Your Rights as a Shareholder
Shareholders do not assume responsibility for day-to-day management of a company, however they can influence company behaviour over the longer term by exercising influence on fundamental matters including:
- board composition;
- amendments to the company’s constitution;
- approving extraordinary transactions;
- environmental and social issues.
Shareholders of different sizes have different options for exercising their rights. Generally the larger the holding, the more options available.
An activist shareholder is one who seeks to use their position of ownership in a company to put pressure on its management. A number of mechanisms are available to shareholders that allow them to make use of their power.
Methods of participation
Shareholders are able to influence company behaviour through various activities, including meetings with corporate officials, the co-filing of shareholder resolutions initiated by others, initiating a shareholder resolution, proxy voting, participating in the company annual general meeting (AGM) or divesting.
Shareholder activism is an effort on the part of owners of companies to change the policies and/or the behaviour of companies through a variety of means, including meetings with corporate officials, letter writing, proxy voting, co-filing/initiating shareholder resolutions. It is vital that shareholders use company engagement as a tool to raise issues within the company, as well as to promote good company governance and performance.
A resolution is a formal way in which a company can make decisions at a meeting of company members. There are two types of resolutions: ordinary and special. Under the Corporations Act 2001, decisions that affect a company need to be made by a resolution. Additionally, a company's constitution may have its own rules about decision making. Resolutions by shareholders can bind the company (e.g. to amend the Constitution) or advise the board (e.g. ‘Say on Climate’).
In Australia, 100 shareholders can come together to request that a company distribute a notice about a matter of concern to all shareholders in that company. Similarly, 100 shareholders can lodge a resolution for consideration by all shareholders at their next Annual General Meeting (AGM). A shareholder with at least 5% of the available votes also has these rights.
The most successful resolutions are those that are withdrawn. In these circumstances the board will have agreed to act in accordance with the proposal because it considers there is already sufficient concern amongst its shareholders.
Even if the resolution proceeds to the meeting but fails to win majority shareholder support, it will often have a significant influence on the operations of the company. The same resolution will often be put to a company a number of years in a row, slowly gathering support. Once support has reached 10 to 15%, a resolution will often have been, at least partially, successful.
Shareholders may also vote on resolutions put to a meeting. Resolutions include those proposed by the board regarding the operation of the company. For example, the election of new directors, the remuneration of executives as well as any resolutions put forward by the shareholders using the mechanism described above.
One share corresponds to one proxy vote. Those with significant holdings, such as institutional shareholders, have a proportionally greater opportunity to exercise influence when casting their votes. Many institutional investors engage proxy advisers who issue voting recommendations. Proxy advisors provide research and voting recommendations to help institutional investors vote their shares on issues such as executive compensation and corporate governance. However, note that you do not need a significant holding to put forward a resolution with other shareholders, you can do so with a minimum holding.
Making use of your proxy vote
An agency agreement deals solely with making a request for the inclusion of a resolution or the distribution of a statement in advance of a company meeting. It does not appoint ACCR as your proxy. Shareholders are able to both enter into an agency agreement to support the lodgment of a resolution as well as cast their vote in respect to the resolution at a company AGM.
If you can’t attend a company AGM you may choose to appoint a proxy to attend and vote on your behalf. When applicable, a number of shareholders who assist us to co-file will assign their proxy to a member of a group affected by a company’s operations. This action, may for example, give workers or indigenous elders the opportunity to access a company and their board and to ask questions in their own voice. An example of this ACCR-coordinated action was during Woolworth’s 2018 AGM, when Malaysian immigrant Putri Nazeri used her proxy to question the company’s board about allegations of labour exploitation, which is a matter of concern to ethical investors and which she claims she experienced first-hand with the company.
Shareholder meetings: Annual General Meetings (AGM) and Extraordinary General Meetings (EGM)
In Australia, company directors have the power to call general meetings of all shareholders or meetings of only those shareholders who hold a particular class of shares. These meetings are classed as either Annual General Meetings (AGM) or Extraordinary General Meetings (EGM), both of which provide shareholders with an opportunity to discuss the management of their company with its board of directors. However, only shareholders who hold at least 5% of the votes which may be cast at a general meeting of a company have the power to call and hold a meeting themselves or to require the directors to call and hold a meeting. A shareholder of a company may ask the company for a copy of the record of a meeting or of a decision of shareholders taken without a meeting.
Annual General Meetings (AGM)
An annual general meeting (AGM) is a mandatory yearly gathering of a company's interested shareholders. At an AGM, the directors of the company present an annual report containing information for shareholders about the company's performance and strategy. An AGM provides shareholders with an opportunity to ask questions to their company’s board and vote on key issues. These issues include the election of company directors and the voting of shareholder resolutions. Shareholders who do not attend the meeting in person may usually vote by proxy, which can be done online or by mail. It is crucial to note that an AGM is one of the only ways for everyday shareholders to speak directly with their company’s board of directors and representatives. The Australian Shareholders’ Association provides shareholders with resources on AGM practice guidelines, including how to prepare for an online AGM and how to vote at an AGM.
Institutional investors may have access to a company and its board through private means facilitated by the size of their investment.
Extraordinary General Meetings (EGM)
An extraordinary general meeting (EGM) refers to any shareholder meeting called by a company other than its scheduled annual meeting. The extraordinary general meeting is utilized to deal with urgent matters that come up between annual shareholder meetings. EGMs are often considered for unforeseen or emergency measures e.g. for resolving an immediate legal matter or a large transaction.
Coordinating actions at a company AGM
The coordination of an action at an AGM provides an opportunity for shareholders and interested stakeholders alike to put pressure on a company. Visitors or members of the public without company holdings are allowed to attend a company AGM to observe but not participate in proceedings. If you would like to participate in an AGM either by asking questions or being a part of a coordinated action, please contact us.