Intersting article from the North Shore Times

Shareholders with Gunns grab power

04 Jun 10 @ 01:12pm by Andrew Main

SHAREHOLDERS in public companies are finally starting to make their presence felt with errant boards of directors.
Don’t expect to see heads on poles any time soon, but the old clubby world of directors doing pretty much what they wanted over issues such as pay and company strategy has given way to a more transparent relationship between companies and the people who actually own them.
That’s partly because of government policy and partly because institutional investors are finally turning more activist.
Earlier this year the Productivity Commission, an advisory body, recommended that if a company’s board gets a significant 25 per cent-plus no vote against its remuneration policy for two years running, then the entire board will have stand before the shareholders for re-election.
That’s not law yet although the two strikes recommendation was accepted by the government in April (by minister Chris Bowen) and should become law later this year. That’s a step forward from the previous temporary arrangement whereby shareholders have been empowered to cast a non-binding vote on every listed company’s remuneration policy.
A bit like encouraging shareholders to shout “boo” in annual meetings without changing anything: a measure designed to make them at least feel better.
During the past year that’s happened to several companies, including giant insurer QBE and transport group Asciano, as well as smaller companies such as Bendigo and Adelaide Bank and Challenger Financial Services.
That’s a start, but it’s worth remembering that mum-and-dad shareholders hold little sway, often no more than 15 per cent or so, compared with the big institutions. But those institutions, mostly fund managers who are actually managing your superannuation, are turning activist with sometimes startling results.
A push by some of Gunns’ biggest shareholders last month succeeded in persuading former Tasmanian premier Robin Gray to retire from the board.
Then, on May 28, John Gay, the former chief executive and current chairman, cut all ties with Gunns a day after I reported a shareholder saying: “We’d like to see John Gay go immediately.”
It’s rare for shareholder pressure to oust a chairman - usually such pressure is on the chairman and the board to oust an underperforming chief executive.
But as with every sharemarket trend, once something like that starts to happen it spreads.
Gay is a proud Tasmanian and a tireless champion of Gunns, but it’s widely felt he did not take enough notice of what shareholders were saying about some of the company’s more controversial plans. Company chairmen will look a lot more closely at such issues now.

Andrew Main is business editor of The Australian. For the latest business news see theaustralian.com.au.