On Wednesday last week, the Commonwealth Bank held their annual general meeting at which our client, the ACCR, put a special resolution to amend the CBA company constitution to require the bank to report on their financed emissions.
On Wednesday last week, the Commonwealth Bank held their annual general meeting at which our client, the ACCR, put a special resolution to amend the CBA company constitution to require the bank to report on their financed emissions.
The resolution attracted about 3.2% of the vote. This might sound low, but remember that CBA is worth about $131 billion so the amount of support for the resolution actually represented share holdings worth around $4 billion!
In other countries, like the US, which have a long history of shareholder engagement, anything more than 3% is considered a success for the first time a resolution is considered. Very similar resolutions have been put over a number of years to large US companies and last year a similar resolution to Bank of America achieved 24% support.
Whilst shareholder activism is fairly new to Australia, with only a handful of resolutions having been considered over the last decade (as opposed to the hundreds each year in the US and UK) it has already proven to be a powerful tool for change. In response to the resolution, CBA have undertaken to do some additional reporting on their financed emissions but only through their business lending division. Nevertheless this is an important win and combined with the undertakings that have been given by Westpac and NAB, significant progress has been made. These banks will now be far more publicly accountable for the climate damaging activities they facilitate.
So what does this mean for our case against CBA?
Whilst the special resolution was considered at the AGM, the Federal Court case is about the right of shareholders to put ordinary resolutions and is still ongoing, and still very important.
CBA are arguing that they didn’t have to give notice of the ordinary resolutions about the management of the company to their shareholders and that those resolutions cannot validly be considered at the general meeting.
The importance of ordinary resolutions is that they only need 50%, as opposed to 75%, support. Institutional investors and proxy advisors are also much more prepared to consider and support ordinary resolutions. Institutional support is vital for resolutions for getting significant proportions of the vote and to achieving change.
Special resolutions for constitutional change are in some ways quite artificial and make unnecessary additions to what should be a document about the governance of the company, rather than something that deals with particular issues about the operation of the company that will inevitably change over time.
Company shareholders should have the ability to discuss and vote on matters relating to the operation of the company; as the owners of the company it is almost nonsensical to think that they can’t express a view about the activities of the company. The case will set an important precedent that will have a huge impact for corporate accountability right across Australia.
Whilst the rest of the world is committing to real action on climate change and our government is continuing to fly the flat earth flag on the global stage, corporate accountability is one of our few remaining mechanisms for change.
After all, the corporations are the ones that are driving climate change and in whose pockets our current government lies.
We have a directions hearing in two weeks on 28 November which will set out the timeline for the rest of the case, including when the court hearing will be.
Stay tuned for updates.
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