re not 100 percent sure that legal advice is correct – you can get different legal opinions,” Mr Storey said.

“There are some things that will need constitutional amendment and a shareholder vote, but they are not mutually exclusive; it doesn’t mean the board can’t adopt some of the key recommendations in their own policies, procedures and board charter documents that are owned by the board – it’s not one or the other.”

AWI has also claimed that the recommendations regarding the Board Nomination Committee and how director elections are conducted will see wool growers lose their ability to vote for candidates for board elections – this is simply false, WPA said.

“Comparisons with the Meat and Livestock Australia election process are factually incorrect, nowhere do the recommendations suggest that the number of candidates running for board elections will be stifled,” Mr Storey said.

“Nominees will need to possess certain skills in line with a skills-based board, which is a requirement under the Statutory Funding Agreement.

“This does not mean that candidates will not possess knowledge of the wool industry; rather they will be able to use these skills in addition to their industry knowledge to add further value to AWI,” Mr Storey said.

He said he was looking forward to the AWI showing leadership in a considered and informed response to the review recommendations, hopefully by the next board meeting in late August.

AWI is preparing AGM resolutions

An AWI spokesperson said the company is continuing to work on arrangements for implementation of the review recommendations.

“The requirement is for AWI to report to the Department of Agriculture and Water Resources on its implementation plan within three months of receipt of the (review) report.

“AWI has, and will continue to, obtain the best legal counsel it can on these various matters throughout this period to ensure the company continues to thoroughly comply with the corporations law,” the spokesperson said.

There are very definite constitutional matters that will be presented as resolutions for shareholders to vote upon at the AGM on November 23, the spokesperson said.

“AWI is committed to ensuring our shareholders receive a full exposition of major issues in the recommendations contained in the report.

“AWI is continuing to work on implementation arrangements and intends to initiate a comprehensive consultation process with shareholders on matters where they should be consulted and have the opportunity to properly have a say.”

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Comments

  1. Mark Wootton, August 4, 2018

    Just watch the AWI board use the selective use of the democracy card to suit their own self-serving agenda, again. How about this for a real democratic approach….make the levy a voluntary one? Levy payers can select how much they wish to pay, if at all. Levy payers can then make the decision on what sort of value proposition AWI is for their business. Come on AWI, put your performance to a real market test, just like your levy payers do everyday in the real world.

  2. Jim Gordon, August 1, 2018

    Ed, keep battling.

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