Henderson Investment voting advice
21 November 2003
| Company: | Henderson Investment Limited (HI) |
| Stock code: | 0097 |
| Meeting type: | Annual |
| Date of meeting: | 1-Dec-03 |
| Time of meeting: | 11:00 |
| Advice date: | 21-Nov-03 |
| CCASS voting cut-off | 28-Nov-03 VOTE NOW |
| Notice of Meeting: | Click here |
| Proxy form: | Click here |
| Voting method: | Webb-site.com will require a poll, all proxies will be counted |
| How to vote: | See our voting guide |
Note to journalists:
We have up to 4 proxy seats available inside this AGM. Please contact
us if you want one. Don't risk getting shut out of the meeting!
| Item | Description | Vote |
| 1 | Receive and consider the accounts | FOR |
| 2 | Declare a final dividend | FOR |
| 3 | Re-elect Colin Lam Ko Yin | FOR |
| Re-elect Leung Hay Man | AGAINST | |
| Re-elect Ho Wing Fun | FOR | |
| Re-elect Lau Chi Keung | FOR | |
| Re-elect Donald Cheung Ping Keung | FOR | |
| Re-elect Augustine Wong Ho Ming | FOR | |
| Fix the remuneration of directors | AGAINST | |
| 4 | Re-appoint auditors | FOR |
| 5A | Mandate the directors to repurchase shares | FOR |
| 5B | Mandate the directors to issue additional shares | AGAINST |
| 5C | Mandate the directors to issue repurchased shares | AGAINST |
| 5D | Increase the authorised share capital to HK$720m as and when required | FOR |
| 6 | Amend the articles of association | FOR |
We note that the proxy form fails to separately number the director-election resolutions, adding to the confusion.
Reasons AGAINST
Item 3, second candidate
We oppose the re-election of Mr Leung Hay Man as an "independent non-executive director" because we do not regard him as independent. He is also an "independent non-executive director" of Henderson Land Development Co Ltd (HLD, 0012), and a non-executive director of Hong Kong Ferry (Holdings) Co Ltd (HKF, 0050) and Hong Kong and China Gas Co Ltd (HKCG, 0003). At least the last two don't claim that he is independent.
HLD is the majority shareholder of HI, and HI in turn controls HKF and HKCG. This means that whenever the companies engage in connected transactions with each other, Mr Leung is conflicted out because he sits on the boards of both ends of the transaction, so he cannot give advice to independent shareholders. For an independent director, giving no advice incurs no liability, but what good is that to minority shareholders?
Last year, when HLD proposed to privatise HI, page 10 of the privatisation document showed this conflict for what it is:
"In respect of the independent non-executive [HI] Directors, Sir Po-Shing Woo and Mr Leung Hay Man, being common directors of HLD and [HI], are...not considered to be independent so as to express any view to the Independent Minority Shareholders regarding the Proposal".
As a result, there was only one director able to give any advice to minorities. He recommended acceptance of the $7.35 offer which he regarded as "fair and reasonable", and shareholders duly voted it down. Today, without any privatisation offer, the minority shares are quoted at $8.45.
This little case study shows why the SFC would make a better regulator than the Stock Exchange - under the SFC's Takeover Code, he was not considered independent, but under the Stock Exchange Listing Rules, he is.
Of course, illustrating the conflict further, HLD will probably cast its majority vote in favour of Mr Leung's re-election, but you should vote against in protest. We again call on the Stock Exchange to amend the Listing Rules to prohibit cross-directorships of independent directors in the same group of companies.
Item 3, last part
The reason for voting against the proposal "to fix the remuneration of directors" is that the proposal is undefined and meaningless - neither the notice of AGM nor the proxy form specifies the level at which the remuneration is proposed to be fixed. It is like proposing to elect a director without saying who the candidate is. As a result, only those shareholders who make it to the meeting will find out what the proposed remuneration is, by which time it will be too late for absent shareholders to send proxy voting instructions. So vote against.
Items 5B and 5C
Webb-site.com urges all investors to vote against the general issue mandate for all listed companies, for the reasons explained in Project Vampire, unless they comply with the recommendations set out in that article. The non-pre-emptive issue mandate allows management to choose the shareowners by allotment of shares. This corrupts the governance mechanism. Shareowners should choose management, not the other way around. If a company wishes to raise cash by issuing shares, then it should do so by rights issue, and give you the opportunity to maintain your percentage ownership stake in the company.
If your company offers new shares to other investors at a discount, but not to you, then your company is transferring value from you to the new investors. Their gain is your loss. That's why we believe an issue for cash should be done by rights issue, failing which it should be limited to 5% of existing issued shares and a maximum discount of 5%.
This year so far, a majority of independent investors in 10 Hang Seng Index companies: Cathay Pacific, Cheung Kong Infrastructure, China Unicom, CITIC Pacific, Legend, MTRC, PCCW, Shanghai Industrial, Swire Pacific and Television Broadcasts have all voted against the issue mandate. In July, another index member, Johnson Electric, became the first member to modify their mandate to partially comply with the Project Vampire recommendations by cutting the size of the mandate to 5% of existing issued shares. HSBC, as a UK company, also complies.
Their fellow index members would do well to take note of this. After all, we don't mandate boards to buy back shares from chosen shareholders at a premium to market price, so why should they be allowed to issue shares to chosen shareholders at a discount?
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