Noble AGM: shareholders may not be so supportive next time

Published May 08, 2015

Originally published in Business Times on April 21, 2015


I REFER to “Noble dodges accounting queries at AGM” and “Sound bites from Elman” (BT, April 18-19).

This was a huge opportunity for the company to clarify what to me are legitimate questions that have been raised about its accounting, business model and corporate governance. Sadly, based on the reports of what transpired at the meeting, the company quashed the opportunity.

Questions about the accounting treatment and valuation of Yancoal are clearly related to the first resolution on the adoption of the audited financial statements. According to reports, the chairman was reluctant to address these questions. Perhaps he has been advised by the company’s legal advisers not to address these questions, and in that case, he could have said so.

Under the Code of Corporate Governance, the external auditors should be present “to address shareholders’ queries about the conduct of audit and the preparation and content of the auditors’ report”. Perhaps shareholders should also have directed their questions to the external auditors, given that the external auditors are supposed to report to the “members of the company” and provide their independent opinion about the financial statements. Shareholders attending AGMs of companies should consider directing questions about the external audit at the external auditors, not just direct questions about the financial statements at the board and management.

The reports also mentioned that a shareholder had raised questions about the contributions of two independent directors who were proposed for re-election. In the notice of the AGM, Noble merely stated that one of these two independent directors will remain on the audit committee and continue to be independent after re-election, while it was silent on the other independent director. It is entirely appropriate for shareholders to ask why certain directors are proposed for election or re-election and what value they will add to the board and the company – especially when a company has failed to provide sufficient details for informed voting by shareholders. It is surprising that the chairman thought that the AGM was not an appropriate forum to raise issues about the contributions of directors and only allowed for this when pressed.

The Code recommends that “the chairman of the audit committee, nominating committee and remuneration committee should be present and available to address shareholders’ queries at these (general) meetings”. Questions about the financial statements and the appointment of directors are more appropriately dealt with by the chairman of the audit committee and nominating committee respectively. This is especially important for a company such as Noble where the chairman is an executive director and therefore part of management.

In the 2014 annual report, Noble stated that it has “adhered to the principles and guidelines set out in the . . . Code of Corporate Governance 2012 . . . save as disclosed . . . in relation to areas of deviation from the Code”.

Under “Shareholder communications”, the company states: “The Board welcomes the views of shareholders on matters affecting the Company, whether at shareholders’ meetings or on an ad hoc basis.” This is line with the Code which states that “companies should encourage shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company”.

However, it appears that the company is only prepared – and apparently with reluctance – to answer questions directly relating to the resolutions and takes a rather technical approach to determining what are legitimate questions. It would seem that Noble will need to review its corporate governance section for its next annual report and state more clearly that it only allows shareholders to ask questions on matters relating to the resolutions at general meetings based on the chairman’s interpretations as to what are legitimate questions. Otherwise, its corporate governance section would not accurately reflect how the company communicates with shareholders.

Finally, the company should not feel smug about the high level of shareholder support for the resolutions. Given that many shareholders probably voted in advance and the reports that have now come out as to what transpired at the AGM, perhaps they may not be so supportive the next time. Hopefully, proxy advisers, fund managers and institutional investors will carefully consider whether the company has been sufficiently transparent about its corporate governance – including why certain directors are proposed for election or re-election – and what transpired at the AGM, when making their voting recommendations and decisions the next time.

Mak Yuen Teen



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