Vampire bites Cathay
18 May 2003

It shouldn't have been that difficult. The Annual General Meeting of Cathay Pacific Airways Ltd (CPA, 0293) was the 9th in Project Poll, and the 8th in the Hang Seng Index this year. All previous HSI companies had admitted the media to observe their AGMs. Only Hong Kong Exchanges and Clearing Ltd (HKEx, 0388), which is not in the index, had resisted, and we eventually persuaded them to let the media in.

So it came as quite a surprise to learn that Cathay Pacific, not known for secrecy and disclosure problems, has never in the past admitted the media to its shareholder meetings. Not so much as a web-cam, it had all been behind closed doors. With Project Poll going so smoothly, the media had become complacent, and not a single journalist bothered to take up our offer of a proxy to guarantee entry to the meeting.

Chairman James Hughes-Hallett, kicking off proceedings, said that over 7,000 registered shareholders had received notice and could have attended if they wanted to. We pointed out that many of them were at work or housebound, and surely he did not think that 6,990 of them did not have any interest in the discussion at the meeting. We reminded him that this was a public company, not a private one, with beneficial shareowners (most of whom are not registered shareholders) around the world who could not attend. We looked at a nearly complete Cathay board and saw Henry Fan and Vernon Moore of CITIC Pacific Ltd (CP, 0267), who had conducted their AGM in open forum. Mr Moore is also an independent director of CLP Holdings Ltd, which even has video replays of its AGMs available on its web site.

So we asked nicely, and the Chairman refused to let the media in. In that case, we said, we will object to taking the notice of meeting as read. Very well, he said, and proceeded to read it out, word for word, as required by law.

5 minutes later, we asked again. If he did not admit the media, we said, then we would, in the interests of transparency, have no choice but to propose an adjournment for not less than 7 days, so that we would have  time to use our 4 spare proxies to appoint journalists to attend the closed-door meeting. Shareholders not present had a right to know what was going on. He declined, perhaps not having read that we had employed the same tactic (but for a different reason) at the HKEx AGM. And of course, we would demand a poll on the proposal. That's blackmail, he claimed. No, we were not demanding money, just transparency, we replied. He retracted the accusation.

After printing of ballot slips, voting and counting, it was 1 hour into the meeting, and we at last had the results of the poll. Not surprisingly, we lost to the controlling shareholders. But our point was made, and we did pick up 2,000 votes in addition to the 10 we held. Then, to our surprise, the Chairman relented and admitted the media. Perhaps he was worried that they would all go home rather than wait outside for the delayed press conference.

We do not enjoy using such tactics. It wastes our time, and those of the board and other shareholders, but we will continue to do so whenever necessary in the interests of improved transparency and governance.

The next, day, our representative at the AGM of largest shareholder Swire Pacific Ltd (SP, 0019/0087), also chaired by Mr Hughes-Hallett, reported no such problems, with media given free access, so it seems that this was not just a flash in the pan, and the group has now changed its policy, so credit them for that. Lesson learned, we hope.

Vampire bites

For the 3rd time this season, investors in a Hang Seng Index company have voted against the general mandate, as we show below.

Our Project Vampire (Vote Against Mandate for Placings, Issues by Rights Excepted) urges shareholders to vote against the general share issue mandate unless it complies with our recommendations, based on international best practice, which are:

1. The mandate to issue shares for cash, other than by a rights issue, shall be in respect of not more than 5% of the issued shares a the time of the mandate
2. The discount for shares issued other than by a rights issue shall not exceed 5%.
3. The mandate to issue shares for other purposes, including acquisitions, shall be for not more than 20% of the issued shares

CPA's has two large shareholders, SP (46.14%) and CP (25.75%), while directors own 52,000 shares between them. This is a total of 2,399,451,708 shares. Assume they voted in favour of their board's proposal. Deduct that from the votes "in favour" in the official poll results, then the voting of independent investors (those without board representation) on the issue mandate was as follows:

In other words, public investors voted by 62:38 against the general mandate, the largest majority yet. Total votes cast were about 7.87% of the free float.

Click here to read news of the 4th investor vote against the issue mandate, which followed next day at Swire Pacific.

© Webb-site.com, 2003

Organisations in this story

• CATHAY PACIFIC AIRWAYS LIMITED

People in this story

• Hughes-Hallett, James Wyndham John

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