MORE POINTLESS REM REPORT NONSENSE AT HARVEY NORMAN

The ‘first strike’ against – indeed, a good oldfashioned majority rejection of – retailer Harvey Norman’s remuneration report shows the complete uselessness of these votes.

If more than 25 per cent of shareholders voting on the rem report at a company’s AGM vote against it, a ‘strike’ is recorded.

In the case of HN, not simply more than 25 per cent voted no, but indeed an actual majority – 50.63 per cent; so the rem report was not just technically ‘struck’ but actually rejected.

And so what happens? Answer: absolutely nothing. Not only are the historical ‘rems’ for all the executives left untouched, but also the future ones.

The company doesn’t have to and won’t change a single pay packet.

A-ha, but, if HN’s rem report gets a second strike next year, well then, things start to happen, don’t they?

Actually, again, no. Yes, a ‘second strike’ would immediately trigger a socalled ‘board spill motion’.

This does not lead directly, as it often incorrectly reported, to all the directors having to stand for re-election. No, it just produces a vote on whether they should all have to stand.

In the case of HN, such a vote would be overwhelmingly rejected. We would then have had two strikes against the rem report and then ... still absolutely nothing.

Why do I say this with absolute confidence? Because HN’s founder, executive chairman and continuing driver of the whole business Gerry Harvey, would be able to vote his shares against the spill motion.

As an executive, with a – nevertheless, meaningless – ‘interest’ in the rem report, Harvey can’t vote on that specific resolution. It was lost 184 million votes to just under 180 million.

I say, it’s a meaningless interest – just like the meaninglessness of the entire rem report nonsense – because Harvey, or indeed any other executive, voting to endorse the rem report would have exactly the same practical consequences as a vote against it. Zero.

Just as voting to ‘strike’ or even majority reject the rem report does not stop the rems being paid, a vote for it does not ensure the rems

paid. They are paid completely irrespective.

All the other resolutions on which Harvey could vote at this week’s AGM – and in crucial particular, the election of directors – were carried by 70 per cent-plus majorities.

Exactly the same would happen to any spill motion at next year’s AGM if there were a second rem report ‘strike’. are

These other votes included, interestingly and puzzlingly, many more votes cast against the election of individual directors (around 280 million) than the 184 million voted against the rem report.

This reversed the almost universal practice at other AGMs of institutional shareholders virtuesignalling in voting against a rem report and then turning around and overwhelmingly endorsing individual directors who they’ve just voted they had no confidence in!

At least at HN, those shareholders who voted against the rem report followed through by also voting against the directors, albeit just as pointlessly.

The broader point about these rem report ‘strikes’ is that they only make sense if you are prepared to go to the next step after the second one – and vote to spill the board.

But even if you are, it’s probably going to still be pointless (even the HN voting position aside), because of the different thresholds: 25.1 per cent gets you a strike but you need 50.1 per cent to spill.

The more basic point is that if shareholders actually want to sack the board, they can go for that both directly and immediately; it makes no sense to go through a tortured process spread over 12 months.

The whole thing is a virtue-signalling nonsense, which is supposed to ‘signal’ shareholder displeasure to boards. Unfortunately, far too many boards are supinely inclined to allow themselves to be virtue signalled at.