Voting recommendations
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Note: the share buy-back and new issue mandates are dealt with in a separate EGM to follow immediately after the AGM. Click here for voting advice on that. Reasons AGAINSTItem 2 - Breach of Listing AgreementThere is a fundamental defect in this proxy form. Take a look at it. Some genius has simply copied the "purposes" set out in the notice of AGM into the proxy form, without specifying the resolutions to be proposed at the meeting. So shareholders are expected by NWD to submit proxies approving the re-election of any and all directors in one go! This in our view is a breach of the Listing Agreement, which is part of the Listing Rules. Paragraph 35 of the Listing Agreement states:
Now since there will be a separate resolution for the election of each director, this rule clearly requires that the proxy form contain a separate "for" and "against" box for each such resolution, not an all-or-nothing box which combines 5 resolutions into one. We urge the Stock Exchange to intervene and require this breach of the Listing Agreement to be rectified by adjourning or postponing the meeting in order to circulate new and proper proxy forms. A spokesperson for NWD contacted by Webb-site.com declined to do this. But in the meantime, assuming the Stock Exchange does not react in time (which is usually a safe assumption), we recommend that you vote against the 5-in-one resolution on the proxy form. According to the directors' report, the directors standing for re-election are Henry Cheng Kar-shun (Mr Cheng), Michael Sandberg, David Liang Chong-Hou and Payson Cha Mou-sing (Mr Cha). If shareholders had been able to vote on these separately, then we would have been in favour of the first three and against the re-election of Mr Cha, who is listed as an "independent non-executive director". The reason is simple - Mr Cha is the Deputy Chairman of HKR International Ltd (HKR, 0480) and is also the son of its chairman and controlling shareholder, while Mr Cheng (son of the chairman and controlling shareholder of NWD) is one of the two "independent non-executive directors" of HKR. So the two hereditary tycoons sit on each other's boards as independent directors. This creates obvious conflicts of interest due to the risk of reciprocity. Whenever a company combine separate proposals into the same resolution (as they have done here), if we are against part of a resolution (in this case, Mr Cha's re-election), then we always vote against the whole thing. Item 3 NWD has not one but two auditors, PriceWaterhouseCoopers and H.C. Watt & Company Limited. You might think that two is better than one, but consider what happens when something goes wrong and the auditors fail to spot it - one could blame the other for the failure, unless they have both done all the work (stock-taking, invoice verifying, fixed asset checks etc). Furthermore, there is a question of duplication. Either they divide the work between them, or they double-up on each part of the audit, which would increase costs compared to having a single auditor. And if they divide the work up between them, then each is relying on the other and investors cannot know which part is done by which firm, and might simply be trusting the "brand" of the larger firm for areas of work it has not done. So for this reason we would vote against the re-election of joint auditors in any company, including NWD. We want a single auditor on whom we can pin liability. Don't forget to vote in the EGM too! Copyright Webb-site.com, 2003 Sign up for our free newsletter Recommend Webb-site.com to a friend Important notice: All material on this site, except where otherwise accredited, is copyright to Webb-site.com. Media and researchers are welcome to quote from articles on this site, provided that such quotation is attributed to Webb-site.com. The information in this site should not be relied upon by any person in making any investment decision. No responsibility or liability is accepted by Webb-site.com or any person related to it for any loss arising from or in reliance upon the whole or any part of the contents of this site. Persons who are in any doubt about an investment or potential investment should take professional investment advice. From time to time parties associated with Webb-site.com may own long or short positions in securities issued by or related to companies or governments on which we comment. |