CRE voting advice
27 May 2003
| Company: | China Resources Enterprise, Limited (CRE) |
| Stock code: | 0291 |
| Meeting type: | Annual |
| Date of meeting: | 05-Jun-03 |
| Time of meeting: | 15:00 |
| Advice date: | 27-May-03 |
| CCASS voting cut-off | 02-Jun-03 VOTE NOW |
| Notice of meeting | Click here |
| Voting method: | Webb-site.com will require a poll, all proxies will be counted |
Note to journalists:
We have up to 4 proxy seats available inside this AGM. Please contact
us if you want one.
| Item | Description | Vote |
| 1 | Adopt the accounts | FOR |
| 2 | Declare a final dividend | FOR |
| 3 | Re-elect Ning Gaoning | FOR |
| Re-elect Chen Shulin | FOR | |
| Re-elect Ralph Keung Chi Wang | FOR | |
| Re-elect Houang Tai Ninh | FOR | |
| Re-elect Eric Li Ka Cheung | FOR | |
| Fix the remuneration of the directors | AGAINST | |
| 4 | Re-appoint auditors | FOR |
| 5 | Mandate the directors to repurchase shares | FOR |
| 6 | Mandate the directors to issue additional shares | AGAINST |
| 7 | Mandate the directors to issue repurchased shares | AGAINST |
Note: the lack of numbering on the individual election resolutions is confusing.
Reasons AGAINST
Item 3, last bit (unnumbered)
Far too often, companies forget that a proxy card only allows investors to vote "for" or "against" - and so proposals must be framed in a complete manner which allows such a binary yes/no response. This one, "to fix the remuneration of the Directors" is incomplete, so we recommend against it in protest. The proposal was probably copied to the proxy form straight from the notice of meeting which sets out the purposes of the meeting but not the resolutions for ordinary business.
The proposal clearly makes no sense without a figure for remuneration, which it should have stated, as did, for example, Hong Kong & China Gas. Maybe the board will come up with a figure at the meeting, but by then it will be too late for absent shareholders to give voting instructions on proxy forms. It is also unclear whether this proposal relates only to directors fees or to their total remuneration (including salaries, bonuses and other benefits). It would be unusual to include the latter, but the use of the word "remuneration" leaves it ambiguous.
Items 6 and 7
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 govern management, not the other way around. If a company wishes to raise cash by issuing shares, then it should do so by rights issue.
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%.
Recently, a majority of independent investors in 6 Hang Seng Index companies: Cathay Pacific, Cheung Kong Infrastructure, China Unicom, CITIC Pacific, PCCW and Swire Pacific have all voted against the issue mandate. 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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