Should the Australian Shareholders’ Association (ASA) get into the business of running external candidates for boards to achieve governance progress and improved outcomes for retail investors?

After spending three years as an ASA director and spokesman, that’s certainly my view, but there is negligible support for a more aggressive approach from the mostly conservative volunteers who run Australia’s main advocacy organisation for investors.

Board tilts are effective because directors are normally very happy to make concessions in order to avoid a contest for their positions.

And as federal Liberal MP Paul Fletcher explained this week when defending preselection challenges by moderates in NSW, what is wrong with a bit of healthy and democratic competition for positions?

The Fairfax papers have today reported on the situation at Woodside Energy where a formal nomination for the board on Monday this week, flushed out the revelation that Shell will be cutting its board representation from two to one at the April 21 Woodside AGM in Perth.

These Shell issues were first publicly flagged in this Crikey piece on Monday. The formal letter nominating for the Woodside board followed a few hours later in the afternoon.

Who knows if Shell was thinking about re-nominating Andrew Jamieson for the Woodside board, but the prospect of a messy public campaign and contest against his re-election would have strengthened the argument to go quietly.

After contesting 48 public company elections since 2000, I’m more convinced than ever that, tactically, they are the fastest way home if you want to achieve change.

Let’s take the example of QBE as just one example.

The insurance giant had arguably the worst record of any company in the ASX 50 when it came to diluting retail investors in capital raisings, as was explained in great detail at the 2010 QBE AGM.

Firstly, in 2007 it did a $406 million institutional placement with no share purchase plan (SPP) for retail investors at all.

This was followed up by a monster $2.1 billion institutional placement on November 28, 2008, at $20.50 a share to fund acquisitions. Small investors were offered an SPP on the same terms, but this only amounted to $114 million after a heavy scale back.

When you politely write to companies in a timely fashion and ask them to lift caps on SPPs, quite a few respond positively, as this list demonstrates.

However, given QBE’s past recalcitrance, this was no sure thing in 2013 when it completed a $650 million institutional placement at $10.10 and then announced the subsequent SPP would be capped at $160 million.

I was in my last days at the ASA and sent this cheeky email to QBE company secretary Peter Horton on September 10, 2014.

Hi Peter,

Could you please let the board know that I’ll be running for the QBE board at next year’s AGM if there isn’t a modest nod to ASA’s concerns about the current SPP.

The placement in 2008-09 was $2 billion but then QBE limited the subsequent SPP to just $5000 for individuals and $100 million collectively. This was one of the most highly dilutive capital raisings by an ASX50 company.

QBE has had multiple opportunities to expand past SPPs and you’ve never done it. I do note that QBE has a new CEO, chairman and company secretary from those days so this represents a good opportunity to start afresh.

With a market cap of $15.8 billion, a modest expansion of the SPP to something like $250 million would have no material impact on your capital ratios. At the moment, with the cap, the split is 80-20. If there is strong demand, we really hope you can do a bit better for retail on this occasion.

Yours Sincerely

Stephen Mayne
Outgoing ASA spokesman and QBE shareholder  

Lo and behold, the QBE board settled on a 25% expansion of the in-the-money SPP offer to $200 million and the first board contest in its long and storied history was avoided.

There was still plenty of scale back. My $15,000 BPAY application for the discounted SPP shares boomeranged back with one new share at $10.10 and a refund of $14,989.90.

But collectively, for the 50,000 small QBE shareholders who did apply, the paper profits on those extra $40 million worth of shares had hit 40% about 10 months later, although the stock has since retreated back to yesterday’s close of $10.47.

Sometimes even the smallest of concessions can be achieved by the prospect of a board nomination. A few years ago, mining giant Rio Tinto was refusing to supply transcripts from its previous AGMs.

As the 2009 deadline for nominations approached, I responded by threatening to run for the board on a “transcripts for shareholders” platform. The transcripts in question duly arrived two days later and there was no contest that year. Instead, the long-planned run at the Rio board was delayed until 2010.