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Blow to shareholder rights as Australian court dismisses advocacy group’s test case

Australasian Centre for Corporate Responsibility may consider appealing

The Australasian Centre for Corporate Responsibility (ACCR), the Canberra-based shareholder advocacy group founded in 2013, has had a test case against Commonwealth Bank of Australia dismissed.
The case centred on the rights of shareholders to put resolutions to the AGMs of Australian companies. The ACCR had put a resolution to the bank calling on it to report on its financing of carbon emissions and when the bank declined to put it onto its AGM agenda, the ACCR took the matter to court, hoping to set a precedent in a country where shareholder resolutions are rare.
Justice Jennifer Davies in Federal Court in Melbourne has today (July 31), in effect, ruled that shareholders do not have the legal right to put such resolutions. In her 17-page judgment Davies cited precedent that AGMs aren’t “the proper forum to determine matters of management”.
“In respect of matters concerning the management of the company, shareholders have the statutory right at the AGM to ask questions about or comment on the management of the company but such a right does not carry by implication a power for shareholders to convey their views by way of advisory resolutions,” Davies said.
“Today’s decision says that, in Australia, shareholders – the owners of a company – can only comment on the behaviour of their company by attempting to change the company’s constitution,” said ACCR Executive Director Caroline Le Couteur. ACCR is modelled on organsiations such as the UK’s ShareAction and Ecumenical Council for Corporate Responsibility, andthe Interfaith Center on Corporate Responsibility (ICCR) in the US.
She said the decision left Australia “far behind” other developed countries. ACCR and its lawyers, Environmental Justice Australia, will assess the options for appealing “and if necessary take this all the way, with an appeal to the High Court”.
“As a result of this case, it will be harder for shareholders who own and ultimately control companies to hold the company accountable for harm the environment, abuse human rights or engage in other conduct that isn’t in the best interests of their shareholders or the community ” said Felicity Millner, Director of Litigation at Environmental Justice Australia.
Only about a dozen shareholder resolutions have been filed in Australia in the last decade; they were mostly special resolutions, seeking to change companies’ constitutions.
In 2014 the ICCR tabled a motion on human rights and environmental damage at a company involved in a controversial Papua New Guinea mine. Australia’s first ever climate change resolution was at Woodside Petroleum in 2011, seeking a Carbon Price Assumption Report.
A Commonwealth Bank spokesman was quoted by the Guardian as saying it welcomed the participation of shareholders at its AGMs and that the judgment confirmed it acted in accordance with the law.
Focus will now shift to the ACCR’s shareholder resolutions at Australian energy firms.