If anyone needs another example of Labor supporting political activists instead of shareholders, then look no further than its asinine refusal to abolish the 100 Member Rule. The Rule allows 100 shareholders of a company to call Extraordinary General Meetings.
The rule is anachronistic. As it stands, voting rights are based on the number of voting shares held by an individual. Thus, the concept of "majority rule" in corporations refers to the majority of voting shares, not the majority of members.
The Commonwealth’s proposal to remove the 100 Member Rule will mean that EGMs will be able to be convened by shareholders with five per cent of the votes that may be cast at the meeting. This is a reasonable requirement for a meeting to be convened, given that a resolution would require either 50 per cent or 75 per cent of votes cast to succeed. The threshold for convening a general meeting in comparable jurisdictions ranges from 5 per cent up to 20 per cent of voting rights. No other comparable international jurisdiction has a numerical threshold equivalent to the 100 Member Rule.
The Commonwealth, business and shareholder groups are united in their support for the removal of the 100 Member Rule. The State and Territory governments need to support this reform for the Rule to be repealed. To date, the States and Territories have twice rejected its removal.
The Rule is fundamentally inconsistent with the ‘majority rule’ framework, as it allocates the right to call EGMs to a group of 100 shareholders, regardless of the number of shares that the group holds.
Since 2003, NRMA has had three general meetings called by just 0.005 per cent of its members, using this Rule, at an estimated cost of about $12 million dollars. None of the ten resolutions proposed at these general meetings succeeded. The ability of political activists to impose these costs gives them undue leverage in negotiating with large companies.
In 2003 at the instigation of the Wilderness Society, the 100 Member Rule was used to requisition an EGM of Gunns. The motions were supported by just 0.45 per cent of votes cast at the EGM. Again, the significant costs of this exercise were ultimately borne by shareholders.
Opposition Leader Kevin Rudd claims to be an economic conservative and therefore he must show leadership and compel Labor to support this vital corporate governance initiative. Rudd must shy away from the special interest groups that Labor stalks for support and take action in the defence of all shareholders.
Rudd knows the States and Territories have an opportunity to put the interests of Australian prosperity above party political allegiances and should facilitate the removal of the Rule. By refusing to support the abolition of the Rule, Labor is obstructing market forces to the detriment of all Australians.