Rejected directors survive vote
THE directors of Penrice Soda have called for the "two-strikes" rule to be revoked, after avoiding going down in history as the first board dumped under the contentious rule.
The chairman, David Trebeck, and his deputy, Andrew Fletcher, were both re-elected after receiving 78 per cent of the vote at an extraordinary general meeting convened in Adelaide on Friday.
Both men had already created a bit of unwanted Australian corporate history, with the small Adelaide-based chemicals manufacturer with a market capitalisation of $10 million thrust into the spotlight for being the first board to be spilled and forced to fight for re-election.
Shareholders rejected the company's remuneration report for the second year in a row in October.
The "two-strikes" rule was designed to deliver shareholders a greater say in the executive remuneration policies of large corporates, particularly as pay packets bulged often at odds with diminishing shareholder returns.
But after the meeting on Friday, Mr Trebeck said the negative vote received against the remuneration report "had more to do with general shareholder disaffection" - the company's poor performance, a declining share price and the absence of dividends - than it did with excessive executive pay.
"Ideally, the two-strikes policy should be terminated," Mr Trebeck said, adding that before the two-strikes rule, shareholders who were disgruntled with the performance of the board could still muster enough support to request an extraordinary general meeting and move against some or all directors.
Shareholder advocacy groups and large institutional funds have largely delivered positive feedback on the "two-strikes" regime, and the fact that company directors were now more open to stakeholder feedback.
The influential fund manager AMP Capital said earlier this month it had experienced a "dramatic increase" in companies engaging with it, when previously concerns "fell on deaf ears".
"I'm not convinced," Mr Trebeck said. "I think directors generally are more than capable of identifying and responding to prevailing shareholder sentiment without needing a legislative sledgehammer to do it for them."
He said defending the board spill had been a "massively time consuming" process.
Penrice has suffered mounting losses and a plummeting share price in recent years, leading to agitation from 5 per cent shareholder London City Equities for board renewal.
Three potential directors put forward by LCE were defeated, each receiving about 25 per cent support.
Penrice recently announced it would cease production of soda ash - an ingredient used in glass-making - and instead import it in a bid to slash costs.
Mr Trebeck said Penrice would focus the company's future and working in the interests of shareholders. He also criticised the disruptive nature of LCE's shareholder activism.
The vote on remuneration reports was previously non-binding, until the two-strikes rule was introduced in 2011.
There are concurrent calls from companies and shareholders alike to simplify executive pay reporting requirements.