Annual General Meetings of large companies have almost always been held physically. This changed with COVID when the use of Virtual AGMs was authorised. Virtual AGMs were necessary when the country was plagued by lockdowns, but now as restrictions ease big companies such as banks are desperately trying to hold on to them.
Virtual AGMs allow the big banks to shut down investor questions and avoid scrutiny on important topics like the huge salary bonuses of top executives. AGMs that used to take an entire day because of questions from investors are now being sailed through in just a couple of hours.
I believe in the free market and to have that we must have confidence in the stock market. Physical attendance at AGMs for those investors that want it is a fundamental part of maintaining that confidence in the stock market and the companies in it.
Transcript
[Senator Roberts] And thank you all for attending today. The corporation’s coronavirus economic response determination number three, 2020, provided the basis for virtual AGMs. ASIC have replaced that determination, which expired this week with order 21-056 MR, which takes a no action position on virtual AGMs. Does this mean that corporations can run a virtual AGM with no restrictions coming from ASIC?
[Commissioner Melina] Senator, hopefully I can help you with that. In relation to this, there is a bill that parliament is considering about a full-time permanent change to the law to allow virtual AGMs, but that bill is still in committee and being considered.
[Senator Roberts] That was the rule of the Senate to extend it.
[Commissioner Melina] Yes, exactly, exactly. So in light of the fact that the pandemic, whilst we’ve operated very effectively nationally in the pandemic, but there is still some uncertainties about the pandemic for companies whose balance dates, for example, after December 31, this year, they have five months to have their AGM. In light of that fact, we think that it is reasonable given that there are still some restrictions of movements for companies to temporarily, until we hear, and it is temporary, but until we hear how parliament intends to pursue that matter, have an opportunity to, if they need to hold a virtual AGM to comply with various restrictions, wherever they may be located. Now, it is only a no action position. We don’t have the power to amend the law in this area or make any more permanent situation. But we are intending to give guidance to companies about what’s important. If they do need to take advantage of having a virtual AGM to ensure really the safety of their shareholders, their employees, and their staff. We are working to ensure that we give enough guidance about what’s necessary, so that people have an opportunity to ask questions of the chairs.
[Senator Roberts] So you’re saying this is temporary.
[Commissioner Melina] Temporary, absolutely.
[Senator Roberts] When will it expire?
[Commissioner Melina] We intend to revisit it once we, one, if the pandemic conditions change dramatically and two, once we hear more how the Senate and the parliament are considering this particular issue.
[Senator Roberts] So why couldn’t you’ve extended it until September 30th?
[Commissioner Melina]Well, we weren’t feeling comfortable about doing that because we were, my understanding and please correct me because I’m not so familiar with parliamentary time-tabling but my understanding was it’s possible that this bill could be determined before then. I understand the committee that is considering it is due to report at the end of June. So we did want to take our lead from the decisions of parliament. We’re not interested at all in-
[Senator Roberts] So the intent is temporary, but there’s no deadline.
[Commissioner Melina] And we could announce in a month or two, you know, it’s no longer applicable, but we want to give companies the opportunity to plan. These events do require a bit of logistics.
[Senator Roberts] Were you happy with the outcome of the trial of virtual AGMs?
[Commissioner Melina] Generally, there were some instances where we received complaints about how those, on some occasions, how questions were dealt with, but generally we were reasonably happy, and we’re able to go back and talk to chairs and companies about the particular issues.
[Commissioner] Senator, I just wanted to emphasise what Commissioner Melena just said, that the dialogue, the ongoing dialogue, which we had with the director community and the corporate community was very constructive so that we saw improvements taking place, as this was operationalized by companies in that initial no-action period.
[Senator Roberts] Okay my experience and the feedback we’ve got is quite the opposite. Companies are using virtual AGMs to disenfranchise activist shareholders. And these tactics include sending activist shareholders a wrong entry code. So they can’t access the virtual meeting room. Accepting questions on notice and then not reading them out, not calling on shareholders who they know will ask difficult questions and switching off shareholders, who were asking difficult questions. So this is why virtual AGMs went to an inquiry. So you’re basically invalidating the process.
[Commissioner Melina] Well, Senator we would be very happy to take those points on board and review them ‘cos that sort of feedback is very helpful.
[Commissioner] Yeah, we are interested in following up that sort of feedback.
[Senator Roberts] It does become a great way to manipulate annual general meetings and shareholders. American shareholder organisations are stating just that. So I understand the benefit for small companies to have virtual only AGMs, if shareholders agree before every AGM. But are you really saying that 100% virtual is acceptable for large companies like the banks and Crown Casino, who featured strongly in complaints to my office? And in addition, it seems like some of these companies want to shut down the problems, but that only defers it, because they eventually pop up, and then it becomes more embarrassing.
[Commissioner] Senator the points that you’re raising, we will certainly take on board, but just to confirm and this is explicit in your question. This is a temporary relief, we’re waiting on parliament. And certainly we will take those points on board but it strikes me that these are issues for Parliament’s consideration.
[Senator Roberts] Okay, thank you. Going to Banking Code of Practise. The enforceable code provisions, particularly, how close are we to seeing which provisions of the Banking Code of Practise will be enforceable?
[Commissioner Hughes] Morning Senator. Sean Hughes-
[Senator Roberts] Good morning.
[Commissioner Hughes] Commissioner at ASIC. Thank you for your question. The current version of the code, which we approved in January, which came into effect on the 1st of March does not contain any enforceable provisions. The changes that were approved by us in January are essentially minor in nature. We are however waiting to see the outcomes from the ABO’s triennial review of the code, which commences in June, that will also include a consideration of the small business threshold definition with the reviewer recommending an increase of that definitional threshold from $3 million to $5 million. At that point in time, I’d suggest Senator that we would revisit to the issue of enforceability in relation to any provisions of the code.
[Senator Roberts] So what date after June?
[Commissioner Hughes] So they’re commencing the triennial review in June.
[Senator Roberts] So at the moment, ASIC doesn’t have any provisions it wants to see as enforceable?
[Commissioner Hughes] The position in relation to enforceable code provisions, Senator is that the relevant body in this case, the ABA needs to apply to ASIC to say whether any provisions should be made enforceable. No such provisions were nominated to us and having considered it, we didn’t believe that any needed to be made enforceable at this point in time. As I say the changes that we approved in January were relatively minor and technical in nature. We would prefer to revisit the question of enforceability post the triennial review in June.
[Senator Roberts] So basically at the moment ASIC is waiting for the banks to tell them what to do.
[Commissioner Hughes] That’s not the case at all Senator. We have not identified any enforceable provisions in relation to the minor and technical changes to the code made in January.
[Chair] Senator Roberts, two more questions.
[Senator Roberts] Yes, exactly that, two. Going to unconscionable conduct. My question relates to this week’s judgement of the full bench of the Federal Court in the Kybolt Case which saw a substantial change in the definition of unconscionable conduct. Unconscionable conduct is contained in section 12CB of the ASIC Act. Will ASIC assist Corporate Australia to meet the lower standard of proof this offence now carries by way of a regulatory document or note or report?
[Commissioner Hughes] Senator I’ll take that question as well. We are aware of and have followed the decision of the High Court in relation to that proceeding that was commenced by the ACCC. And we’re revisiting the extent to which that may have an impact in enforcement actions that we are running. But as you rightly point out, Senator, that’s a very fresh judgement from the High Court. And I can’t make predictions as to what we will do in relation to future litigation matters at this stage.
[Senator Roberts] Will you be assisting Corporate Australia though to understand this component?
We will certainly continue to inform and educate Corporate Australia as to the impact of that decision. As I know, the ACCC will do, and we will be discussing with colleagues across the law enforcement agencies the benefits and the implications of that judgement .
[Senator Roberts] Last question. Well, it’s not a question, actually it’s a statement. May I compliment ASIC for its enforcement history on unconscionable conduct cases against the major banks. And I look forward to this judgement making your job even easier.
[Commissioner] Thank you, Senator.
[Commissioner] Thank you, Senator.
