Individual shareholders (or retail investors) are not always the most powerful voice in the room when they attend an annual general meeting (AGM), writes the Australian Shareholders’ Association.
ASX-listed companies see their AGMs dominated by large institutional investors whose holdings are much larger in comparison. Knowing this can already make us feel insignificant or powerless as retail shareholders, but it is important to remember a key mantra: there is power in numbers.
If you are new to investing, here’s a short primer on how AGMs work:
If you buy shares in my company, I have to give you a chance to vote at my AGM on a number of subjects. For example, you can choose to support the election of a director to be a member of the company’s board, the group of people who, among other things, look after shareholder interests, or you can choose to oppose it. If enough people oppose it (usually a simple majority or more than half the voted shares), the election fails. Therefore, my company depends on your approval to function as I think it should. Also, it’s key to remember that every ordinary share is equivalent to a vote – so, if you own 1,000 shares, you essentially own 1,000 votes.
One of the reasons that retail shareholders may not feel like they can engage with publicly owned and listed companies is because as retail shareholders we have fewer shares than institutional investors like super funds or managed funds. This means that we have fewer votes at any AGM, but this is where the mantra comes in. Numbers are power. As individuals, we might not be able to influence how a company operates and who it chooses to elect to its board, among other things. Together, however, shareholders have the ability to actually bargain for what they want.
There may be cases where retail shareholders tip the balance of power where institutional or larger shareholders disagree about how a company should function. For example, at 30 September 2019, 46 per cent of Westpac shares were owned by retail shareholders and 54 per cent by institutional investors. If half the institutional investors are in favour of one director and the other half against, the retail shareholders will decide if she or he is elected. Another important aspect of retail shareholder participation is that they can tell a company what they think about the company. If a company’s definition of “business as usual” does not align with yours, having a voice at the AGM will force them to hear this and possibly prompt change. This has been the experience of the Australian Shareholders’ Association (ASA), an independent, not-for-profit individual investor association who represent retail shareholders at AGMs.
This is where proxies come in handy. Proxy voting essentially allows shareholders to hand their voting rights to an individual or organisation who can vote on their behalf. With enough proxies, organisations like the ASA can become a voice of change advocating on behalf of the people whose voices are least heard.
Policy and advocacy manager at the ASA, Fiona Balzer, said they “monitor the performance, governance and functioning of listed companies”.
“Our primary focus is advancing and protecting the rights of retail shareholders,” she said.
How the ASA functions and why you might consider appointing them your proxy
A trained team of company monitors who volunteer their time for ASA meet with company directors and executives to ensure that retail shareholder interests are not being ignored. The monitoring team is comprised of ASA members who are retail shareholders who work within a national framework that enables the team to monitor companies and attend AGMs held across the length and breadth of Australia. Alongside the small number of staff, these people work on analysing lengthy company reports and ASX announcements to produce voting intentions that decide in favour of voting for or against resolutions at AGMs. ASA also provides publicly available guidelines that are used to inform these voting intentions. These voting intentions are checked by staff and heads of each state-based team to ensure accuracy and consistency, but they are not placed in a one-size-fits-all setting. ASA looks at each company and thinks about the specific issues that relate to their functioning, complexity and size before making any decisions about advocating for or against them.
“What ASA does is essentially help amplify the voice of the retail shareholder by grouping the votes together and speaking about the issues to companies, media and regulators,” Ms Balzer said.
“Often, our proxies at AGMs are equivalent to a position in the top 20 shareholders list which allows us to have more than a voice; it ensures that we get heard.”
Setting up a proxy is very easy. You can simply appoint them as a proxy by inserting “Australian Shareholders’ Association” on the proxy form where it asks for the name of your proxy – if asked if your proxy is an individual or a body corporate, ASA is a body corporate. The form needs to be returned to the share registry at least 48 hours before the annual general meeting takes place.
You do not need to be an ASA member to give them your proxy.
The Australian Shareholders’ Association is an independent, not-for-profit association for retail investors.
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