Considerable attention is currently focused on shareholder activism. This activism can take many forms including shareholder resolutions. Our recently published research note analyses resolutions proposed by shareholders of the top 300 Australian companies listed on the Australian Securities Exchange for the 10 year period from 2004 to 2013. We investigate the number of shareholder resolutions over time, the subject matter of the resolutions, whether the resolutions were supported by management, the number of resolutions at extraordinary and annual general meetings, and some of the characteristics of companies that were the subject of many of the resolutions.
Under Australian corporate law, shareholders of a company have a statutory right to propose resolutions for consideration at general meetings of the company and also have a statutory right to have the company distribute statements supporting the resolutions. These rights apply to both annual general meetings (AGMs) and extraordinary general meetings (EGMs). The Corporations Act 2001 provides that:
- shareholders with at least 5% of the votes that may be cast on a resolution; or
- at least 100 shareholders who are entitled to vote at a general meeting,
may give a company notice of a resolution that they propose to move at a general meeting.
Shareholders can also propose resolutions as part of requiring directors to call and hold an EGM. Directors of a company must call and arrange to hold a general meeting on the request of shareholders with at least 5% of the votes that may be cast at the general meeting.
There were 877 shareholder resolutions during the period of the study. There was a significant peak of shareholder resolutions in 2008 and 2009 – the global financial crisis (GFC). The increased number of shareholder resolutions in 2008-2009 was due to both an increase in shareholder resolutions per company and an increase in the number of companies that were subject to shareholder resolutions.
Of the total number of 877 shareholder resolutions from 2004 to 2013, management recommended against 714 resolutions (81%), management recommended for 29 resolutions (3%), and for 138 resolutions there was no management recommendation (16%).
We analysed the shareholder resolutions by the agenda description. Of the total of 877 shareholder resolutions from 2004 to 2013, 448 (51%) concerned the election of directors, 360 (41%) concerned the removal of directors, and the remaining 73 (8%) of resolutions were on other topics. The other topics included proposed amendments to the constitutions of companies and matters dealing with the issuance of shares. Ninety two percent of all shareholder resolutions from 2004 to 2013 therefore concerned the removal or election of directors.
We compared the number of shareholder resolutions that were proposed for consideration at AGMs and at EGMs. Of the 877 shareholder resolutions, 252 resolutions (28.7%) were proposed for consideration at AGMs, and 625 resolutions (71.3%) were proposed for consideration at EGMs.
The data set contained 198 companies, with a total of 877 shareholder resolutions from 2004 to 2013. Twenty three companies each accounted for one percent or more of the total number of shareholder resolutions. Together, these 23 companies accounted for 37.2% of all the shareholder resolutions in the data set. They were operating in a wide range of industries with the highest number in the energy industry and tended to be small capitalisation companies. Of the 327 shareholder resolutions for the 23 companies, 183 (56%) were in 2008-2009. Of these shareholder resolutions in 2008-2009, 52% concerned the removal of directors, 44% concerned the election of directors, and 4% concerned other matters.
Hui Xian Chia is a Project Officer at the Centre for Corporate Law and Securities Regulation, Melbourne Law School, the University of Melbourne and Ian Ramsay is the Harold Ford Professor of Commercial Law and Director of the Centre for Corporate Law and Securities Regulation, Melbourne Law School, the University of Melbourne.