The Australian Shareholders Association has called on the chairman of Harvey Norman, Gerry Harvey, to resign and for an independent non-executive director to replace him. The ASA believes the replacement of Harvey, one of the founders of the company who owns about a third of the company’s shares, should be part of wider corporate governance changes at the company.
The call for changes follows what the ASA described as the “hostile response” by Harvey at its recent AGM (14th November) following criticisms of its annual reports and accounts prior to the meeting. The Sydney Morning Herald reported that investors and proxy advisers in Australia were questioning the transparency of Harvy Norman’s accounts including the A$943 million in loans paid to its franchisees last year. There are also concerns that the structure of the franchise operations are designed to avoid payroll tax. In the SMH report Harvey denied these accusations. These concerns come despite a strong financial performance at the retailing group this year.
Australian Shareholders Association votes against key resolutions at AGM
The ASA stated that: “After weighing up the media debate, the position of some proxy advisers and the AGM discussion, ASA ended up voting undirected proxies against the adoption of the Harvey Norman accounts. We also opposed the remuneration report and the re-election of two long serving non-independent directors.”
In the statement issued a day after the AGM, Diana D D’Ambra ASA chairman said: “The incomplete reporting of the company’s controlled entities was also disappointing and contributed to the decision to oppose the accounts.
“The experienced ASA representatives who attended yesterday’s AGM, including two directors, were all very disappointed with the leadership shown by Gerry Harvey and believe substantial change is now warranted. ” D’Ambra added.
Although the resolutions were all carried at the AGM the proxy voting results show high levels of votes against the reports and accounts and against the election of directors. The ASA is now also calling for the company to have an open tender for the 2016-17 audit in order to introduce a “fresh set of eyes” and to follow ASX and ASA guidelines that the majority of the board should be independent within two years.
Executive pay vote fails at Commonwealth Bank of Australia
The issues raised at Harvey Norman follows the AGM of the Commonwealth Bank of Australia (9th November) which saw its remuneration pay report rejected by shareholders and the company withdrawing a resolution which would have granted awards to the chief executive, Ian Narev under its group leadership reward plan.
Commenting at the meeting the bank’s chairman, David Turner, acknowledged the concerns of shareholders which related to the proposed long term reward plan and the lack of clear targets and metrics. They also related, he said, to the lack of clarity of the short term incentive plan targets and how the Board exercises its discretion in relation to these awards. In response to the concerns awards would be given to Narev, not under the new scheme but under the scheme approved by shareholders in 2015.
Turner, who will be replaced as chairman by Catherine Livingstone at the end of the year, said that when Narev was appointed five years ago, his remuneration was set at a level below that of his peers and below that of his predecessor and that the bank had performed strongly since his appointment.
Turner added: “We will be engaging with shareholders over the next 12 months on all of these issues and the board will also be considering moving the basis of the calculation of the number of award rights from fair value to face value.”