ACCRVCBA[2015]FCA785:NONBINDINGSHAREHOLDERRESOLUTIONSAND IMPLICATIONSFORSHAREHOLDERACTIVISM MICHAELHEY* DaviesJ’sdecisioninACCRvCBA[2015]FCA785affirmedanimportantandcontroversialaspectofcorporatelawthathassignificantimplicationsforshareholderactivisminAustralia.HerHonourheldthattheCommonwealthBankofAustralia’s(‘CBA’)boardwasentitledtorefusetoputtheAustralasianCentreforCorporateResponsibility’s(‘ACCR’)proposednonbindingresolutionstoCBA’sAGMasitinfringeduponthewellestablished‘divisionofpowers’doctrinebetweentheboardandthegeneralmeeting.Althoughthisdoctrineiswellestablishedhereandoverseas,itsapplicationtononbindingshareholderresolutionsisquestionableassuchresolutionshavenolegaleffectandthusarguablydonotinterferewiththeboard’spowers.IntheUS,shareholdersregularlyusenonbindingshareholderresolutionsasatooltoformallyconveytheiropinionstotheboard.However,theAustralianauthority–namely,thecontroversial1980scaseofNRMAvParker–makesitclearthatnonbindingresolutionsdoinfactusurptheboard’sauthorityandthusinfringeuponthedivisionofpowersdoctrine.ACCRvCBAprovidedanopportunitytorevisitthispointandquestionthecorrectnessofParker.ThiscasenotewillbrieflyanalyseDaviesJ’sdecisionfromalegalandpracticalstandpoint,aswellasconsideringtheimplicationsthisdecisionhasforshareholderactivisminAustralia. IINTRODUCTION ManyactivistshareholderswerewatchingcloselyasDaviesJhandeddownthejudgmentinAustralasianCentreforCorporateResponsibilityvCommonwealthBankofAustralia1(‘ACCRvCBA’)inJuly2015.HerHonouraffirmedacontroversialprecedentfromthe1980sthathasimportantimplicationsforshareholderrightsand,consequently,shareholderactivisminAustralia. *LLB(Hons),BComcandidate(UWA).1AustralasianCentreforCorporateResponsibilityvCommonwealthBankofAustralia[2015]FCA785. 399 400 TheUniversityofWesternAustraliaLawReviewVolume40 ACCRvCBAinvolvedanactof‘greenactivism’.ACCRattemptedtoinfluencetheenvironmentalreportingpolicyoftheCommonwealthBankofAustralia(‘CBA’)throughanonbindingshareholderresolution.DaviesJupheldacontroversialauthorityfromthe1980s,NRMAvParker2(‘Parker’),whichstandsforthepropositionthatshareholderscannotmaketheboardofdirectorsputforwardamotion,orrequisitionageneralmeeting,forthepurposeofanonbindingshareholderresolution.Nonbindingshareholderresolutions,asthenamesuggests,donotbindtheboardtoactinanyway,rathertheysimpleprovideaformalforumforshareholderstogivetheiropiniononparticularaspectsofpany.Whilesuchresolutionshavenolegaleffect,theycanbeanextremelyinfluentialtoolasboardmemberswillgenerallynotbeboldenoughtoactcontrarytothewishesofalargeportionofshareholders. DaviesJ’sdecisioninACCRvCBAseemstobealogicalonefortheproperfunctioningofthecorporation,however,thelegalanalysisislacking.HerHonourappearstoreadtoomuchintothesettled‘divisionofpowers’doctrineandpastauthoritywithoutdelvingdeeperintothereasoningbehindthedecisions. Nevertheless,ACCRvCBAhasmanyimplicationsforthegrowingphenomenonofshareholderactivisminAustraliaasitaffirmstheinabilityofactiviststousethisusefultoolintheircampaigns.NonbindingshareholderresolutionaremonplaceinotherjurisdictionssuchastheUS;the‘home’ofshareholderactivism. ThiscasenotewillanalysethedecisioninACCRvCBAwhilealsolookingatthepracticalimplicationsofthedecision;bothforthepartiesinvolvedinthecase,aswellasshareholderactivismgenerally.ThepracticalimplicationsareparticularlyimportanttoanalysehereasalthoughACCRlostthelegalbattle,intheend,theywereabletoeffectivelyinfluenceCBAtochangeitsenvironmentalreportingpoliciesduetothepublicpressurethatthecaseprovided. IITHEDIVISIONOFPOWERSDOCTRINE Corporategovernanceliteraturetendstodefinetherelationshipbetweenshareholdersandtheboardofdirectorsasoneofprincipalandagent.3However,theconceptof‘agency’isamuchnarrowerconceptinlawthanitstraditionaluseinthefieldofeconomics.Thefactthatdirectorsoweafiduciarydutytoactinthebestinterestsofpanyasawhole,4asopposedtoindividual 2NRMALtdvParker(1986)6NSWLR517.3See,eg,MichaelJensonandWilliamMecklin,‘Theoryofthefirm:Managerial,Behaviour,AgencyCostsandOwnershipStructure’(1976)3JournalofFinancialEconomics305.4SeeReSmith&FawcettLtd[1942]Ch304,306;GreenhalghvArderneCinemasLtd[1951]Ch286,291;CorporationsAct2001(Cth)s181
(1)(a). 2015 CaseNote:ACCRvCBA 401 shareholders,placestherelationshipbetweendirectorsandshareholdersoutsidetherealmofpureagency.Corporatelawpreferstorefertoshareholdersanddirectorsastwoansofauthoritythroughthe‘divisionofpowers’paradigm.5Thepowersofpanyare,unlessotherwisestatedinthecorporateconstitution,dividedbetweentheboardofdirectorsandthegeneralmeeting,suchthatanhasexclusiveandnon-hierarchal‘jurisdiction’overtheirrespectiveareasofauthority. TheuseoftheagencyconceptundoubtedlyoriginatesfromtheearlyEnglishjurisprudencedatingbacktotheeenthcentury,whichregardedthegeneralmeetingasthedominantbody;interveninginmanagementofpanywheneveritsawfit.6Beforepanieslegislationconferredcorporatestatusonjointpanies,membersessentiallyactedtogetheronbehalfofpany,muchlikepartnersdoforapartnership.7However,achangeintheEnglishCompaniesActattheendoftheeenthcenturysawmanagementpowerfirmlydelegatedtotheboardofdirectors.8TheEnglishCourtofAppealconfirmedthisapproachintheseminalcaseofJohnShaw&Sons(Salford)LtdvShaw9(‘JohnShaw&Sons’).TheEnglishCourtofAppealoutlinedthatshareholdersessentiallyonlyhadtwooptionsiftheyweredissatisfiedwiththeboard;changetheconstitutionorchangepositionoftheboard: Ifpowersofmanagementarevestedinthedirectors’theyandtheyalonecanexercisethesepowers.Theonlywayinwhichthegeneralbodyshareholdercancontroltheexerciseofpowersvestedbythearticlesinthedirectorsisbyalteringtheirarticles,or,ifopportunityarisesunderthearticles,byrefusingtore-electthedirectorsofwhoseactionstheydisapprove.Theycannotusurpthepowerswhichbythearticlesarevestedinthedirectorsanymorethanthedirectorscanusurpthepowervestedbythearticlesinthegeneralbodyofshareholders.10 ThedivisionofpowersdoctrineisappliedstrictlyinAustralia.Section198A(1)oftheCorporationsAct2001(Cth)(‘theAct’)provides,asareplaceablerule,thatthebusinessofpanyistobemanagedbyorunderthedirectionof 5SeeNRMALtdvParker(1986)6NSWLR517.6See,eg,section90oftheCompaniesClausesConsolidationAct1845(UK)whichstatedthattheexerciseoftheboard’spowers‘shallbesubjectalsotothecontrolandregulationofanygeneralmeetingspecificallyconvenedforthepurposebutnotsoastorenderinvalidanyactdonebythedirectorspriortoanyresolutionpassedbysuchgeneralmeetings’.SeealsoCottonLJinIsleofWightRailwayCo.vTahourdin(1883)25ChD320,329.7RobertP.Austin,IanM.Ramsay,Ford’sPrinciplesofCorporationsLaw(16thed,LexisNexisButtersworth,2015),244.8SeeAutomaticSelf-CleansingFilterSyndicateCo.vCunningham[1906]2Ch34,42;Gramophone&TypewriterLtdvStanley[1908]2KB89.9JohnShaw&Sons(Salford)LtdvShaw[1935]2KB11.10Ibid134. 402 TheUniversityofWesternAustraliaLawReviewVolume40 thedirectors.11Apartfromconstitutionalorboardchanges,theActalsorequiresgeneralmeetingapprovalforalimitednumberofcircumstancesthatresultinlargestructuralchangesandotheractsthatpotentiallyeffectshareholders’rights.12TheASXListingRulesalsorequireshareholderapprovalforcertainmajortransactions.13Takeoverlawisanotherareawherethedecisionmakingauthorityislargelyshiftedtoshareholders.14Thesecircumstancesarelargelyontheextremeendofthespectrum.Byandlarge,allbusinessdecisionsaremadebytheboardofdirectors(oratleastsupervisedbytheboardthroughdelegatingdecisionstomanagement). In1986,thisprinciplewastakenonestepfurtherinthecontroversialNSWCourtofAppealcaseofParker;notonlyweredirectorsnotboundtofollowdirectionfromshareholdersonhowtorunpany,butshareholderswerenownotevenallowedtoformallyexpressanopinionabouthowtheboardshouldexercisetheirmanagementpowersthroughanonbindingshareholderresolution.15Parkerimportantlystandsforthepropositionthatmemberscannotusetheirstatutorypowerstorequisitionageneralmeeting(ss249D,249F)ordemandamotionbeputtoageneralmeeting(s249N)ifthesubjectisamatterofmanagementexclusivelyvestedintheboard.16 JohnShaw&Sonsclearlystatesthatshareholderscannot‘usurpthepowerswhichbythearticlesarevestedinthedirectors’.17However,itiseasytoseetheargumentonemightposeinresponsetoParkerconcerningnonbindingshareholderresolution;howdoshareholders‘usurp’theboard’spowersiftheyaremerelyexpressinganopinionthattheboardisnotboundtofollow?
Theboard’spowersarewhollyunaffectedbysuchresolutions. Ontheotherhand,thecounterargumentisthatonecannotsimplylooktothelegaleffectofsuchresolutions,itisimportanttoconsiderthepracticaleffectaswell.Theabilitytoproposenonbindingresolutionsatwillhasthepracticaleffectof‘usurping’theboard’spowersastheyareconstantlyreceiving 11ThesepowersdonotincludethoselimitedbytheCorporationsActorpany’scorporateconstitution.CorporationsAct2001(Cth)s198A
(2).12Eg,TheCorporationsAct2001(Cth)requiresgeneralmeetingapprovalfor:reducingpany’sissuedsharecapital(ss256B,256C),alteringrightsattachedtoshares(Pt2F.2),alteringpany’sstatus(Pt2B.7),selectivebuy-backs(s257D),andconsolidatingorsubdividingpany’sshares(s254H)13Eg,TheASXListingRulesrequiregeneralmeetingapprovalwhere:pany’smainundertakingisbeingsold(LR11.2),panyismakingsignificantchangetoitsactivities(LR11.1)panyproposestoissuenewsharecapitalinexcessof15%ofitscapitalinanyperiodof12months,andthenewissueisnotprorataamongmembers(LR7.1).14SeeCorporationsAct2001(Cth)Chapter6.15Ibid522;Itfollowsthatthes249Qrequirementthatageneralmeetingisrequisitionedfora‘properpurpose’mustbeforapurposeofwhichshareholdersarelegallyentitledtovoteon.NRMALtdvSnodgrass(2001)39ACSR260.16NRMALtdvParker(1986)6NSWLR517.17JohnShaw&Sons(Salford)LtdvShaw[1935]2KB11,134. 2015 CaseNote:ACCRvCBA 403 directiononhowtoexercisethosepowers.Thisisespeciallysowhen,inAustralia,itiseasy,relativetocountriessuchastheUS,toremovedirectors. ThisdifficultquestionwasthecentralissueofACCRvCBA. IIIACCRVCBA AFacts TheAustralasianCentreforCorporateResponsibility(‘ACCR’)advocatesforsustainableandethicalinvestmentsbylargecorporations.18ACCR,on4September2014,onbehalfof100membersoftheCommonwealthBankofAustralia(‘CBA’)gavenoticeofcertainnon-bindingresolutionsitproposedtomoveatCBA’snextannualgeneralmeeting(‘AGM’)on12November2014.19CBAlistedthreealternativeresolutionsinorderofpreference.20 Thefirstproposedresolutionstatedthat,intheopinionoftheshareholders,itwouldbeinthebestinterestsofpanyforthedirectorstoprovideareportonCBA’sgreenhouseemissions,thelevelandrisktopanyof‘unburnablecarbon’andCBA’sapproachtotacklingtheseissues.21Thesecondproposedresolutionwassimplyanexpressionofconcernfromtheshareholdersthatthemattersinthefirstresolutionwerenotbeingaddressed.22Andlastly,thethirdresolutionproposedtoamendtheconstitutionsothatCBAhadtomakeayearlyreportofthegreenhousegasemissionsitproducedthatyear.23 Thefirsttwoproposedresolutionsweretherefore‘nonbinding’resolutionsthatsimplyexpressedtheopinionofshareholders,butdidnotpeldirectorspletethoseacts.Onlythethirdresolution(theconstitutionalamendment)wasincludedonthenoticeofCBA’s2014AGM.24Itwaspaniedbyamendationfromtheboardofdirectorsthattheydidnotconsideritinthebestinterestsofpany.25 CBA,inalettertoACCR,statedthatthefirstandsecondresolutionswerenotincludedonthemeetingnoticeastheywerematterswithinthepowersoftheboardandwerethusnotlegallyvalidorcapableofbeinglegallyeffective.26 18AsstatedonAustralasianCentreforCorporateResponsibilitywebsite,<.au/>.19AustralasianCentreforCorporateResponsibilityvCommonwealthBankofAustralia[2015]FCA785,[2].20Ibid[1]-[2].21Ibid[1].22Ibid.23Ibid[2].24Ibid[3].25Ibid.26Ibid[4]. 404 TheUniversityofWesternAustraliaLawReviewVolume40 BSubmissions ACCReptedthedivisionofpowersdoctrinebutargueditdidnotpreventanonbindingproposalbeingputtoshareholdersassucharesolutionwasnotanexerciseofpany’spowersandthusdidnotusurpthepowersoftheboard.27Todothis,ACCRhadtoargueParkerwaswronglydecided.ACCRalsoarguedinthealternativethatthetworesolutionswereanexerciseofpowerthatwasimpliedlynotconferredontheboard.28 ACCRsoughtdeclarationsthatthefirsttwoproposedresolutionscouldbevalidlymovedatanAGMofCBAandthatthedirectorsactedoutsidetheirpowersinmentingonthethirdproposalinthewaythattheydid,aswellasaninjunctiontomaketheboardputforwardthefirstandsecondproposedresolutionsatCBA’snextAGM.29 CBA,ofcourse,arguedthatACCR’scontentionswerewrongandthatParkerclearlyestablishedtheprecedentthatshareholderscannotforcetheboardtoallowthemtoexpressanopinionbyresolutionastohowapowervestedbypany’sconstitutioninthedirectorsshouldbeexercised.30 CDecision DaviesJfoundinfavourofCBAonallissuesand,indoingso,upheldAustralia’sstrictdivisionofpowersdoctrineinitsapplicationtonon-bindingresolutions,asexpressedinParker.DaviesJheldthat; !
resolutionsconstituteanexerciseoftheboard’spowers;31!
ParkerwasdecidedcorrectlyandACCR’ssuggestedauthorities (WinthropInvestmentsandAuervDressel)pellednodifferentanswer;32and!
Thereisnoimpliedorstatutorypowerfromss249P,250Rorotherwiseforshareholdersinageneralmeetingtoexpressviewsonmanagementthrougharesolution. DaviesJrestatedthefundamentaldivisionofpowersdoctrinefromtheearlyEnglishcasesofGramophone&TypewriterLtdvStanley33andJohnShaw&Sons.34HerHonourwentontoconsiderthemorerecentAustraliancase,WinthropInvestments,35whichformedthebasisforACCR’sargument. 27Ibid[13]-[14].28Ibid[14].29Ibid[6].30Ibid[15].31Ibid[17]-[18].32Ibid[27]-[32].33Gramophone&TypewriterLtdvStanley[1908]2KB89.34[16].35WinthropInvestments[1975]2NSWLR666. 2015 CaseNote:ACCRvCBA 405 WinthropInvestmentsconcernedthepowerofthegeneralmeetingtovalidateabreachofdirectors’duties.ACCRreliedonastatementbySamuelsJAwhichelaboratedontheprinciplesenunciatedinJohnShaw&Sonsbystatingthattheresolutiontoapprovethedirectors’breachofdutyinthatinstancewasnotbindingandthusthisexpressionofopinionbytheshareholdersdidnotinvolvedanyexerciseofpower.36ACCRarguedthatifsuchanexpressionofopiniondidnotinvolveanyexerciseofpower,itthereforecouldnotimpingeontheexerciseoftheboard’spowers.DaviesJrejectedthisargument,pointingoutthatWinthropInvestmentsmustbeunderstoodincontext.37Itwasacaseaboutratifyingdirectorsbreachesinwhichthedirectorsthemselvesreferredaquestiontoshareholdersatageneralmeeting.HerHonourstressedthatSamuelsJA’sdictummustbeunderstoodinthecontextofthatcaseandshouldnotbetakenasastatementofageneralprincipleregardingshareholderresolutions.38 DaviesJalsorejectedthesubmissionthattheNewYorkCourtofAppealscaseofAuervDressel39warrantedadeparturefromtheprinciplesinParker.HerHonoursimplydismissedthiscaseasitdidnotfollowthelineofauthorityinAustralia.HerHonourconcludedthatneitherAuervDresselsnorWinthropInvestmentswarrantedadeparturefromthedecisioninParker,whichshouldbefollowedinthisinstance.40 DaviesJalsorejectedACCR’sancillaryargumentsthatusedinterpretiveprinciplestoreaddownapowerofshareholderstoproposenon-bindingresolutionsthroughanimpliedpowerorthroughcertainsectionsoftheActsuchasss249P41and250R
(1)(a).42HerHonourdismissedtheseargumentslargelyonthebasisthattheexistenceofs250S,whichallowsshareholderstoaskquestionsmentonthemanagementofpanyatanAGM,wasnotconsistentwithACCR’sconstruction.43 IVLEGALANALYSIS DaviesJ’sdecisionleavesalotlackinginlegalanalysis.HerHonourseemstorelymostlyonParkerwithoutreallydelvingintothereasoningbehindit.ThecrucialEnglishauthoritivestatementsinGramophone&TypewriterandJohnShaw&SonsrepeatedinherHonour’sjudgmentmakenomentionofnon- 36Ibid683.37AustralasianCentreforCorporateResponsibilityvCommonwealthBankofAustralia[2015]FCA785,[29].38Ibid.39AuervDressel(1954)306NY427.40AustralasianCentreforCorporateResponsibilityvCommonwealthBankofAustralia[2015]FCA785,[27].41[35]-[36].42Ibid[38]-[39].43Ibid[36],[39]. 406 TheUniversityofWesternAustraliaLawReviewVolume40 bindingresolutions.ThoseEnglishcasesareauthorityforthebroaderdivisionofpowersdoctrine.Itthereforedifficulttounderstandhowsuchstatementsevolvedintoaprinciplethatprohibitedthemereexpressionofopinionconcerningtheexerciseoftheboard’smanagementpower,oratleastthepowertoputsuchaproposaltothegeneralmeeting.ThiscanonlybeunderstoodbylookingmorecloselyatthedecisioninParker;andthereinliestheproblem. Parkerhasevenlesslegalanalysisofthisproposition.McLellandJappearstospendonlyoneparagraphonthediscussionofwhetheranon-bindingresolutioncanbeputtoageneralmeeting.44Inthisparagraph,hisHonourauthoritativelystates; Inmyviewitisnopartofthefunctionofthemembersofpanyingeneralmeetingbyresolution,ieasaformalactofpany,toexpressanopinionastohowapowervestedbytheconstitutionofpanyinsomeotherbodyorpersonoughttobeexercisedbythatotherbodyorperson.45 McLellandJ,whileperhapscorrect,providesnolegalreasoningforthispropositionandappearssimplytobegivinghisopiniononwhatshareholders,‘inhisview’,shouldhavethepowertodo.Thiswouldappearanamplecasetoresorttooverseaspersuasiveauthoritytoinformsuchanimportantpartofcorporatelaw. DaviesJalsofailstogiveanadequateexplanationofSamuelsJA’sstatementinWinthropInvestments.HerHonoursimplystatesthatSamuelsJA’sdictumwasconfinedtoitscontextandshouldnotbereadasageneralprinciple,wheninfactSamuelsJA’sstatementwasmadeinrathergeneralterms.PerhapsamorehelpfulexplanationmayhavebeentodistinguishWinthropInvestmentsonthebasisthatdirectorshadvoluntarilyaskedforshareholders’opiniontoratifyabreachofdirectors’duties,whereasinACCRvCBA,shareholderssoughttoforcetheboardtoplacethisresolutiononthenoticefortheingAGM. DaviesJdisposesoftheACCR’sUSauthoritywithoutfurtherexplanationasitconflictswiththeprecedentinAustralia.Thismayseemobviousandapointthat‘goeswithoutsaying’,however,thisisnotnecessarilyalwaysthecase.Courtsinthelatterpartofthetwentiethcentury,especiallyintheareaofcorporatelaw,haveincreasinglylookedoverseastojurisdictionssuchastheUSforguidanceondifficultandunclearareasoflawandpolicy.Thiswasnomoreapparentthaninthe1986NSWCourtofAppealcase,AdvanceBankvFAIInsurance,46inwhichKirbyPcitednumerousUScasesandacademicwritings 44NRMALtdvParker(1986)6NSWLR517,522.45Ibid.46AdvanceBankAustraliaLtdvFAIInsuranceLtd(1987)9NSWLR464. 2015 CaseNote:ACCRvCBA 407 etohisdecision.47ItmayhavebeenappropriatetodigslightlydeeperintothereasoningbehindAuervDressel,aswellascontrastingthistoMcLellandJ’sreasoninginParker.Nevertheless,itisnosurpriseDaviesJrejectedtheNewYorkCourtofAppealscasehereasitdirectlyconflictedwiththeAustralianauthority. Overall,DaviesJmadeasafejudgmentandfollowedtheauthorityinParker.DepartingfromParkermaywouldhaveresultedinasignificantchangeinthecorporatelegallandscapeandoverturnedaseeminglysettledprincipleincorporatelaw.WhileherHonourisnotnecessarilyincorrect,itmayhavebeenofgreaterbenefitifherHonourdugdeeperintothereasoningbehindwhyexactlynonbindingshareholderresolutionsinfringeuponthedivisionofpowersdoctrine.Asaresult,ACCRvCBAsimplyservestofurtherentrenchthebriefandunderwhelmingjudgmentinParker. VPRACTICALANALYSIS:IMPLICATIONSFORSHAREHOLDERACTIVISM ItisimportantnotonlytoanalyseDaviesJ’sdecisionfromalegalstandpoint,butalsotoconsiderthepracticalramificationsonthisparticularscenario,aswellasmoregenerallyforshareholderactivism.Indeed,whileACCRmayhavelostcourt,ACCRwouldconsiderthecaseavictoryinrealityasCBAeventuallyimplementedmanyoftheirsuggestionstovaryingdegreesduetothepublicitythecasegenerated. APracticalimplicationsforCBA AlthoughACCRlostthelegalbattlewithCBA,theFederalCourtcasecreatedalotofmediaattentionaroundtheissue.ThisattentionlikelyshoneanegativelightonCBAasitappearedtobeinsensitivetothehighlypublicisedissueofclimatechange,wheninfactCBAwassimplyadheringtoaseeminglysettledprincipleofcorporategovernanceinrejectingACCR’sproposedresolutions.ThemediaattentiongeneratedfromthecourtcaseundoubtedlyplayedapartinCBAimprovingitsemissionreportingaftertheresolutionwasproposed.48GreenactivistssuchasACCRareusuallynotexpecting,orevenaimingfor,substantialsupportfromshareholdersfortheirproposals.TheirbiggestweaponispublicityandinthiscaseACCRcertainlyachievedthepublicityandeffecttheywerehopingfor.Thisbegsthequestionofwhetheritisdesirableforgreenactiviststousepublicitypanyresourcestoinfluencetheboardinto 47Seeibidat476-478whereKirbyPreferstoLawyers'AdvertisingCovConsolidatedRyLighting&RefrigeratingCo80NE199;187NY395(1907)andProfessorMAEisenbergin“esstotheCorporateProxyMachinery(1970)83HarvardLawReview1489,1496.48SeeCommonwealthBankofAustralia,Environmental,Social&Governance(ESG)LendingCommitments–ImplementationandReporting,. 408 The
UniversityofWesternAustraliaLawReviewVolume40 makingadecision,ofwhichonlyapproximately3%ofshareholdersapprovedofinthiscase.49 Anotherinterestingpointfromthiscaseistheuseofaconstitutionalamendmentasanapparent'loophole'inwhichashareholdercanrepackagetheirnonbindingresolutionintoaconstitutionalamendmentsotheboardislegallyrequiredtoputtheproposedresolutiontoageneralmeeting.ACCRusedthistacticbysubmittingtheirthirdresolutiontotheAGMintheformofaconstitutionalamendment.Thistacticcanbeeffectiveforgreenactivism,whichaimspredominantlyforpublicity,however,itwouldlikelybelesseffectiveforthetraditionalactivistwhoseekstoinfluenceboarddecisionsforeconomicreasons.Thisisbecauseofthedifficultyincondensingtheactivist’sdemandsintoaconstitutionalamendment50andthefactthatconstitutionalamendmentsrequireaspecialmajority. BPracticalimplicationsforshareholderactivismgenerally Shareholderactivismhasmonplaceamongtheworld’sdevelopedmarkets.Someconsideractivistsas‘capitalism’sunlikelyheroes’,51whileothersseeshareholderactivismas‘directlyresponsiblefortheshorttermistfixationthatledtothe[2008]financialcrisis.’52RecentyearshaveseenshareholderactivismtakeplaceatmajorpaniessuchasQantasAirways,53FairfaxMedia,54Brickworks,55BillabongInternational56andInfigenEnergy.57 49ThiswastheapprovalrateforthethirdresolutionattheAGM.50KarenEvans-Cullen,RodHalsteadandJohnElliott,‘2014:Theyearoftheshareholderactivist?
’ClaytonUtzInsights,6February2014,.51‘Capitalism’sunlikelyheroes’,TheEconomist(London),7February2015.52MartinLipton,JayW.Lorsch,TheodoreN.Mirvis,‘Schumer'sShareholderBillMissestheMark’TheWallStreetJournal(NewYork),12May2009.53Aconsortiumofinvestors,includingformermanagersandactivistinvestor,MarkCarnegie,soughttochallengeCEO,AlanJoyce’scorporatestrategy.However,inearly2013,aftermajorinstitutionalshareholdersfailedtorallybehindthegroup,theactivistconsortiumsoldtheirholdingsinQantas.SarahThompsonandJamesChessell,‘DixonGroupSellsQantasHolding’,AustralianFinancialReview(Sydney),30January2013.54GinaRinehart,alongwithJohnSingletonandMarkCarnegie,workedtogetherinattemptinginfluencethedirectionofFairfaxMediain2012.Rinehartfailedinanattempttosecureaseatontheboardduetorefusingtosignacharterofeditorialindependence.RickFeneley,‘MarkCarnegie:landingbigfishwithasmalllure’,TheSydneyMorningHerald(Sydney),5January2013;RuthWilliams,‘GinaRinehartsellsentireFairfaxstake’,AustralianFinancialReview(Sydney),7February2015.55Inlate2013,MarkCarnegieandPerpetualattemptedtounlockthecross-shareholdingstructurebetweenBrickworthsandWashingtonH.SoulPattinson.PhilipPodzebenko,‘ActiviststakeaimatSoulPattinson-Brickworkscross-shareholdingset-up’,TheAustralian(Sydney),28October2013. 2015 CaseNote:ACCRvCBA 409 However,Australiahasnotseenalargeamountofshareholderactivismbyinternationalstandards. Australia’s‘shareholderfriendly’regulatoryenvironmenthascausedsometoproclaimAustraliaas‘fertilesoil’forawaveofactivism.58ThetoolsintheAustralianactivist’sarsenalinclude,interalia,the‘twostrikes’rule,59therighttorequisitionageneralmeeting60andreplacedirectors,61restrictionsondirectors’abilitytocampaignusingcorporatefunds62andtheprohibitionofmanyanti-takeoverdefences.63ThesetoolsaregenerallynotavailableintheUS–thehubofshareholderactivism.64Equally,therearesomewhothink‘Australia’slegalsystempaniesovershareholders,presentingmoreobstaclesforactivistinvestorstonavigate…’.65Theinabilitytoproposenonbindingshareholderresolutionstoageneralmeetingiscertainlyoneoftheseobstacles.ACCRvCBA’saffirmationofthepropositionthatshareholderscannotformallyexpresstheiropinionregardingtheexerciseoftheboard’smanagementpowerstakesawayanimportantweaponintheactivistshareholder’sarsenal. ThepositioninACCRvCBAisincontrasttotheUSwhereshareholders 56US-basedCoastalCapitalInternational,in2013,pressedforageneralmeetingtooustmostofBillabongInternational’sboardamiditsdebtcrisis.GillianTan,‘ActivistShareholderTakesAimatBillabong’sBoard’,WallStreetJournal(Online),2September2013.57London-basedactivisthedgefund,TheChildren’sInvestmentMasterFund,forcedtheresignationsofthechairmanandadirectorofInfigenEnergyin2010.TracyLee,‘UKinvestorTCIforcesInfigendirectorsout’,TheAustralian(Sydney),13November2013.58See,eg,Friedlanderetal’sclaimthatAustraliais‘fertilesoil’foraninfluxofshareholderactivisminDavidFriedlander,MedardFischer,MichaelTing,‘Economicactivism:Re-thinkingdirectors’dutiesandgovernancestructuresintheactivistcontext’(PresentedatSupremeCourtofNewSouthWalesAnnualCorporateLawConference,Sydney,8August2014),6.59CorporationsAct2001(Cth)s300A.60Ibids249N.61SeeReplaceableRules201GinCorporationsAct2001(Cth);WorcesterCosetryLtdvWitting[1936]Ch640,650.Typically,pany’sconstitutionmakesprovisionforshareholdersabilitytoappointdirectors.RobertP.Austin,IanM.Ramsay,Ford’sPrinciplesofCorporationsLaw(15thed,LexisNexisButtersworth,2013),242.62SeeGummowJinFraservNRMAHoldingsLimited(1994)124ALR548,565citingtheprinciplesinAdvanceBankvFAI[1987]9NSWLR464tosupportthefindingthattheuseofcorporatefundsbydirectorstodistributeproxypaperstomembers,explainingandadvocatingthemendationsofthedirectors,maybeimproper.63SeeTakeoversPanel,GuidanceNote12:FrustratingAction,18July2014.64King&WoodMallesons,‘Directions2015:CurrentissuesandchallengesfacingAustraliandirectorsandboards’<.au/~/media/resources/director%20resource%20centre/cgei/directions%20report%202015.ashx>,17.65RossKelly,‘ShareholderActivismRisesDownUnder’,TheWallStreetJournal(NewYork),3December2013quotingactivistinvestor,MarkCarnegie. 410 TheUniversityofWesternAustraliaLawReviewVolume40 regularlymakenon-bindingproposals66toformallyexpresstheiropiniontomanagementandgaugethelevelofsupportfromfellowshareholders.67AlthoughstudiesintheUShaveshownnonbindingvotingisgenerallyineffectiveinconveyingtheexpectationsofshareholderstomanagerswhentheshareholdersandmanager’sinterestsarenotaligned,68thepowerofnonbindingresolutionswouldlikelybesignificantlymorepowerfulinAustralia.Thisisbecause,unlikeintheUS,shareholdershavethepowertorequisitionameetingandspilltheboardatanypoint(aslongastheymeetthestatutoryprerequisites),andtherefore,ifadirectorofanpanydidnotimplementanonbindingproposalthatreceivessignificantsupportfromshareholders,thereisarealriskthattheymaylosetheirjobbecauseofit. Nevertheless,whethernonbindingshareholderresolutionsaredesirableinAustraliaisadeeperquestionwithinthewiderdebateovershareholderempowerment.This‘desirability’canbemeasuredonmanyscales,suchas,whetheritimprovescorporategovernance,shareholdervalueorcorporatesocialresponsibility.AustinandRamsay,twooftheleadingscholarsonAustraliancorporatelaw,tendtoagreewithMcLellandJ’sapproachinParker.69Theycitepracticalreasonsfortheiropinion;although,legally,theboardarenotboundtofollowshareholders,becauseofthethreatofaboardspill,thepowerofashareholdertocontinuallyexpresstheiropinionformallycouldhavethepracticaleffectoferodingthedirector’smanagementpowers.70AustinandRamsayalsocitetheunnecessaryfinancialburdenforcirculatingsuchproposalsandconveningmeetings.71AustinandRamsay’sfirstreasonholdsmoreweightandisundoubtedlywhatDaviesJandMcLellandJwerealludingtointheirrespectivejudgments,albeitnotparticularlyclearly. VIConclusionOverall,DaviesJ’sjudgmentinACCRvCBAisanimportantaffirmationoftheprinciplesfromParker;ie,thepropositionthatshareholdersdonotholdthestatutorypowertodemandanonbindingshareholderresolutionbeputtoageneralmeeting.WhilethismaybethecorrectdecisionbasedontheAustralian 66Therewereapproximately943shareholderproposalsfor2015shareholdermeetingsreportedasof17July2015.ElizabethIsing,‘ShareholderProposalDevelopmentsDuringthe2015ProxySeason’onHarvardLawSchoolForumonCorporateGovernanceandFinancialRegulation(17July2015)

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67UnderRule14a-8ashareholderwith1%or$2,000worthofsharesmaymakeanon-bindingshareholderproposalatanannualorspecialmeetingofshareholders.SecurityExchangeCommission,CodeofFederalRegulations,§240.14a-8(2013).68DoronLevittandNadyaMalenko,NonbindingVotingforShareholderProposals(2011)66
(5)JournalofFinance1579.69RobertP.Austin,IanM.Ramsay,Ford’sPrinciplesofCorporationsLaw(16thed,LexisNexisButtersworth,2015),248.70Ibid.71Ibid. 2015 CaseNote:ACCRvCBA 411 authority,DaviesJ’sjudgmentlackssubstanceandapersuasiveargumentwhyanonbindingshareholderresolutionwouldinfringethedivisionofpowersdoctrine.ItfurtherservestoentrenchtheevenlesssubstantiatedjudgmentinParker. Nevertheless,theauthorfindsthepracticalargumentssupportDaviesJ’sdecision.Whileinastrictlegalsenseanonbindingdecisiondoesnot‘usurp’theexerciseoftheboard’smanagementpowers,thepracticaleffectis,intheAustralianlegalenvironmentwhereshareholderscanspilltheboardatanytime,thattheboard’spowerswillinfactbeundermined.Furthermore,suchresolutionsthatareusedbygreenactivistsforpurelypublicitypurposesareawastepanyresources–suchqueriesarebetterlefttoaquestionmentatanAGM,orinformaldiscussionwiththeboardandothershareholders. Whicheverwayyoufallinthedebateovershareholderempowerment,thereisnodoubtthatACCRvCBAhasseriousimplicationsforshareholderactivistsinAustralia.WhilemanyfeelAustraliais‘fertilesoil’forshareholderactivism,thestrictinterpretationofthedivisionofpowersdoctrinedilutesthisclaimbytakingawayausefulweaponavailableinmostotherjurisdictionswhereshareholderactivismismoreproliferate.