In the wake of the Westpac money laundering scandal, investors have some decisions to make. They are being given the choice of opting out of a share purchase plan and they may want to vote on the company’s remuneration report at the upcoming annual general meeting.
Westpac will provide a withdrawal option for share purchase plan applicants who applied for shares under the plan prior to Austrac’s launch of court proceedings against the bank on November 20.
The share purchase plan opened on November 12. Following an institutional placement and designed for small investors, shareholders were offered up to $30,000 of new fully paid ordinary shares, with no brokerage or transaction costs.
The shares were priced at the lesser of $25.32 – the price paid by institutional investors – and the volume weighted average price of Westpac shares on the ASX during the five trading days up to an including the closing date of the offer (December 2), less a discount of 2 per cent. The stock finished last week at $24.52.
Withdrawal requests can be made up until December 6. If the share purchase plan fails, the bank will be around $500 million short of the capital raising target it outlined at its results briefing.
On the AGM issue, the Westpac board faces the threat of a spill at the bank’s annual general meeting on December 12. The bank’s remuneration report was rejected by shareholders last year and a “second strike” next month would trigger a spill resolution.
If 25 per cent or more of the shareholder votes cast at a listed company’s annual general meeting oppose the adoption of the remuneration report, the company has a first strike recorded against it.
A vote against the remuneration report the next year is counted as a second strike. Following a second strike a spill resolution must be put to shareholders at the same meeting. A spill of the board occurs if 50 per cent or more of eligible voters are in favour.
A spill meeting must be held within 90 days of a passed spill motion. If the spill motion is not passed the slate is wiped clean.
In addition to Westpac, some of the companies that received a strike at last year’s AGMs were ANZ, Austal, Brickworks, Clean Teq Holdings, Computershare, Emeco Holdings, Goodman Group, Harvey Norman, Karoon Energy, Mineral Resources, Myer, NAB, Tabcorp and Telstra.
Of those, two were second strikes – Myer and Karoon. One, Mineral Resources, was a third consecutive strike.
The two-strikes rule was introduced in 2011, with the aim of increasing directors’ accountability to shareholders on executive pay issues, which are often contentious.
However, the vote against adoption of the remuneration report can often be seen as a more general protest vote against the company’s performance or its handling of a particular issue.
The two-strikes rule restricts the ability of key management personnel (directors and senior executives) and their related parties to vote on the remuneration report and other “remuneration-related” resolutions (such as the spill motion).
Before the introduction of the rule, listed companies were required to put their remuneration report to a non-binding shareholder vote at the AGM.
According to an ASX study, between 2011 and 2013, 306 companies received first strikes and 51 of them received a second strike. This resulted in 12 board spills.