Time for shareholders to stop wasting their votes

Shareholders' voting rights and company boards' accountability have come under the microscope in an industry discussion on corporate governance.

Speaking at the Conference of Major Superannuation Funds, Ann Byrne, chief executive, Australian Council of Superannuation Investors (ACSI), urged for an increase in shareholders' voting rights looking forward.

"We have to make sure we're voting our shares," she told the conference, pointing to various forms of shareholder voting globally that have proven effective in addressing board membership issues.

Martin Lawrence, co-head, Asia-Pacific research at RiskMetrics, agreed it was fundamental for shareholders to utilise their voting rights in order to address inadequacies in governance.

"Use the franchise. Votes that aren't exercised are useless," he said.

Lawrence noted a previous fund manager revolt against cheap takeovers and major shifts in how executives are paid as proof of the value of using the "shareholder franchise".

"Electing directors is a fundamental shareholder right," Lawrence said. "Shareholders have done a reasonable job of bringing boards up to speed."

Lawrence argued that while things could be better in Australia, they could be worse. "Do we expect too much from our boards?" he asked, noting "fundamentally, power to govern the company is invested in the board".

Byrne said in her speech that problems have arisen because in the past boards have tolerated perverse incentives, there has been mismatched remuneration, and a failure of too little regulation.

"We must stop the box-ticking and move to real action," Byrne said. She noted that it has been difficult for shareholders to hold boards to account with markets on the rise in the past, but urged for an increase in shareholders' rights and also stressed the significance of separating the roles of chair and chief executive officer.