Investor advocacy group the Australian Shareholders' Association (ASA) has called for the head of retail billionaire Gerry Harvey after an incendiary shareholder meeting on Monday failed to resolve controversy over Harvey Norman's relationship with its franchisees.
"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," ASA chairman Diana D'Ambra said in a prepared statement on Tuesday.
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Retailer Harvey Norman has reported a 30 per cent increase in net profit on the back of Australia's strong appetite for housing and connected devices. Vision courtesy ABC News 24.
The ASA is calling for the resignation of Mr Harvey, saying he should be replaced as chairman by an independent non-executive director.
It also said the company should change its auditor to provide a "fresh set of eyes" on the accounts, and said the majority of the board should be independent within two years.
The ASA voted against the Harvey Norman accounts, its remuneration report and the re-election of two directors.
At the shareholder meeting, Mr Harvey blamed a short seller for the "hearsay and rumours" about the retailer's financial relationship with its franchisees.
"It has been started by a short seller ... he's been trying to disrupt our company," he told investors.
"I think they should be banned .. [they have] huge incentive to go out and damage the price."
![Harvey Norman chairman Gerry Harvey: "If you're telling me I'm not looking after shareholders you've got a loose cog in ...](/web/20170507122343im_/http://www.theage.com.au/content/dam/images/g/s/o/w/c/e/image.related.articleLeadwide.620x349.gspqb7.png/1479186582953.jpg)
One of Mr Harvey's alleged short sellers, Bronte Capital's John Hempton, denied short sellers were colluding with proxy advisers to drive down the retailer's share price.
Gerry Harvey blames me.https://t.co/2JVXujYnX9
— John_Hempton (@John_Hempton) November 14, 2016
![Bronte Capital's John Hempton denied short sellers were colluding with proxy advisers to drive down the retailer's share ...](/web/20170507122343im_/http://www.theage.com.au/content/dam/images/g/r/v/l/j/o/image.related.articleLeadwide.620x349.gspqb7.png/1490937589206.jpg)
The allegations were triggered by the retailer's latest annual report, which contained the surprise that it has loans totalling $943 million to its franchisees and had written off $566 million of those loans – what it calls "tactical support" – since 2011.
Proxy advisor Ownership Matters recommended a vote against Harvey Norman's accounts. It also said the retailer should consolidate its franchisee accounts with its group accounts, and provide greater clarity in regard to this $943 million it "advanced" to franchisees in recent years.
The ASA said it received a "hostile response" from Mr Harvey and called for "substantial governance reform" at the company, which is in effect controlled by Mr Harvey, who is one of its founders.
ASA representative Allan Goldin asked Mr Harvey on Monday why he doesn't privatise Harvey Norman if he is not prepared to run it as a public company.
"If you're telling me I'm not looking after shareholders you've got a loose cog in your head," Mr Harvey told Mr Goldin.
Following another exchange between the two, Mr Harvey replied: "I've answered your stupid questions."
Harvey Norman has been contacted for comment.