MRC Report: Resetting the Bar

resetting the bar: anti-corporate activism and shareholder rights

Published: December 2024

Author: Chris Fryar

Unchecked for a decade, well resourced activist groups are ramping up pressure on Australian companies to accommodate their economic, environmental and social agendas by exploiting a weakness in Australia’s Corporations Act 2001. Without reform, these activists will only get bolder and expand their agendas into new areas.

Most Australians will be completely unaware of section 249N of the Corporations Act. This lack of awareness makes it ripe for exploitation. Section 249N provides that resolutions at general meetings can be moved by shareholders who own 5% of the shares, or by 100 shareholders.

Activists routinely leverage the 100 shareholder rule to exert disproportionate influence on company behaviour, particularly when it comes to climate policies.

In the era of the internet and ‘mega-registers’ the 100 shareholder rule is demonstrably an anachronism. From a deregulation viewpoint it imposes a substantial, unwarranted regulatory burden on Australian corporations — disproportionate to the miniscule stakes held by the proponents of resolutions — and is not fit for purpose.

Shareholder engagement with companies should be encouraged. However, the current settings have the wrong balance between shareholder rights and allowing for effective corporate governance.

Nearly two-thirds of countries surveyed by the OECD only allow shareholders holding a minimum fixed percentage of shares to file resolutions for company general meetings. The most common threshold is 5%.

Australia could better align with OECD and international practice by abolishing the 100 member rule for publicly listed corporations and replacing it with a requirement allowing for resolutions to also be filed by a fixed percentage of shareholders.