By Stephen Mayne
Tollroad giant Transurban has been saved by unprecedented institutional voting from the floor of today's AGM in Melbourne to finish with a remuneration report that scraped over the line with 52% in favour.
After the proxy votes were running a record 69% against, Transurban released the final poll at 3.37pm this afternoon showing that a staggering 562 million shares - 43% of the shares on issue - were voted from the floor in a poll.
The three biggest shareholders control about 40% of Transurban and are the government-owned Canadian Pension Plan, the Ontario Teachers Plan and specialist Sydney-based tollroad investor CP2, run by fund manager Peter Doherty.
The Canadians are believed to have backed the remuneration report from the floor, whilst Doherty voted against from the floor, and the balance of the major investors were strongly against as shown by the proxies.
With the exception of the Howard Government voting its stake from the floor at Telstra annual general meetings over the years, proxy votes usually comprise more than 95% of all votes cast.
Never before has a widely owned ASX-listed company seen such a turnaround in proxy voting in a poll. However, last year's Transurban AGM was a portent of things to come when the remuneration report went from 55% support in the proxies to defeat with 58.56% against in the poll.
The issue last year was the excessive termination payment to Transurban's founder CEO Kim Edwards, who collected a total of $16.6 million in 2007-08.
The latest concern about Transurban relates to the low performance hurdles for new CEO Chris Lynch and other senior executives.
An excessive 20% of the long-term incentive was awarded in 2008-09 for nothing more than continued service and a further 40% was based on a questionable performance measure using a non-audited figure which did not account for variables such as debt or shares on issue.
Shareholders were also upset at not being asked to specifically approve the incentive shares.
Chairman David Ryan battled valiantly against persistent questioning from the Australian Shareholders' Association's John Curry and after some lengthy exchanges received the backing of the two public sector Canadian shareholders.
Sometimes it's important to have the message rammed home
Under pressure
David Ryan struggled with the debate today and his position should be under intense pressure, especially considering he was only re-elected with 66% of the votes in favour at last year's AGM.
This record protest against an ASX-50 chairman was because Ryan was the chairman of ABC Learning when it collapsed last year and had chaired the childcare giant's audit committee since first joining the board way back in 2003.
I asked Mr Ryan to explain the ABC Learning collapse today and justify his on-going position with Transurban but he declined and repeated the comments from last year's AGM that he acted with great integrity at all times. Yes, but what about the $3 billion that was lost? How about some ministerial accountability?
Given the odium surrounding ABC Learning and the two consecutive remuneration protests, there is an argument that Ryan's fellow Transurban directors should tap him on the shoulder and facilitate a speedy retirement.
Indeed, your correspondent laid down that very challenge to 300 investment industry players at the SuperRatings ''Day of Confrontation'' in Melbourne two weeks ago. Watch the video here.
The edited audio highlights from today's Transurban AGM are available here.
Bendigo & Adelaide Bank has today revealed it could only approve lucrative incentive deals for its top two executives through the use of undirected proxies and shares voted by current and former directors.
Trouble was clearly afoot when the $3.5 billion community bank failed to release the poll results before the ASX shut up shop at 7.30pm last night, even though the simultaneous annual general meetings in Bendigo and Adelaide finished several hours earlier.
The voting results were finally released at 9.37am today and they were stunning.
The remuneration report attracted an against-vote of 32.46% in the proxies but was passed by a show of hands on the floor of the AGM with no poll.
Similarly, the chairman of the remuneration committee, former IOOF managing director Tony Robinson, received a 25.71% against-votes on the proxies, way above the usual 96% approval rate for non-executive directors of major public companies.
However, these two protests were dwarfed by the near majority of votes cast against the $5 million incentive scheme for new CEO Mike Hirst and the $2 million incentive package for the other executive director, former Adelaide Bank CEO Jamie McPhee.
Mike Hirst's incentive package was line-ball in the proxies with 58.44 million votes in favour and a hefty 56.73 million against. A mandate of 50.8% is not what a new CEO wants, but this increased to 52.79% in the poll after the board used the majority of the 5.6 million in undirected proxies to get the deal over the line.
Jamie McPhee's incentive deal received only 50.68% support from the directed proxies and 52.57% in the poll with the crucial 5.3% undirected voting block largely controlled by the chairman once again proving decisive.
The use of undirected proxies is something the Productivity Commission is proposing to eliminate as part of its review of executive pay. And when you include votes cast by current and former directors, it is clear these two incentive deals - worth as much as $7 million - only got approved courtesy of the votes by insiders.
The extended delay in releasing the poll results perhaps suggests the board was considering whether the resolutions should have been withdrawn. In my view, there's a very strong case for that and it's a debate that needs to be had over the coming days.
When you consider Australia's cumbersome manual voting system and the fact that credible major investors such as AMP have previously complained that they've experienced several examples of their against-votes somehow being lost, there isn't a lot of cause for confidence in the system.
After all, what sort of voting system in 2009 doesn't allow for any external scrutinising by outside observers and also fails to provide any form of electronic audit trail?
I'm not for a moment suggesting something untoward happened in Bendigo yesterday, but the system doesn't inspire a lot of confidence in a line-ball vote.
There is also the complicating factor of the relationship with IOOF. The former IOOF managing director Tony Robinson is chairman of the Bendigo remuneration committee and also received what many regard as an excessive $1 million bonus earlier this year after IOOF merged with Australian Wealth Management. Did IOOF vote any shares in favour of the contentious Bendigo resolutions yesterday?
Bendigo is the second-largest shareholder in IOOF with 7.8% and will presumably vote in favour of the IOOF remuneration report and Tony Robinson's own pay packet at the AGM in Melbourne on November 27. All the detail about IOOF's pay practices were released at 3.57pm yesterday, just as the Bendigo AGM was winding up.
After Tony Robinson formally presented the remuneration report yesterday, Bendigo chairman Robert Johanson told shareholders the proxies against were ''quite substantial'' and a ''great cause of concern''. Listen here for the full debate on the pay resolutions.
The Bendigo board wasn't subjected to much pressure from a supportive home crowd audience but the chairman erred when claiming such big protests had been registered against ''many'' companies.
To my knowledge, there has never been a major listed company suffer four big protests on different pay-related resolutions at the same AGM. We've seen the odd withdrawn resolution on pay issues before from the likes of AMP, Oz Minerals, Harvey Norman and Tabcorp, but such a tight vote on two big incentive deals for executives is very unusual.
As this list tracking big remuneration report protests shows, there have been less than 30 occasions since the non-binding vote was introduced in 2005 when an ASX-150 company has received a protest vote exceeding 30%.
The problem for Bendigo shareholders, as advised by proxy advisers RiskMetrics and CGI Glass-Lewis, was that both Mike Hirst and Jamie McPhee were receiving half of their free performance shares for simply turning up to work. And they will get more than 80% of all performance shares for merely matching average performance by fellow ASX-100 companies.
When challenged about this at the AGM by Rex McKenzie from the Australian Shareholders' Association, Mr Johanson launched a passionate defence claiming it was all about learning the lessons from the global financial crisis and not giving bank executives incentives to chase excessive returns for short term bonuses.
Surely, it would have been simpler to give Bendigo's executive directors a bigger salary rather than going through the pretence that the incentive scheme had appropriately challenging hurdles.
There was also considerable disquiet amongst institutional investors over the maximum $1 million performance bonus related to the Adelaide Bank merger paid to long-serving former Bendigo Bank CEO Rob Hunt.
Bendigo paid far too much for Adelaide Bank and bought itself a bundle of trouble courtesy of big exposures to the collapsed Great Southern Plantations.
Hunt formally retired on July 3 after a stellar 19 years as CEO but it is disappointing shareholders won't be advised of his farewell entitlements until the next annual report is released in September 2010.
When long-serving Adelaide Bank CEO Barry Fitzpatrick finally retired after 21 years in 2006, he received an $8.3 million retirement payment which contributed to the need for this profit warning statement to the ASX.
As we all brace for a series of record profit reports from the big banks in the coming days, who would have thought it would be the much-loved community bankers based in regional Victoria getting into the most strife over pay excesses?
After all, the biggest protest against any resolution at a Macquarie Group AGM was the 21% against-vote on the remuneration report in 2007. This year's Macquarie remuneration report was backed by 97.5% of votes cast.
Whilst Bendigo's board will no doubt be smarting, the biggest protest vote so far this AGM season has been against engineering contractor Downer EDI. A whopping 59.08% of shares were voted against the remuneration report due to CEO Geoffrey Knox collecting the 14th biggest pay packet in Australia when his company barely scrapes into the top 100.
Indeed, Knox's overall package jumped by 67% and this included $4.5 million in cash, featuring a $2.5 million cash bonus when the share price had gone backwards during the year, albeit less than the boarder market.
Fellow engineering contractor United Group is coming second on the pay shame ladder for 2009 due to anger that CEO Richard Leupen was in line for a $500,000 bonus for simply finding a successor. A 30% pay rise was also considered excessive.
The United Group remuneration report was behind on the proxies but managed to narrowly avoid defeat in the poll with 49.2% against, partly due to the use of undirected proxies by chairman Trevor Rowe. Have a listen to how the BrisConnections chairman handled the debate.
The pay protest which has received the most attention occurred in Perth on October 21 when a poll produced a 42.55% against vote for the Qantas remuneration report, following up the 41.48% protest in 2008.
Sometimes it is important to have the message rammed home on the floor of the AGM but that hasn't really happened to Qantas, Bendigo, Downer EDI or United Group.
Indeed, Qantas chairman Leigh Clifford got away with some very light questioning (listen to the audio here) from shareholders and was not challenged as he created the impression former CEO Geoff Dixon's $3 million tax-effective termination payment was some legacy obligation dating back several years.
Truth be known, the payment was only made last year and related to Dixon's contract extension after the private equity takeover bid fell over in 2007.
James Strong, chairman of the Qantas remuneration committee since he re-joined the board in mid-2006, was arguably responsible but shareholders failed to push home the point when he was re-elected for another three-year term with 97.28% of the vote in favour.
The directors club will only really take remuneration protest votes seriously when they start to see their colleagues voted off boards for ignoring messages from shareholders. Instead, James Strong feels massively re-endorsed after serving up an excessive payout to his old mate Geoff Dixon, although former Qantas chairman Margaret Jackson is arguably more responsible.
Whilst Geoff Dixon has been widely portrayed as the pin-up boy for executive greed of late, perhaps it is time to shift the debate to the directors who approve some of these deals?
If institutions still want to send James Strong message, they can do so when he faces re-election at the Woolworths AGM in Sydney on November 26. Similarly, Margaret Jackson is up for re-election at the Flexigroup AGM on the same day in Sydney.
As for other companies which could potentially face large protest votes, keep an eye on gold miner Newcrest this Thursday, plus conglomerate Wesfarmers which still apparently hasn't learnt the lessons from last year when its remuneration report was defeated with 50.5% against.
There are still more than 100 companies which are holding their AGMs in the last week of November and haven't yet released the notice of meeting or annual report.
Indeed, as a shareholder in almost 700 companies, yesterday was the busiest day for your correspondent ever had scheduling AGMs with no less than 39 different notices of meeting lobbing in the PO box.
And considering the worst is often left to last, stand by for many more major pay protests in the weeks ahead. The pay debate is going to get hotter as the Production Commission prepares to release its final recommendations before Christmas.
Based on what we've seen so far this AGM season, public company boards still have a lot to learn.
, a shareholder activist and publisher of The Mayne Report contributed this article to . He can be reached on