"Close minded" proxy advisers are stripping Australia's top companies of vital know-how by insisting on a majority of independent directors at the expense of industry expertise, outgoing chairman of Mortgage Choice and veteran businessman Peter Ritchie warns.
Mr Ritchie, who was managing director of McDonald's Australia for two decades and later its chairman as well as a director of Westpac, was reacting savagely to an unprecedented 79.5 per cent protest vote by shareholders against the company's remuneration report on Tuesday.
As flagged by The Australian Financial Review, the record ASX300 protest vote came after proxy advisers ISS and Ownership Matters recommended a "no" vote and ISS blocked the re-election of directors Rodney Higgins and Deborah Ralston "because both directors have tenure of 12 years or more".
"Unfortunately they take a 'cookie cutter' type of approach and have quite fixed views on most things," Mr Ritchie told the franchisee's AGM in Sydney on Tuesday.
Woolworths & BHP boards questioned
"Here's how they are hurting Australia," he said. "It's those sort of thoughtless recommendations which are resulting in boards who are so independent they don't know what business they are in! How did Woolworths get to the point where they have no retailers on the board? Or BHP finding themselves without a miner? How, and why have we allowed these remote advisers to have so much influence in the Australian business community?
"They are recommending that we throw off our board the most senior of our founding partners (who knows the business from the grassroots up, and is close friends with many of our older franchisees) and Dr Ralston who is one of the most respected women in the finance industry in Australia! Is anybody doing any thinking here!"
Both Mr Higgins and Dr Ralston were re-elected on Tuesday, despite a significant protest vote of 21 per cent and 23 per cent respectively, compared with an average 4 per cent protest vote for an ASX300 director. The 79.5 per cent protest vote on pay, a record for a top 300 company, is far above the 25 per cent needed to trigger a "strike" and the third in a row for Mortgage Choice, which received a 50 per cent "second strike" last year but avoided a board spill.
Critics said there were three experienced oil men and two experienced miners on BHP Billiton's board and so Mr Ritchie's complaints were misguided.
"Beneath all the hyperbole, there is a message there from shareholders," co-founder of Ownership Matters Dean Paatsch said. "I hope the new chairman can find it."
It's a nonsense
Mortgage Choice chief executive John Flavell also hit out at the proxy advisers ahead of Tuesday's meeting, describing their recommendations as "crazy", "ridiculous" and "a nonsense".
"I just don't understand it [at] all. To what extent, if any, have these proxy firms sought to demonstrate a deeper understanding of our business or the industry?" Mr Flavell asked.
Chief executives and directors are becoming increasingly angry at shareholders this AGM season, after CSL and AGL Energy suffered their "first strike" over pay. Catering and cleaning services company Spotless Group face a protest vote on Thursday and chief executive Martin Sheppard complained that the advice from proxy advisers ISS was "poorly informed", given he had only been at the company for a week before a shock profit downgrade in December.
Origin Energy also faces a fiery AGM on Wednesday as investors take aim at the grant of $1.35 million of equity options to outgoing CEO Grant King and "overloaded" chairman Gordon Cairns, who is also chairman at Woolworths and a director on the Macquarie Group board.
Mortgage Choice announced that its revenue rose 6.8 per cent to $197.4 million in the year to June 30 and its profit increased 3.6 per cent to $19.5 million, as the property boom and record low rates lifted demand for home loans.
However, lenders are imposing tougher borrowing conditions and Mortgage Choice's share price has remained relatively flat this year, rising marginally from $1.89 to $2.04, after falling from more than $3 in 2014.
