So keen were they to convey their concerns that two of the three proxy advisers drifted off the reservation and supported the election of governance crusader/agitator, Stephen Mayne, on the basis that he was independent.
Shareholders make a fair point. Harvey Norman has put only one new independent director on the board in 12 years, which is otherwise occupied by Harvey Norman executives, Gerry Harvey’s wife and chief executive, Katie Page, his son, Michael, and directors who have been board members since 2005 or earlier. One director, Christopher Brown, has been on the board since 1987 and has acted as the company’s lawyer since 1982.
Harvey clearly sees governance through a very different lens: “The family business doesn’t exist as far as they’re concerned,” he told shareholders on Wednesday.
While, in general, companies at risk of even a first strike will engage with shareholders to stave off what they see as a public relations nightmare, Harvey’s resolve appears fortified by the intrusion of what he dismissively refers to as agitators such as Mayne.
In classic Harvey outlandish and aggressive style, he asked Mayne (in front of an audience of shareholders) “are you a sexual predator”? Harvey’s question was apparently a reference to an article Mayne penned 18 years ago ranking female politicians by appearance.
Harvey seemed to answer the question himself by saying “no he’s not or he’s not admitting it”.
Diversions aside, Harvey wasn’t about making meaningful concessions to shareholders in response to the threat of a second strike.
According to the head of proxy firm Ownership Matters, Dean Paatsch, Harvey has previously made a number of undertakings to consider the issues raised by shareholders but little has changed.
(Having said that, Harvey would surely argue the recent appointment of a new director is a picture of him giving some ground.)
And then there is the school of thought that investors know the rules of engagement when they buy shares in Harvey Norman. As Argo Investments chief executive Jason Beddow recently told media: “It’s like those people who buy a house next door to a noisy pub and then complain about the noisy pub next door.”
Paatsch, meanwhile, made recent headlines by recommending shareholders vote in favour of Mayne joining the board and against the re-election of Page as a director. But he reaffirmed on Wednesday that he never expected the Harvey Norman board to suffer a spill motion nor did he think Mayne’s candidacy would be successful.
Indeed, shareholders who vote for a strike rarely, if ever, vote to hold a spill motion.
Kicking out an entire board is not in the interests of shareholders.
In the likely event that Westpac receives a second strike at next month’s annual meeting it will almost certainly not get shareholder support for a spill.
It was James Packer who famously declared years ago that if the board of Crown Resorts was ever thrown out after a second strike against its remuneration report and there was a successful vote to spill directors, he would simply reappoint them.
And while Crown did ultimately receive two strikes on its remuneration report, Packer never needed to make good on that threat.
Shareholders want to send a message, they want the board to engage with them but they don’t want to commit financial suicide.
Most of all they want their company’s financial performance to be strong.
In Harvey Norman’s case, the news on that front was not particularly positive on Wednesday.
Like many other discretionary retailers the company is feeling the effects of soft consumer sentiment with comparable sales from Australian franchisees inching up only 0.4 per cent in the quarter against the same period last year on a constant currency basis.
Elizabeth Knight comments on companies, markets and the economy.