The Governance Institute said the 100-member rule can be a significant cost to the majority of shareholders and is “open to abuse by special interest groups”.
These special interest groups split 100 shares giving each person one share each and threaten to call an extraordinary general meeting between annual general meetings, unless the company negotiates on marginal issues, said the Governance Institute.
Governance Institute chief executive Tim Sheehy said this is a vexatious practice that can cost a company such as Telstra many millions of dollars to hold an extraordinary meeting.
“Let’s not forget that these costs come straight off the corporate bottom line and ultimately hurt the entire shareholder base by toying with the share price and dividend stream,” said Mr Sheehy.
He believes removing the 100-member rule will not disempower shareholders because the bill still allows groups with five per cent of the votes that can be cast to requisition an extraordinary meeting.
According to Mr Sheehy it also preserves the right of 100 members to put issues on the agenda of the annual general meeting and initiate a debate at the meeting and have the information concerning the resolution distributed to members at the company’s expense.
“The remaining measures continue to allow minority shareholders to bring matters to the attention of other members of the company effectively, without derailing the company’s financial position,” he said.
“They support shareholder activism, which is an essential component of corporate governance – it’s a simple, workable solution that’s fairer to everyone.”
He said the 100-member rule is a clear example of “costly and inefficient red tape that must go”.
The Governance Institute said in 2005 the Corporations Amendment Bill recommended the repeal of the rule, despite this however momentum in removing the rule has stalled.
“The government must finally commit to getting rid of the rule once and for all,” said Mr Sheehy.
