ANALYSIS: Australian shareholders put the squeeze on corporate greed

By Sid Astbury Oct 27, 2011, 7:12 GMT

Sydney - The scruffy anti-capitalism protestors that police dragged out of Australia's squares last week had gathered under banners proclaiming that greed is not good, that society is more than just an economy and that democracy is not working for 99 per cent of the population.

They are older, better dressed and not given to violence, but there is matching passion among some shareholders filing in to company meetings these days to speak out against corporate greed.

And while officials show little sympathy for the local contingent of the Occupy Wall Street movement, those turning up to annual general meetings to vote down lavish remuneration packages for company executives are being emboldened by legislation and cheered on by government officials.

'This is concrete action where you can have your voice heard,' said Finance Sector Union spokesman Michael Clifford. 'It's unrestrained corporate greed and a lack of consciousness that is driving inequality.'

Clifford notes that senior banking executives are sometimes earning 240 times the take-home pay of a bank teller in the same organization.

'Our members don't get a bonus at all if they don't meet their targets for selling products and yet executives who don't meet their targets are still getting massive bonuses,' he said.

Since 2005 shareholders have had the right to vote on remuneration packages but there were no sanctions if their verdict was ignored.

Under recent amendments, if more than a quarter of votes at two consecutive annual meetings oppose the remuneration report, the chairman must offer a vote putting the board up for re-election.

The 'two strikes' rules that came in earlier this year shows signs of taming corporate greed.

Toll road operator Transurban Holdings Ltd, which had defied the will of shareholders three years running, dodged a 'two strikes' bullet this month by shrinking the purse available to executives.

'The board took last year's vote very seriously, acknowledged further work was to be done and undertook that work,' a contrite Transurban chairman Lindsay Maxsted told shareholders.

In annual meetings this month, brewer Foster's Group Ltd and underwear company Pacific Brands Ltd earned strikes against them when shareholders rejected the cash bonuses that managers wanted to vote themselves.

Australian Shareholders Association chief Vas Kolesnikoff was at those meetings, holding proxies for many small investors. He welcomed the uprisings and would like to see the 'two strikes' rules toughened further to chivvy institutional investors into also taking a stand.

'A couple of million dollars for the average CEO (chief executive officer) doesn't seem to be enough,' Kolesnikoff said. 'Their expectations change the minute they become a CEO. They seem to stop being a normal person.'

His big beef is that before the global financial crisis, when company profits and stock prices were going up, it was harder for minority shareholders to oppose big corporate pay packets.

Now, it is equally hard because boards simply lower the bar to rich rewards for performance.

'There isn't an alignment between payment and return,' the former investment banker said. 'Now, remuneration unexplainably continues to increase.'

Union boss Clifford makes a link between the noisy Occupy Wall Street crowd and rowdy shareholders campaigning for better corporate governance.

'The annual general meeting seems the logical place to raise issues that are concerns in the broader community. Issues like sending jobs offshore to drive down wages. If the new legislation assists us with that, then that must be a good thing,' he said.