Australasian Centre for Corporate Responsibility takes Commonwealth Bank to court over climate risk
Corporations are among the most powerful institutions in the world, and their power is growing. Governments are held to account at the ballot box, but there are very limited ways that shareholders can hold corporations to account for important issues like climate change.
Corporate democracy is an important part of responsible corporate governance in most developed countries. Australia lags far behind the rest of the world in recognising shareholder rights.
Most other developed countries allow some form of shareholder resolution. The US, UK and Canada in particular have strong cultures of shareholder engagement, and shareholder resolutions are a longstanding and effective way for concerned shareholders to achieve change in the way a company does business.
Placing resolutions on the agendas of very large companies’ AGMs promotes awareness of issues and helps to change corporate behaviour. Resolutions on issues like climate change have been considered by company general meetings. Even when a majority of shareholders do not support the particular resolutions, companies will often change their practices in response to the continued public pressure brought about by shareholder resolutions.
In October 2014, on behalf of shareholder group the Australasian Centre for Corporate Responsibility (ACCR), EJA filed a Federal Court case against the Commonwealth Bank of Australia (CBA).
The case sought a declaration that shareholders have a right to put ordinary resolutions about the management of the company to the bank’s Annual General Meeting – an important tool to hold corporations to account. Australian law was unclear about whether shareholders had this right and companies were acting on the assumption they do not.
The ACCR had attempted to put an ordinary shareholder resolution to the AGM of Commonwealth Bank, asking it to report on the amount of climate change causing carbon pollution it finances, which was rejected. The ACCR lodged an alternative resolution to change the CBA’s Constitution to allow for the disclosure of this information.
Shareholder resolutions are relatively rare in Australia. Only about a dozen have been filed in the last decade and the majority of these were special resolutions, seeking to change the constitution of the companies concerned. This case aimed to set a precedent that would apply to future AGMs of Australian companies and improve corporate responsibility in relation to climate change.
On 31 July, 2015, the Federal Court ruled that shareholders do not have the legal right to put such resolutions to their shareholders.
This was a very disappointing result that left Australia far behind other developed countries such as the US, the UK, New Zealand and Canada, where shareholder resolutions are an accepted, healthy part of corporate culture and where they have proven capable of bringing about real change.
This decision means it is now harder for shareholders who own and ultimately control companies to hold the company accountable for harm the environment or other conduct that isn’t in the best interests of their shareholders or the community.