Our SIX community are the latest players in a growing and powerful movement of Australian shareholder activists. We wanted to reflect on how this movement emerged, to understand what came before us. So we sat down for a conversation with one of the key figures in this movement: Howard Pender. 

Howard is Chair and a co-founder of the Australasian Centre for Corporate Responsibility (ACCR), a not-for-profit organisation established in 2012 to coordinate shareholder activism in Australia. Howard also co-founded the ethical fund manager Australian Ethical in the early '90s. 

SIX: Cast your mind back to when you, John McKinnon, Robert Howell and Jill Sutton decided to begin ACCR… what was your motivation? What drove you to put your time into this?

Howard: That’s going a long way back! I had actually tried to start something like ACCR even earlier, the first time was around 2000, but I had a lot of challenges getting the permissions needed out of the federal government. I almost gave up, but I'm glad I didn’t.

I’d had an interest in ethical investing (you might hear this sometimes referred to as “responsible investing”) for a long time, including:

• Screening of investment portfolios (i.e. screening in positive activities, screening out negative activities),
• Providing finance for impact (now “impact investing”), and
• Running shareholder resolutions.

The last was basically unknown in Australia! That’s where ACCR came in, to coordinate this type of activity here - as other organisations do in countries like the US, UK and Canada - and use this as a tool to create change on ESG issues.  

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SIX: We’re now about 12 years on since ACCR began. What are some of the major changes in the ethical investing space - particularly around shareholder activism - that you've noticed since then?  

Howard: That’s an easy one! We’ve normalised these activities. Back when I first told people about ideas like ACCR and shareholder activism, they thought it was silly. But now look at the space! ACCR puts climate change resolutions in Europe and Japan; Market Forces emerged with their vision for getting environmentally sustainable behaviour from the finance world; organisations like Doctors for the Environment Australia have a “Healthy Investment” special invest group that looks at activities to drive the green finance transition; and SIX joined the movement to make ethical investing and shareholder activism easier too.

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SIX: What do you think have been the most successful shareholder resolutions that ACCR has proposed over the last 12 years?

Howard: Thinking about impact, it would have to be the first time we got a 50% vote of support from shareholders. That was Woodside Energy, the major oil and gas company, in 2020. The investor vote was unprecedented in Australia: 50.16% votes for our resolution that called on Woodside to set climate targets in line with the Paris Agreement (the agreement is a legally binding international treaty on climate change, with a goal to limit warming to well below 2°C pre-industrial levels.)

This showed the board that shareholders care about a systemic risk issue like climate change and they needed to start paying attention.

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‍SIX: In terms of formatting resolutions, ACCR pioneered an approach called the “double-barrelled” resolution. This is now the approach followed for almost all shareholder resolutions proposed in Australia, including by advocates like SIX and Market Forces. Can you explain what this approach is, and the reasoning behind it?

Howard: To understand the problem we were trying to solve, you have to go back to 2014. ACCR wanted to put forward a resolution to the AGM of the Commonwealth Bank of Australia (CBA), asking the company to prepare and release a report detailing the greenhouse gas emissions the bank was financing, the risks posed by climate change to the bank, and the mitigation strategies they would adopt.

As expected, the CBA board had refused to put the resolution onto the agenda for their AGM as an "ordinary resolution" (a resolution covering general matters, and only needing a bare majority of votes to pass). The CBA board argued that shareholders didn’t have the right to put forward such resolutions relating to “company management”.

ACCR challenged this response in a "test" case in the Federal Court of Australia and sadly we lost. The judges determined that, unlike in the US, UK, Canada and New Zealand, shareholders do not have the authority to propose ordinary resolutions like this under Australia's Corporations Act - not unless a company’s constitution expressly gives them the right to do so.

This was a tough time and we had to think a lot about workarounds. That’s when we figured out the “double-barrelled” approach. I think this is one of the most important things I did with ACCR.

What ACCR started doing - and others followed - is creating resolutions with two (or more) parts:

• First, we have a special resolution that proposes amending the company’s constitution so that shareholders could put forward advisory resolutions that express an opinion on company operations.
• Secondly, we then have an additional resolution (or resolutions) that is advisory, which contains what we actually want to ask of the board. Strictly, this additional resolution is dependent on the constitutional amendment passing.

The first resolution needs 75% shareholder support to pass, so obviously that’s very tricky. But this approach allows us to put the second resolution on the table, allows all shareholders who lodge proxies to vote on it and thus, if they wish, to send a clear message to the board.

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‍SIX: Part of ACCR’s challenge with CBA back in 2014 was that you were told your ordinary resolution ask of the company wasn’t “shareholder business”. In your experience, where is the line drawn between what is shareholder business and what is not?

Howard: There's a few things to keep in mind when you're organising a shareholder resolution: 

• What you’re asking has to be legal
• It has to be clear, don’t be vague or uncertain
• You can’t use resolutions as a vehicle for personal disagreements
• It can’t interfere with the day-to-day management of the company

It’s the final point that suffers from a lot of confusion, around what actually is the “day-to-day management” of a company. Shareholder resolutions that ask for policy to be developed are generally okay.

It also helps to look at how shareholder activists are approaching resolutions in the US and other countries, because this often sets the tone for what will be accepted here.

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SIX: Given shareholder activism is still relatively new in Australia, what can investors here learn from how overseas investors propose resolutions and use shareholder advocacy tools?‍

Howard: Get specialised, and get the experts in the room with you. Looking to the USA, there’s a very high level of specialisation in how investors there organise resolutions and the shareholders that are lead-filing or co-filing on a resolution. For any subject, there are people that specialise in it, so connect with the people who know a lot about it.

Take your resolution on Save the Skate, for example. There are people who have a particular expertise and interest in sustainable corporate fisheries. Make sure they are in the room. And bring the NGOs and not-for-profits with the detailed subject matter expertise along too. And take the time to make sure everyone involved understands the fiduciary duty, institutional investors, shareholder voting and proxy advisors.

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