Steven Mabb, Chairman of the Australian Shareholders Association (and QAV Club member) returns to share his thoughts on proxy votes, QANTAS, Nick Scali, EML, Virgin UK, FMG, REM reports, AGMs, director workloads, auditors becoming board members, the value of independent directors, gender representation on boards, and much more.


[00:00:00] Cameron: Hi, welcome to QAV. This is episode 637 and we’ve got a special guest on today, but before we get to the special guest, hi TK, how are you?

[00:00:15] Tony: Hey, good Cam.

[00:00:16] Cameron: Back in

[00:00:18] Cameron: Shidney?

[00:00:18] Tony: Yeah.

[00:00:19] Tony: Hello to everyone. I’m going to be on the Gold Coast when you’re hearing this, I would think, having a

[00:00:23] Tony: nice break.

[00:00:24] Tony: So thanks to Steve for coming on and

[00:00:27] Cameron: Hey,

[00:00:27] Tony: in for me, I

[00:00:28] Cameron: We haven’t said who the guest is. Well, I guess

[00:00:30] Cameron: they’ve probably seen it in the title. before we get to Steve, I want to

[00:00:33] Cameron: do a shout out to Ed Nixon, who invited me up to present at the Noosa Stock Doctor’s Association, um, the other day, that was a lot of fun, didn’t get to see any beach, didn’t have time, had to get back for Kung Fu, but drove two hours to Noosa, did a dog and pony show and drove all the way back, but that was, that was nice to present to the Stock Doctor, hello to all the Stock Doctor people in Noosa, uh, up there.[00:01:00]

[00:01:00] Cameron: And, um, hello to, Steve and Kathy, who came onto the webinar last night too, and they’ve been long term members, but, hadn’t really met them before. They’re from the Gold Coast. So, went through the latest buy list and stuff with them, which was always fun. But one of the things I wanted to just point out, one of the things that was reaffirmed to me at the Stock Doctor thing that I did, these people, you know, they’ve been investing for a long time, uh, all use Stock Doctor obviously, smart people, and, and I sort of did my dog and pony show, explain how QAV works, and then they, uh, uh, opened up their portfolio, they have like a group portfolio, and they were talking about, you know, things that they could add to it.

[00:01:42] Cameron: And after I’d just spoken for an hour about general philosophy is figure out what something’s worth and then try and buy it for less, I was just fascinated that when they were analyzing things to add to their portfolio, not once did anyone talk about what its intrinsic value was [00:02:00]and, you know, whether or not they could get it at a discount.

[00:02:03] Cameron: Um, and so I remember from time to time would pull up my buy list or checklist and go, yeah, well, I wouldn’t buy that. Uh, you know, we wouldn’t buy that at the moment because it’s PropCaf is 53. you have to wait 53 years for it to return the price. And,I was thinking, I don’t think any of us have got 53 years in us, unless the AI catches up really quickly.

[00:02:25] Cameron: But. Yeah. it was really interesting just to see that, um, a lot of investors just don’t think about, what is the intrinsic value of a share and, can I get it at a discount right now? I think even people that have been investing for a long time, that’s just not in their wheelhouse.

[00:02:43] Cameron: It just doesn’t seem to be how most amateur investors think about investing. What I now think of as sort of the fundamental premise of investing, figure out what it’s worth and then buy it if you can get it cheap, just doesn’t seem to be on the [00:03:00] radar of a lot of investors, which I always find kind of interesting.

[00:03:03] Tony: Uh, yeah, I mean there’s, I agree with you. Um, and, you know, we’ve discussed this before about where do you draw the line for a buy. Um, in terms of how many years you wait for the cash to be returned to you.

[00:03:15] Tony: And it’s, that’s a great answer. Um, it’s part of the mix. That’s why we don’t just use intrinsic value as our, as the number one thing on our checklist. Um, but the way I look at it is the cheaper something is, the more, as Buffett would say, margin of safety you have if something goes wrong. If, if you’re paying 53 times cash flow for a share, because you think it’s going to, it’s growing really fast, and it’s, you know, the greatest things in sliced bread, it’s a, you know, biggest AI chip maker in the world, or it’s the biggest cryptocurrency hub in the world, or whatever, coin exchange, or whatever, uh, it, it just doesn’t take much to knock it off the rails, and, and you’ll never get that 50 times cash flow.

[00:03:59] Tony: [00:04:00] Suddenly that becomes 100 times cash flow. Um, or whatever. So, you know,

[00:04:04] Tony: the, the cheaper,

[00:04:06] Tony: the quicker you can get repaid, the less likely you are to be derailed is the way

[00:04:10] Tony: I look at it.

[00:04:11] Cameron: Yeah. All right. Anyway,

[00:04:13] Cameron: with that, Uh, welcome Chairman Mabb from the Australian Shareholders Association back to the podcast. This is his

[00:04:20] Cameron: annual proxy vote drive, as I said to him yesterday. Give us your proxies. Give us your proxies.

[00:04:30] Steven: I will point out, Cam, it was you

[00:04:31] Steven: that contacted me, but, uh, but I’m very, I’m shamelessly

[00:04:34] Steven: happy to promote for proxies.

[00:04:36] Steven: today. That

[00:04:37] Tony: He’s, he’s sitting here in his preacher’s robes with his

[00:04:40] Steven: that’s right. Please help.

[00:04:41] Tony: Come in, come in, join the church.

[00:04:44] Cameron: How are you, Steve?

[00:04:45] Steven: I’m wonderful. Pleasure to be back. Thank you so

[00:04:48] Steven: much for the invitation. And, uh, yeah, looking forward to having a bit of a chat and, uh, you know, sharing, sharing a few insights and ideas that might be helpful

[00:04:55] Steven: for

[00:04:55] Cameron: And dirt, lots of dirt. I hope you’re bringing lots of ASA

[00:04:59] Steven: Got a [00:05:00] few

[00:05:00] Steven: stories. Yeah. Got a few interesting stories to highlight some of the points that

[00:05:03] Steven: might be interesting or

[00:05:04] Steven: relevant for people. So yeah, looking forward

[00:05:06] Steven: to the chat.

[00:05:07] Cameron: What’s been going on?

[00:05:08] Tony: Is this

[00:05:09] Cameron: Sorry.

[00:05:09] Tony: this the ASA rear window?

[00:05:12] Cameron: Heh. Mm

[00:05:12] Steven: Pretty much. I do, I do read Rear

[00:05:14] Steven: Window every day and I, I

[00:05:16] Steven: I love the

[00:05:17] Steven: way Joe Aston writes

[00:05:18] Steven: as I know you’re a bit of a fan too. Tony. But, uh, Yeah. I

[00:05:21] Steven: certainly get some, some insights from some, of the things Joe

[00:05:24] Steven: writes that helps with our monitoring and oversight of some

[00:05:27] Steven: of the companies that a s

[00:05:28] Steven: a covers as well.

[00:05:29] Steven: So, yeah, effectively we’re, maybe a little less controversial, controversial version of Rear Window with some of the companies that we monitor, .

[00:05:39] Tony: Mm. A little less litigious, hopefully.

[00:05:40] Steven: yes, I don’t have probably the same amount of legal support that Joe has, I suspect, when he goes

[00:05:45] Steven: after some of these people. but

[00:05:47] Steven: but yeah, looking forward to having a chat about ASA a couple of

[00:05:49] Steven: other little things I’ve

[00:05:51] Steven: come across personally that I thought might be worth sharing as well.

[00:05:54] Steven: So, I’m not sure if you

[00:05:55] Steven: guys have looked at this or not, but there’s a, there’s a website called ListCorp. which is an [00:06:00] Aussie site, listcorp. com and effectively you can, you can put in any company ticket code you like and your email and they’ll start emailing you all the announcements that are made by that company.

[00:06:12] Steven: Just, you know, an email into your inbox. So I find it really easy to be honest. I don’t have to. set up the alerts in Stock Doctor and reset them and all that kind of stuff that I used to do. I just put the ticker into my Listcorp account now and all you need to give them is your email basically. and that way, each and every announcement that comes out, it could be a red flag or a bad news story or whatever it is, I’ll get pinged in my inbox now automatically without having to go, go looking for it, director trades, all that kind of stuff.

[00:06:37] Steven: So yeah, if anyone’s interested, listcorp.Com I’m finding is pretty helpful to stay on top of, all those different company announcements. And then there’s another website I just came across recently called openbriefing.

[00:06:50] Steven: com. And they have all of the results announcements or briefings by management to the market, for [00:07:00] free on that site.

[00:07:01] Steven: So, again, you can put in the companies that you’re interested in or just, go there and put the ticker in of a company you’re interested in. And you can look at the, the earnings call, the, the update from the CEO, the chair, whatever it is, normally within half an hour. But there is.

[00:07:19] Steven: So, so if you are someone that likes to follow what management are saying when the annual report or the half year reports or whatever come out, that’s a pretty good site too, instead of having to sign up, on the company’s investor site or whatever, and make sure you’re there at the right time or whatever.

[00:07:33] Steven: This is a way to just, watch it at a time that suits you, whether it’s a video or just a, Teleconference, they all go on Open Briefing. So, so yeah, I’ve found both of those pretty helpful to follow along with my companies

[00:07:45] Steven: and, some of our QAVers might be, might be,

[00:07:48] Steven: might find that helpful as well for the QAV stocks they’re holding.

[00:07:52] Cameron: Thanks. I’ll check those out.

[00:07:54] Tony: Good.

[00:07:55] Steven: Yeah,

[00:07:56] Cameron: So what else

[00:07:56] Steven: best thing is they’re free

[00:07:57] Steven: as well, so, which I

[00:07:59] Steven: like. Keep your fees low.[00:08:00]

[00:08:01] Cameron: That’s good. What else

[00:08:02] Cameron: have you been, uh, keeping yourself busy with, Steve?

[00:08:06] Steven: Well, we’ve, we’ve had a lot of, media over the last couple of weeks at ASA, particularly

[00:08:11] Steven: around the, the Qantas saga that’s playing out. so lots of

[00:08:16] Steven: requests for, I guess ASA’s

[00:08:18] Steven: position and comment on,what’s been happening, that most people have probably read about or heard about over the last couple of weeks.

[00:08:25] Steven: So that’s, that’s been keeping us busy. and at the moment we’re waiting for the remuneration report there to come out, which is, I think. was due this afternoon, but I think I heard they might have delayed it till Monday now. so we’re very interested to see what, what, changes, if any, the board might have made to the remuneration, for this particular year for Mr.

[00:08:45] Steven: Joyce, given the, the, the things that have been coming to light around the ACCC investigation that was announced and, obviously their, their Senate appearance a couple of weeks ago. I see the Senate have asked, Both Alan Joyce and the new CEO Vanessa Hudson to front up [00:09:00]again next week.

[00:09:00] Steven: I think it is or the week after over the Qatar situation. So there’s a lot going on here and lots of, mainstream press looking for, for comment, which is unusual. Often this stuff normally. kind of finds its way to the financial press that we might read, but this seems to be kind of mainstream news given how many people I guess know and use Qantas.

[00:09:17] Steven: So, so yeah, we’re, we’re, for the moment we’re just waiting to see the report and then we’ll, we’ll make an assessment from there like we do every year on whether we think the remuneration’s, fair and reasonable in the circumstances and, and how the boards applied, their own rules, if you like, to, to remuneration for Mr Joyce for this year.

[00:09:35] Steven: so yeah, if you’re, if you’re interested in that, you’ll be able to find all that on the ASA website in a couple of weeks time, probably once the, the, the report of the voting intentions have been written up, getting a few,

[00:09:46] Tony: Steve, how So, take us through the process there. How do you form a position on Qantas or the REM report? Do you go through a committee? Do you have policies you match it against

[00:09:56] Steven: yeah, it’s an excellent question, TK, So,

[00:09:58] Steven: yes,

[00:09:58] Steven: we, we have,a formal [00:10:00] policy around all of the various things that shareholders get asked to vote on

[00:10:04] Steven: or affect shareholders and that, That doesn’t change too much from year to year,

[00:10:08] Steven: but it’s a, it’s a public document. And, and we then share that with the

[00:10:13] Steven: board each year of the roughly the ASX 200 companies that we monitor.

[00:10:18] Steven: So what happens is we have a policy committee, that’s made up of members, the retail shareholders, just like us, that, and a manager, and they get together and, just review those guidelines every year, make sure they’re still fit for purpose, and if they are, then, out they go to the companies again to say, this is what we’ll be looking for when you put out your annual reports.

[00:10:36] Steven: And then we have a team of about 120 people that are all volunteers, just, regular retail shareholders again, but have an interest in,good governance and the resolutions and the voting process and all that kind of thing. So they’ll then sit down and go through the annual report once it’s published and from there have normally have a meeting with the boards, typically the chair of the board and the head of the remuneration committee.

[00:10:59] Steven: So the [00:11:00] people that are overseeing, directors and, and the remuneration of the company, they’ll have a meeting, they’ll go through, what’s in the annual report and what the resolutions are that are going to be put to shareholders to vote on that year. And,if there’s anything there that’s unclear, obviously we’re trying to clarify that with the company before we put a voting intention together, or if it’s something that we’re really, unhappy about, if you like, we talk through that with the company and, A, let them know what we’re not happy about, and B, give them a chance to, to,explain why they think we might be missing something.

[00:11:32] Steven: And then from there, the monitor will go away and put the voting intentions together. Normally comes out a couple of weeks before the AGM and that way people can have a look at it and, A, see how we suggest you should vote and B, the reasons why. And we’ll share that with the company as well. And that same monitor then will normally go to the AGM.

[00:11:51] Steven: They’ll vote. anyone that’s allocated their votes to ASA, they’ll vote those votes at the meeting, and they’ll also ask questions of [00:12:00] the chair, the CEO, whoever it is that’s relevant at the AGM so that, they publicly get a chance to respond to, anything that we think it’s interesting, controversial, worthy of a public comment, if you like.

[00:12:12] Steven: So, so yeah, that’s all volunteer work. No one gets paid for any of that, but really we’re trying to do it on behalf of, small shareholders that may not have the time or the interest or the inclination to, to go to an AGM themselves or to vote themselves. So that’s, a quick overview, I guess, of how the, how the process works.

[00:12:30] Tony: Do you think, do you think shareholders have voted with their feet already on

[00:12:33] Steven: Well, yeah, I know that, Cam and I were talking about it the other

[00:12:36] Steven: day. That’s obviously something you could Do right? If you’re not happy with how the

[00:12:39] Steven: company’s being managed or how

[00:12:41] Steven: their remuneration works, of course you can sell your shares, right? That’s always an option. but sometimes you get people that still believe in the long

[00:12:47] Steven: term future of the company, for example, and they don’t want to sell their shares in one particular remuneration issue.

[00:12:54] Steven: They just want to be heard. So that’s where You do get some shareholders that say, Hey, I want to go to the AGM or I want to against [00:13:00] the REM report. Cause I want it to change. I still believe in the future of the company. I’m not going to sell my shares necessarily, but I’d like, the board or the management team to change this.

[00:13:08] Steven: So it’s different for everyone, right? Everyone’s got different approaches to, whether it’s a red flag sale and they’re out or whether it’s, this is an issue that I’d like to see change, but I’d still want to be a shareholder. So. Just depends where you sit on that. there’s certainly times where I’ve sold my shares based on something I’ve discovered in a company, but there’s other times where I still like the company and we can probably talk about an example in a second, where I don’t want to exit my shareholding, but I do want to flag something at the upcoming AGM that, I’d like to see how they respond to.

[00:13:36] Steven: So,

[00:13:36] Steven: there’s,

[00:13:37] Tony: Does the ASA, given that, does the ASA take positions and move motions themselves outside of voting on the agenda? So, for example, if

[00:13:44] Tony: you took a position that, if, if a company faced Litigation

[00:13:49] Tony: or, potential

[00:13:51] Tony: legal action from the regulator after the CEO exits, there should be a

[00:13:54] Tony: bonus

[00:13:55] Tony: clawback, and

[00:13:56] Tony: so move a motion to

[00:13:57] Tony: say

[00:13:58] Tony: all company [00:14:00] contracts going forward, should have a clawback

[00:14:01] Steven: yeah, no, we don’t, we don’t move motions of our own. We’re not that activist, but what we would say to the company in that circumstance is, Shareholders would expect you to build this in going forward, or it’s something we’d like to see going forward, and we’ll be looking for this again next year, And most of the time, they’re probably getting similar ish feedback from the big proxy advisors, because there’s, there’s another arm to all of this. Like, the ASA represents small shareholders like all of us, but there’s these big groups called proxy advisors that, that are,pay for service type, type groups, basically, that represent big institutions.

[00:14:33] Steven: So they’ll typically… represent the Superfunds, for example, or Big Fund Managers, and they’ll put together voting intentions that those organizations pay them for. And most of the time, we’re pretty aligned with the proxy advisors on lots of issues. So if there’s something that we’re really unhappy about with remuneration, for example, a lot of the time, the proxy advisors are on the same page, and the company will get that feedback from, these different organizations that are overseeing how they’re, managing these [00:15:00] issues.

[00:15:00] Steven: And, good or engaged boards typically then will try and improve or change those things the year after. So there is some, there is some real change that comes from these things over time. If you’ve got a board or a management team that are truly interested in what their shareholders think, there’s a handful of companies that don’t care, that are just like, we’re doing it our way, we don’t care what you say, like it or lump it, but I’d say that’s probably less than 5%.

[00:15:22] Steven: of the ASX 200. The vast majority of those companies these days are genuinely willing to engage and listen to reasonable feedback from those shareholding groups and, often do tweak things or change things a year, particularly around remuneration. I think we might have talked about this last time, but there is a pretty, hard hitting, clause, if you like, around remuneration reports, where if 25 percent of the shareholders or more vote against the remuneration report in any given year, that’s what they call a first strike.

[00:15:53] Steven: So effectively, it’s, it’s not binding. The company can still do what they want on remuneration, but they’ll record [00:16:00] a first strike if 25 percent or more of shareholders vote against the rem and play in that year. And then if it happens the second year, so two consecutive years, if they didn’t change things, or didn’t improve things, or, did something even worse the year after, whatever it might be…

[00:16:13] Steven: When they get a second strike, then you have the potential to spill part of the board. So effectively vote part of the board,off. And most boards don’t want that, obviously. Most directors or chairs don’t want to be spilled. They don’t want to lose their jobs. So when they do get a first strike, that’s normally when you see some pretty remunerating or incentivizing their management team the following year.

[00:16:37] Steven: because, self interest kicks in and a lot of them want to, want to keep their job the year after. So, so there is some, again, some meaningful change that comes from those things when enough shareholders are unhappy and vote against something that they don’t think was, was fair or reasonable.

[00:16:52] Tony: you, does the ASA meet with the other proxy advisors and coordinate that

[00:16:56] Steven: No, not, not formally. I mean, we bump

[00:16:58] Steven: into them and we chat to them [00:17:00] from time to time

[00:17:00] Steven: but there’s no formal, you, know, tie

[00:17:02] Steven: up. We don’t

[00:17:03] Steven: discuss companies in advance or get on the same page formally. It’s more just, we have a professional working, you, know,

[00:17:10] Steven: rapport with each other but there’s no, close ties or colluding or comparing of voting intentions before meetings or anything like that.

[00:17:17] Steven: So yeah, we, we, we’re certainly not hostile or, in opposition with each other, but there’s no, no, no tie up or close working relationship like that on an individual company.

[00:17:28] Tony: You find the ASA normally lines up with the other proxy advisors or are there retail differences to their kind of

[00:17:34] Steven: Yeah, there’s, there’s a few differences. So probably one of the biggest one is actually

[00:17:38] Steven: around capital raisings.

[00:17:39] Steven: So, lots of, I guess lots of listeners have probably had a company over their journey that’s, raised capital at

[00:17:45] Steven: some point, shareholders for some more money. And the bigger institutions get a different type of capital raising normally to what the retail shareholders typically get.

[00:17:55] Steven: So, there’s a few different ways I guess companies can raise capital. One of them is called [00:18:00] placements and that’s typically what does go to the, to the big institutions, the super funds, the, fund managers, whatever it is. And that’s done normally without retail shareholders even knowing about it at the time.

[00:18:10] Steven: It happens pretty quickly. they, they ring around and then 24 hours, drum up, enough support from enough people and, and do a placement. And then if they’re a company that cares about their retail shareholders, they’ll hopefully then do one of a couple of things after that for their smaller shareholders.

[00:18:25] Steven: So the first one is, what’s called a share purchase plan or an SPP. And that’s typically where you get the chance to apply for up to 30, 000 worth of additional shares at a discount, some kind of discount normally to what the current share price was when the announcement came out. And it’s a few weeks typically before you have to have your money in and those new shares would be issued.

[00:18:47] Steven: So that’s good in a way, cause you get a chance to participate. the, the flip side to that is, my, my personal approach to it has been, I don’t really apply for more shares until a day or two [00:19:00] before the closing date, because sometimes the share price can drop more than the discount price, and you’re actually buying shares for more than you can just buy them on market anyway.

[00:19:07] Steven: so my approach has been, yeah, wait for, wait until a day or two before until you have to repay your money if you did want some more shares in the company. The downside of SPPs

[00:19:16] Steven: is if you don’t participate, you are getting diluted. So, if you don’t buy some more shares, your slice of the pizza, so to speak, is going to shrink a little bit.

[00:19:23] Steven: But, obviously it’s still up to you whether you want to, want to go and buy a bit more of the, the company at that point in time. Probably the, the best way and the fairest way, and the way that we encourage companies to raise capital, is what’s called a, a, a patrio, or a renounceable offer. And that’s where, whether you participate or not, you get compensated, right?

[00:19:43] Steven: So basically, if you participate, You buy some more shares,at the discount, you, you’re not diluted. Even if you don’t participate, the company, compensates you, for, for the dilution that would have otherwise taken place. So it’s not the most common way companies raise capital, but there are [00:20:00] more companies starting to do it because they recognize that it is fairer to, to treat all the shareholders equally, whether they’re participating or not.

[00:20:08] Steven: Sydney Airport was a good example. They did a Patriot raising before they got taken off the. The boards, so there’s, more companies starting to do it, and that’s something we push for. We say, where the proxy advisors wouldn’t be doing that. They’re more than happy with the placement.

[00:20:20] Steven: we really want a patio raising for, for smaller shareholders so that everyone, is treated fairly and equally, if you like. Now, it’s a bit more hassle for the company. That’s why they don’t all do it. It’s a bit more costly for the company too, so there’s some downsides to the company to do it.

[00:20:32] Steven: but anyway, in answer to the question, that’s, that’s what

[00:20:35] Steven: we’d recommend that might be a bit different to

[00:20:36] Steven: the proxy advisors.

[00:20:38] Tony: Yeah, there’s a downside to the company in the extra cost. I get that. But there’s also an upside, which doesn’t seem to get mined, is that they could be

[00:20:44] Tony: raising a large amount of capital from retail shareholders, but they tend to cap it out at a

[00:20:49] Tony: very small amount.

[00:20:50] Tony: So, for example, if the

[00:20:51] Tony: insta raise was 100 million, chances are the

[00:20:53] Tony: retail raise is capped at 10 or 20 million.

[00:20:56] Tony: Whereas they could potentially have raised 50

[00:20:59] Tony: or [00:21:00] 60 or 100 million from the retail shareholders as well. I

[00:21:02] Steven: Exactly. And there’s some really good recent examples of that. Like, both good, good and bad. I mean, in, in 2019, when, when COVID hit, there were, there were three companies I remember that did placement only raisings at the time, when they had a lot of

[00:21:17] Steven: retail shareholders, I think it was Megaport, Temple and Webster and Zipco.

[00:21:21] Steven: And I know none of them have probably been QAV stocks, but, they were pretty popular. Retail stocks at the time, they all did placements only, so they didn’t give their shareholders, their retail shareholders, small shareholders a chance to participate. After pay did a placement, I know in 2020, And, they scaled it back, I think, about 86 percent or something like that.

[00:21:39] Steven: So even if you applied for your 30 grand, you only got 14 percent of it, basically. So, so the retail shareholders, even that wanted to participate, didn’t get their fair crack at it. So there’s some bad examples there of companies. So, so I agree with you Tony, I’m not sure why. Unless they just really don’t think they need any more money, they’ve got so much in the placement that they don’t think they need any more, but it isn’t [00:22:00] the fairest way to do it, that’s for sure.

[00:22:03] Tony: Is there, do you, does the ASA have a position on

[00:22:05] Tony: how

[00:22:05] Tony: much, what the cap should be on a company in

[00:22:08] Tony: terms of how much it can

[00:22:09] Tony: raise in those placements? Because I think from memory the

[00:22:12] Tony: law is it’s

[00:22:13] Tony: capped

[00:22:14] Tony: out at either 10 or 20 percent unless it goes to the vote of

[00:22:17] Steven: think it’s 15 in any one year period, unless you put it to a vote. Yeah, so I think it’s typically 15 percent annually, and we’re, we’re in sync with that as a general rule, and obviously if you feel like you need to raise more than that, then you have to put it to shareholders. I mean, it doesn’t happen very often, but occasionally

[00:22:33] Steven: you might see a company that’s race and capital, and then wants to do another acquisition that looks like it’s a really good acquisition for the business.

[00:22:41] Steven: And it might be earnings accretive, and it’s, going to add value. I mean, that’d be an example where we’d typically support them and say, based on everything we know, we’re happy to, for you to raise capital again, because it’s going to grow the, the value and the earnings of the company on the other side of it.

[00:22:53] Steven: But it’s pretty rare. You don’t see it. too often. particularly not in the ASX 200, the bigger companies that we cover [00:23:00] there, they’re normally a bit more capitalized than that. So, so yeah, we, typically support the 15 percent rule. yeah, so there’s lots of things around capital raisings, but you know, I think ideally, you just want to make sure that the company’s treating you as fairly as possible.

[00:23:13] Steven: SPP is in the middle, the Patrio or the renounceable the best. A placement’s really bad and I’ve had a few companies that have done placements only over the years and I’ve sold them for that reason. I’ve thought, if you don’t care enough about me as a retail shareholder to even give me a chance to participate, I’m not really aligned with you.

[00:23:32] Steven: So, that’s been my personal approach to the couple of companies I’ve had that have done placements only. Now, I could be wrong, they might have gone on to be big winners, but I just felt like if management didn’t, didn’t value me enough, I’m probably back on the wrong horse. So,

[00:23:45] Steven: that’s been my

[00:23:46] Tony: Yeah, look, it’s an interesting situation. I’ve spoken to, well, at least one small CAP chairman who’s just, I guess because they spend their whole day talking to instos, investment bankers, the large end of town, so to speak,[00:24:00] I presented them with research and said, look, here’s the report that came out through this newsletter, which they weren’t aware of because it was going to retail investors.

[00:24:07] Tony: and here’s how your share price moved. And they go, Oh, Oh, I’m going, yeah, retail, the instos,

[00:24:14] Tony: tend to move slowly on your register. But look, the shareholders are turning over the most, the shareholders that are turning over the most in retail, and that’s what’s moving your price, but you’re not communicating with them.

[00:24:25] Tony: You’re not in sync with who researches and sends things to them. And you’re not in sync with them when it

[00:24:30] Steven: yeah, exactly.

[00:24:31] Steven: No, look, I get it.

[00:24:32] Steven: If you’re a small company and you’re really

[00:24:34] Steven: busy and you’ve

[00:24:35] Steven: got five or

[00:24:35] Steven: 10 or

[00:24:35] Steven: 15 institutional shareholders, it’s

[00:24:37] Steven: pretty easy probably to have conversations with them. And then you think, well, I’ve got a few thousand retail shareholders, it’s too difficult

[00:24:44] Steven: to go and talk to them

[00:24:44] Steven: all I want. I kind of

[00:24:47] Steven: get the human nature side of that perhaps. but you’re right, there is more. normally more action or more,more trading amongst retail shareholders in those smaller caps. so yeah, it seems a bit self defeating to me to [00:25:00] not be considering them or trying to treat them fairly if you have, if you want to keep them on your register or keep them invested with you.

[00:25:05] Steven: So yeah, anyway.

[00:25:08] Tony: what’s your feeling on underwriting for those placements too? That’s often the hidden fee that

[00:25:12] Steven: Yeah, well, it’s,

[00:25:13] Steven: look at personal

[00:25:14] Steven: view, it seems to me it’s a pretty good

[00:25:15] Steven: business, but for some

[00:25:17] Steven: of those banks that,

[00:25:19] Steven: for

[00:25:19] Steven: 24 hours get to take a tiny amount of risk and then get a few million

[00:25:22] Steven: dollars for, for raising, capital for, for,

[00:25:25] Steven: for, a company. So, it’s not something we, we have a formal position on per se, but I do know, that it seems like it’s a fairly.

[00:25:32] Steven: risk, low risk and, and, financially successful trade for the Macquarie’s of the world and other kind of, brokers and banks that, in 24 hours can ring around and whip up a bunch of capital and collect some seven figure sums. So maybe we’re in the wrong business TK, we should be,

[00:25:46] Steven: should be brokers or merchant bankers raising capital for people.

[00:25:51] Tony: well, speaking of the wrong business, I guess I’m leading up to a question for the ASA. Have you ever thought about

[00:25:56] Tony: putting together an index fund, a listed investment [00:26:00] company or an ETF? For the

[00:26:02] Tony: ASA investors to list in and then to operate under the good governance policies of the ASA and

[00:26:07] Tony: I

[00:26:07] Tony: guess, you can say you’re, you’re

[00:26:09] Tony: one of the companies then that, that will do things by the book and not, not cut corners or

[00:26:14] Steven: we actually have. I mean, the problem we’ve got at the moment is we don’t have an AFSL. So we can’t really give advice on individual companies. And we also, couldn’t create our own fund per se. It is something we’ve discussed. And look, I think, as it’s a pretty

[00:26:29] Steven: long and complicated process to get an AFSL.

[00:26:34] Steven: So we haven’t said never, we’ve just, kind of parked it for the time being and said, because we don’t have an AFSL, that’s probably not something we can pursue. We definitely have members get together. member groups, and they have a dummy portfolio of their own in their member group, for example, and the, collective wisdom of the, the local discussion groups kind of putting together a portfolio that they update every month.

[00:26:53] Steven: but it’s just a paper, example. It’s not a formal fund, obviously. So yeah, the short answer to the question is yes, we’ve thought about it, [00:27:00] but without the AFSL at the moment, it’s a bit tough to do that, or, not possible to do that,

[00:27:03] Steven: unfortunately.

[00:27:04] Tony: Right, so if someone’s listening out there who’s got an AFSL and would like to partner with

[00:27:08] Tony: the ASA, they

[00:27:09] Steven: That’s right. Yes. We’d love to chat.

[00:27:10] Tony: Yeah. And I guess the second sort of,

[00:27:14] Tony: broad ranging question is what, what

[00:27:16] Tony: what does the ASA see for the

[00:27:18] Tony: future of AGMs? Both in terms of online versus hybrid versus in person, the, the, the makeup, the frequency, the way shareholders are treated.

[00:27:28] Steven: Yeah, look, we’re a huge supporter of the hybrid AGM. so what that basically means is that, they’re having an in person AGM for people that do want to attend in person, but they’re also having a

[00:27:38] Steven: live online version that allows you to vote

[00:27:42] Steven: and ask questions in real time as well. and I’ve really, I’m, like you, I’m in a fortunate position that I’m a full time investor these days, and I am trying to get to all of the AGMs of the companies that I own each year.

[00:27:55] Steven: But there’s some times where you just can’t, right? It’s a location that you’re not going to be able to get to, or there’s two on the one day in [00:28:00] different places or whatever it is.

[00:28:01] Steven: yeah,

[00:28:02] Steven: exactly. Exactly. So there’s times where you just physically can’t be there, of course. And Australia is a big country, right?

[00:28:07] Steven: We’ve got

[00:28:07] Steven: five or six big

[00:28:08] Steven: cities that the AGMs are typically held in. And,

[00:28:11] Steven: you can’t be in

[00:28:11] Steven: all those places at once. So that’s where the online AGM, I

[00:28:14] Steven: think, has become more and more valuable for people. If you are interested and you do want to participate, you do want to see how

[00:28:18] Steven: management… and the chair and, the other shareholders are

[00:28:22] Steven: interacting, being able to watch a live webcast and vote and ask questions in real time is terrific.

[00:28:28] Steven: I mean, a lot of companies will historically would take a recording and they’d put the recording on their website afterwards. but you could only watch that after the fact, and it wouldn’t help you with your, your voting at the time or it wouldn’t allow you to actually ask a question during the meeting.

[00:28:42] Steven: So, so we prefer the true hybrid. We’re not a fan of online only meetings because there still is plenty of people that do want to go in person. It’s their one chance a year where they get to go and talk to the management, talk to the board, have a cup of tea, see what they’re like, see the lights in their eyes.

[00:28:59] Steven: I mean, I know there’s [00:29:00] different views on how valuable that is, but there’s certainly still plenty of retail shareholders that tell us that they value that and that they want to continue to do that. so our approach is hybrid meetings and we did have some companies last year that actually, put forward resolutions to change their constitutions to have online only AGMs so they didn’t have to hold the physical AGM anymore.

[00:29:20] Steven: And fortunately, the vast majority of those companies withdrew the resolutions pretty quickly because they got some pretty strong feedback from both big and small shareholders that that is not something that they wanted to see. They’d need a 75%. in favour vote to change something like that and they were not going to get it.

[00:29:36] Steven: So most of the companies pulled those resolutions. There were some really small caps that got it through because no one was probably looking, but it has to be changed in your constitution to allow that. So like during COVID we got it, it’s difficult to get together face to face, you need an online only meeting, we got all of that.

[00:29:51] Steven: I mean there’s times where that might, might be the case again in the future, but as a general rule, yeah, we like the chance to be able to either go in person or participate online if you’re, if you’re interested.[00:30:00]

[00:30:01] Tony: you have a, do you have a

[00:30:02] Tony: policy or a template, I guess, for how to conduct a hybrid meeting?

[00:30:06] Tony: Because, yeah, you hear complaints from time to time of people who say, I didn’t get my question answered. Or they edited my question, they rewrote it. Or they limited it to a certain number of questions, 10 or 20, and I just didn’t get a

[00:30:18] Steven: Yeah, yeah, so. So there’s a couple of different platform providers that, that allow, or, facilitate hybrid meetings. There’s one called

[00:30:25] Steven: Lumi that we use. So like ASA has been running a hybrid

[00:30:28] Steven: AGM for our, our

[00:30:29] Steven: own organization for many years, and we use the Lumi platform, and it’s really good.

[00:30:33] Steven: So when companies are asking about it,

[00:30:36] Steven: we’ve been recommending Lumi. We don’t… Get anything out of that. There’s nothing, financial out of it. But, but, if companies aren’t sure how to do it, there’s a couple of different platform providers that, have the technology to allow you to do it.

[00:30:45] Steven: As far as the questions go, unfortunately, it comes down to the, the character or the integrity or the process of the chair. if the chairs, really, open and,transparent around the questions. They’ll allow the company secretary or whoever it is that’s taking the [00:31:00] questions coming in to ask them, and then they’ll allow them to respond.

[00:31:03] Steven: Unfortunately, there are times where you get boards or chairs that will edit the questions or won’t ask the questions. Sometimes they’ll aggregate the questions because they might get 10 questions that are really similar and they’re not going to ask the same question 10 times. So we’re fine with that, obviously, but where they’re deliberately not asking legitimate questions, particularly when they’ve got enough time to, we will definitely write to the company afterwards and voice our displeasure. I think when you get to really big companies like, the CBAs and the Telstras of the world, they have such massive AGMs and so many shareholders in attendance. Practically they do have to try and manage the questions a little bit. Otherwise the meeting would go for days. So depending on the size of the company, there’s some, practical constraints there around how many questions they can read out.

[00:31:49] Steven: But, I’m. I own quite a few, kind of smaller or mid caps. And I find, most of those companies, they, they never run out of time to ask the questions. Often ASA [00:32:00] or a couple of retail shareholders will be the only people even asking questions at those smaller company AGMs. So, you typically don’t find they’re editing things out, which is, which is good.

[00:32:08] Steven: But yeah, I do get the bigger companies just have a practical problem sometimes with just how many questions they’re trying to get through in the few hours they’ve got allocated to the AGM.

[00:32:17] Tony: Mm. Well, I, speaking of AGMs, maybe you can give us a few war stories. What, what was the strangest ag

[00:32:23] Steven: Yeah, absolutely.

[00:32:24] Steven: I, think that there’s a

[00:32:25] Steven: company called EML, which has been in the news a little bit. It

[00:32:29] Steven: was an ASX 200 company back in 2020, and it was Brisbane based. So, I volunteered

[00:32:36] Steven: to, to, to monitor EML that year. And it was back when I was using Motley Fool service a little before I stumbled across the brilliance of QAV, obviously.

[00:32:45] Steven: So, so I had some EML shares and I thought, Oh, well I’ll monitor this company cause I’ve got a shareholding and we weren’t covering it and it was in the 200 now and went through all of that process I talked about earlier. And,I discovered that, there are a few things happening that, that weren’t, weren’t great.

[00:32:59] Steven: [00:33:00] in particular, the, the board had decided that year to use what we call discretion to pay out, management’s bonuses or management’s, variable pay that year, their incentives, without them having actually hit the numbers that the board had set at the start of the year. and it was during COVID and, and the board explained to us that, oh, look, it’s not fair.

[00:33:22] Steven: that wasn’t the management’s fault that COVID happened. They’ve worked really hard, and they’ve made this fantastic acquisition in Europe that, they renegotiated the price down on because of, the impacts of COVID to the business. So we’re going to pay them out their bonuses in full basically, or nearly in full because they, they deserved it and it wasn’t their fault that COVID happened.

[00:33:44] Steven: And we, we explained, but look, we, we understand that, but it also wasn’t shareholders fault that COVID happened and shareholders are down considerably right now. I think the share price was down 30 or 40 percent at that point in time for the year. so effectively what’s happening there is the board saying, we’ve got a [00:34:00] variable remuneration plan, but if we don’t hit it, We’ll kind of just override it and pay the bonuses anyway, regardless of them not, meeting the hurdles that we set out at the start of the year.

[00:34:11] Steven: So, obviously we decided to vote against the remuneration that year, and so the AGM comes along and,the couple of interesting things happened in the AGM, which if you weren’t monitoring the company, or you didn’t have someone from ASA monitoring the company, you probably wouldn’t have heard about, obviously, unless you’d participated in the AGM personally.

[00:34:30] Steven: So the CEO gets up to give his address, and like most CEO addresses, you normally hear them say lots of lovely things about the year and the team, and how optimistic they are about the future, etc. and he said that stuff, but then he said, now I also want to, sorry, I missed a part here, the day before they had an investor, briefing day, that went for about six hours, it was a big online investor conference where they were talking about, all their plans for the future and all their products, they do like, Gift Cards, and Incentive Cards, and all that kind of thing.

[00:34:59] Steven: That’s [00:35:00] what the business was all about. And I watched that being a shareholder before the AGM, and I came away scratching my head thinking, I’m not kind of getting a few things here. There’s some things they’re talking about, these new products, that I just don’t really understand. anyway, the next day comes on, the CEO gives his address, and then he finishes his address by saying, Now, I also want to say, To people out there that are having trouble understanding what we do or some of our products, I’d say to you, you don’t need to understand, you just need to trust management.

[00:35:27] Steven: And if you trust management, you should own EML shares. So that was the first kind of yellow flag for me. I’m like, that’s an interesting comment. Like he’s obviously got some feedback from someone else too that, that it was difficult to understand some of what they were proposing. And instead of explaining it, he’s just said, trust us.

[00:35:44] Steven: so then the chair comes in and. Like I mentioned, one of the jobs of the ASA monitors is to ask questions at the, at the AGM to, kind of get a formal answer. So I push back on the remuneration, obviously, and ask the question around why they’d chosen to use discretion. [00:36:00]And, the head of the REM committee gave, gave the same kind of answer I shared earlier, but then the chair comes in over the top and says, and by the way, we’re in a, we’re in a global, race for talent, and not only did we use discretion this year, but we’ll use discretion again in the future if we have to.

[00:36:17] Steven: So he was basically saying that, we don’t really have a variable remuneration plan. We’re just going to use our discretion as a board to pay out, pay out the bonus. Now, this is an ASX 200 company. So we’re not talking about a little specky minor here that, is wild. We’re talking about one of the top 200 companies in Australia at the time by market

[00:36:34] Steven: cap. So what happens from there? Well, I wrote up my AGM report for all of our members to read and called out those yellow flags and obviously they already knew that we were voting against the REM. A couple of months later, the Irish Central Bank announces an investigation into the acquisition that they’ve made for, potential money laundering.

[00:36:55] Steven: So the share price craters because this fantastic acquisition that they’d allegedly made,[00:37:00] has a whole bunch of regulatory problems. It was a European based business that they’d acquired. and since then, there’s just been one after the other of,controversial or, value destroying announcements or progressions in the business.

[00:37:14] Steven: The c e o, that I mentioned, he sold $16 million worth of shares just before that announcement was made through some creative loophole. the, he subsequently resigned about a year later when the work, the news kept getting worse. The chair was then voted off the board the year after, which, is very unusual, right?

[00:37:33] Steven: It’s pretty rare that you actually get enough shareholders. so displeased that they’ll vote more than 50 percent against a director. He wasn’t willing to stand down, so the shareholders actually voted him off the board. they’ve

[00:37:45] Steven: taken, hundreds of millions of dollars in impairments, and the share price has gone from 5 to, I think it was less than 50 cents last time I looked.

[00:37:54] Steven: but that AGM was the first, or that annual report and that AGM was the first real indication you [00:38:00] got, or certainly that I’d seen, of some things going on that, maybe weren’t aligned or in your best interest as a shareholder. So I think that’s a good example of where, particularly newly monitored companies, if you’d read that report, or you’d kind of, heard some of that commentary, it might have given you…

[00:38:16] Steven: Pause for thought about whether this was really a business that you wanted to stay invested in, for example, and I, I obviously sold my shares in the company well before all of that happened based on the way that the board and management were approaching it. Now, there’s another interesting story I thought I’d share with you too from this year.

[00:38:31] Steven: Nick Scali, which I think is a, is a QAV company. And, and I, full disclosure, I own quite a few Nick Scali shares and, really liked the business. Um, but as I read through their annual report a couple of weeks

[00:38:42] Steven: ago, I picked up something pretty interesting that I am going to go to the AGM and ask about.

[00:38:49] Steven: So, they appointed a new director, by the name of Kathy Parsons this year, earlier this year. and she’s a former, accountant at Ernst Young.[00:39:00] So she looks, very qualified from a financial point of view. She’s got lots of great, audit and risk and financial skills, you’d assume. so there was no, obviously no concerns about that.

[00:39:09] Steven: But then when I looked at her bio, they, they basically declared that she also used to be the, the signing partner for the Nick Scali, audit. And she’s been the signing partner for six years from Ernst Young for Nick Scali up until 2018. So it’s now a five year period I suppose between when she was the signing partner of the audit to when she’s been appointed to the board.

[00:39:34] Steven: And, checking in with the, the, Chartered Accountants, they say that they do like to see a five year break. That’s their, kind of penciled in rule around when audit, audit partners, need to,have some clear air before they consider a board position at the same company.

[00:39:48] Steven: So, kind of checks that box, I suppose. But they continue to use Ernst Young as their auditor. So when I looked back there, I think it looks to me like it’s at least a decade that Nick[00:40:00] Scali had been using Ernst Young as the auditor. And the fact that they’ve now appointed the former signing partner to the board, and she’s probably the most likely person to become the chair of the Audit and Risk Committee going forward, you’d think as well, when that transition happens.

[00:40:16] Steven: It looks to me like there’s a bit of a, potential conflict here. I don’t know. I would assume she’s probably got,friends or colleagues at Anson Young still that, she may be working with, she may not be on Nick Scali’s audits going forward if they continue to use Anson Young.

[00:40:30] Steven: So that’s an example where I’m going to go to the AGM and I’m going to ask them the question around,when When was the last time you tended the audit? When was the last time you considered changing auditors given this given this material connection? And also, why is there only one key audit matter on your audit, which is around inventory?

[00:40:51] Steven: Now, retailers typically, I find, have two or three things that are normally on the list of key audit matters. The other one is,

[00:40:59] Tony: [00:41:00] Valuation of

[00:41:00] Steven: it’s the leases and it’s also goodwill for any acquisitions that they’ve made. and Nick Scali has made an

[00:41:06] Steven: acquisition recently, they acquired Plush,

[00:41:08] Steven: a couple of

[00:41:09] Steven: years ago.

[00:41:10] Steven: So I’m

[00:41:10] Steven: not suggesting for a second that, there’s anything

[00:41:13] Steven: fraudulent going on here, but I do

[00:41:15] Steven: think it’s an

[00:41:16] Steven: example of where, as a shareholder, if you’re looking at these kind of things, you

[00:41:20] Steven: know, it’s your opportunity to at least ask Anthony Scali this year. What’s his view on this? And, are they considering changing auditors?

[00:41:28] Steven: And, does he see any conflict there, continuing to use the same auditor, A, for that long, and B, with a board member that’s so connected to them now? I’m just interested in what he’s, what he’s going to say there.

[00:41:37] Tony: I’m pretty sure I could probably write the answer for him that

[00:41:40] Steven: yeah, I bet, but I think…

[00:41:42] Steven: Putting it on the record, and there may

[00:41:44] Steven: not be anyone to ask that question, I assume they’ll have a

[00:41:47] Steven: discussion around it afterwards,

[00:41:49] Steven: if nothing else. I hope at board level they’ll then go, someone’s flagged this and, we had to answer it publicly. Is this something we’re worried

[00:41:55] Steven: about?

[00:41:56] Steven: Is this something? Now, they may

[00:41:57] Steven: decide not to change, but, but I hope, my [00:42:00] intention, I guess, out of asking that question is at board level, or at least consider it and discuss it. And it’ll be on the other directors radars as well that, we’ve got a pretty close connection here and we haven’t changed auditors for a long time.

[00:42:10] Steven: I did notice that she’s on another, listed company as well, Macmillan Shakespeare, which I think has been a QAV stock, maybe at different times. and interestingly, She is the chair of the Audit and Risk Committee there and she just appointed Ernst and Young as the new auditor. So, again, not suggesting there’s anything necessarily wrong with that, just that there, there looks to be still some pretty close, ties or friendships, it would seem to me, for, for that change to have been made relatively quickly after she joined the Macmillan board.

[00:42:41] Steven: So, so I don’t know her personally. I’m not suggesting that there is anything wrong. I just, that’s an example of, Why you would want to look at these kind of things. And I know, audits and

[00:42:49] Steven: qualified audits are a big deal for you, TK, and it’s something I’ve learned a lot from listening to you.

[00:42:53] Steven: So I do take notice of these audit issues now and, always look for, is there anything here that might be a worry?

[00:42:59] Tony: [00:43:00] Yeah, and I think, I mean, it might be worthwhile for the ASA to, if they haven’t already, have to have a good think about policies in this area. We’ve spoken before on our show about Changing auditors, where miraculously some companies that have had a qualified audit suddenly lose the qualification on the audit, and the auditors have changed, the following year, so surprise, surprise.

[00:43:21] Tony: you, you’ve highlighted the fact that it could be. seen as a conflict of interest that, the ex auditor, even with a break in between, goes on the board. I’m going to go one step further and be careful and, and not saying this is the case with Nick Scali, or I, and I can’t give a case in particular.

[00:43:37] Tony: But, it, it, it’s also possible that, someone with

[00:43:40] Tony: deep knowledge of the company is then going to oversee the future audits of that company. and… Be aware of where the risks are and be sensitive to how they’re reported, which is not necessarily acting completely independently. I’m not saying it’s the case for Nixkali, but That’s

[00:43:58] Steven: That’s right. And I mean, don’t get me wrong, I [00:44:00] think it’s

[00:44:00] Steven: wonderful that you’ve got someone that’s been an audit signing partner on your board, right? Like, clearly those kind of skills

[00:44:05] Steven: would be really helpful to

[00:44:06] Steven: oversee future audits at the company. The question is, should you continue to use Ernst Young for me? Or should you be switching your auditors now after a long

[00:44:14] Steven: time with that firm in case…

[00:44:16] Steven: They’re missing something or you were missing something when you were the signing partner that a new auditor or a new, CA might pick up. So, so that, and that’s really why we do audits, isn’t it? We’re looking for an independent, organization to, that has expertise to come in and look at the company accounts and make sure that something isn’t getting messed up or it doesn’t have to be fraudulent.

[00:44:34] Steven: Of course, it could just be that you’re missing something or you’re not considering something that

[00:44:37] Steven: should be, so. Yeah,

[00:44:38] Steven: exactly. And it’s

[00:44:39] Steven: pretty typical

[00:44:40] Tony: But also too, I mean,

[00:44:41] Steven: things

[00:44:41] Steven: going on at the moment with auditors, so it’s probably a good

[00:44:44] Steven: time to ask that question.

[00:44:47] Tony: Yeah, and I remember working in big companies, the first question an internal auditor and sometimes an external auditor would ask is who’s the person who’s been here the longest and when did they last take

[00:44:58] Tony: holidays? Because [00:45:00] That’s that’s, the red flag for them. If someone’s in the same role for a long time and they’re not

[00:45:03] Tony: taking holidays, in other words, somebody else isn’t coming in to relieve them, it’s, that’s,

[00:45:09] Tony: the potential there

[00:45:10] Tony: is that

[00:45:10] Steven: Yeah, right. That’s a

[00:45:11] Tony: got a scam

[00:45:12] Tony: going.

[00:45:14] Tony: Yeah. And, You could draw a long bow and say that could be the case if you’ve had a lengthy relationship with the same

[00:45:21] Tony: auditor. what’s wrong with a fresh

[00:45:24] Steven: that’s right. Yeah.

[00:45:25] Steven: excellent point. yes,

[00:45:27] Cameron: before we move on from that,

[00:45:28] Cameron: didn’t we appoint you as the,person to push the ASX to do something about Appendix 4Ds and making sure companies were issuing them, you know, uh, externally to their annual report? How’s that campaign going?

[00:45:44] Steven: We’ve raised it with the ASX and,we got a polite, it’s something we’ll look at, but it’s not a priority for us at the moment. And this is, obviously in the midst of them really struggling their chess transition. and they have promised us, That’s right.

[00:45:58] Steven: They have promised us that [00:46:00] there’ll be a lot of things that will change when they finally do figure out this chess transition. Like things, for example, like being able to allocate your proxies in a much easier way. so we haven’t dropped it. We haven’t forgotten it. We got the, hey, we’re too busy to focus on this at the moment, basically.

[00:46:16] Steven: But we will absolutely be re raising it again once they’ve, finalized their technology solution. cause I did think it was an excellent idea to just make it more prominent and,a separate, a separate call out. and on that, the, the talking about how you allocate proxies, I suppose, one of the downsides to all of this is it’s pretty clunky at the moment.

[00:46:35] Steven: If, if you, don’t vote yourself and you’d like the ASA to represent you, You basically have to, do it in a couple of manual ways. There’s no really easy automatic way to, to do it. So, probably the, the most common way is you’ll get your notice of meeting from the company that you own when the AG GM’s coming up and it’ll say, Hey, the meeting’s coming up on this date, and here’s your chance to vote.

[00:46:57] Steven: And that either comes in the mail if that’s how you’ve elected to [00:47:00] receive it, or a lot of the time now, you might have it coming in electronically to your email. And you can just click on the link there if it’s the email, for example, or on the paper form and just write Australian Shareholders Association.

[00:47:11] Steven: So that’s probably the easiest way or the fastest way that most people do it. there is another way if you don’t want to do it individually for every company every year where you can actually contact the, the registry. So, Link or Boardroom or ComputerShare or whoever the registry is. You can contact them and ask for a standing proxy form and they’ll send you a form and you can write in all the companies with that registry that you want to allocate the ASA as a standing proxy.

[00:47:37] Steven: And that means basically every year from then on that you still hold those shares, they’ll, they’ll, recognize your, your proxy. You can change that at any time, obviously, you can change. a writing proxy at any time too. If you go to the AGM, you can still vote. You don’t have to leave your proxies with anyone.

[00:47:53] Steven: so it’s always changeable. if you do sell the shares, obviously, and then re buy them, you have to re register [00:48:00] it, unfortunately, which is a bit of a pain. So these are all very clunky things with the way that the chess system works. We’re hoping in, in the future it’ll be much easier where you can just check a box or something like that and it’ll be a standing proxy on your HIN forever or you know your shareholder number forever.

[00:48:14] Steven: That might make it a bit easier for people to allocate and post to ASA or anyone else that they wanted to. So, so anyway, that’s probably the best way to do it if you’re not someone that’s interested in voting. You can always read, the voting intentions on our website too, so if you actually do want to know how ASA is going to vote or what our opinion is with the company in there.

[00:48:32] Steven: Their proposals for the year. You don’t have to be a member. You can just go to the Australian Shareholders website and go to Companies We Monitor, put in the ticket code and it’ll, it’ll show you the, the report. As I said, it normally is on there about two weeks before the AGM. So if the AGM is coming up in November, it won’t be there yet.

[00:48:49] Steven: The Monitor probably won’t have had the meeting with the company and figured it all out yet. but typically about two weeks before the meeting, those, those voting intentions will go up and that’s free and, easy for anyone to have a look at. [00:49:00] See what,what we think about how they’re, managing remuneration, director elections, anything else they are

[00:49:06] Steven: putting to shareholders for the

[00:49:08] Tony: Yeah, good. So we can allocate our votes to you or we can vote along with you.

[00:49:12] Steven: year. Correct. Exactly. Whichever way you want to do it. Yeah. And then, if, if you do want to figure it out yourself, that’s

[00:49:16] Steven: totally fine as well.

[00:49:17] Steven: we just

[00:49:17] Steven: advocate that, try and

[00:49:18] Steven: have your voice heard, whether you’re figuring it out yourself or you’re allocating it to someone else. If you don’t vote.

[00:49:24] Steven: The Chair just votes on your behalf, basically, and typically the Chair is going to vote based on, what they want to happen, not necessarily what shareholders might want to happen. So, if you don’t vote, just understand that the Chair will be voting your votes for you, effectively.

[00:49:38] Tony: I want to just, step back a bit to what you said before about EML payments and it raised a, raised a thought in my mind I just, wanted to share with our listeners, and it’s to do with Australian companies, historically in my opinion being seen as a seller of last resort or the buyer of last resort for particularly and European companies. EML obviously you’ve spoken about, so they [00:50:00] bought an Irish, I think it was an Irish company. and then Uncovered Problems. there are other examples like that. Slater Gordon bought a company. which the problems became apparent soon after they bought it and they had a huge write down. Uh, I think is the company going through it at the moment. they bought into, took over some funds I think in the UK which have had regulatory issues and they’ve paid the price. going back a long time, NAB bought What’s now Virgin UK so Clydesdale Bank had problems. it’s almost like if someone’s in the UK, only a company in there, they can see. Dark clouds on the horizon, they look around to sell it.

[00:50:37] Tony: Everyone local goes, not touching it. Come find someone in Australia to buy it. So it’s almost a red flag, I think, if one

[00:50:45] Tony: of the stocks you own suddenly comes up with this great acquisition

[00:50:48] Tony: idea

[00:50:48] Steven: So, you’re saying our CEOs are not very good capital allocators, TK? Ha, Ha, ha,

[00:50:55] Tony: Well, it’s a difficult, I mean, I’ve, I’ve picked that up based on my history of watching it. there was a book [00:51:00] written about the fund. The link got mixed up with recently,but I dare say most,CEOs are very operational and don’t have time to read books on, subjects in the UK, even though they’re buying the company. So, yeah, but it’s certainly a well worn, path that when Australian companies go to the UK, they generally are buying problems.

[00:51:21] Steven: yeah, exactly. I mean, it’s like Buffett says, isn’t it? He thinks

[00:51:23] Steven: the CEO’s most important job is to be a capital allocator, but a lot of the time it hasn’t been their skillset or what they’ve done, you know, prior to being in the CEO role. So I think there’s another couple

[00:51:33] Steven: of recent examples too. I know Reece, the, the plumbing firm,

[00:51:36] Steven: family,

[00:51:37] Steven: pretty.

[00:51:39] Steven: Big Insider Ownership, Family Run type business. I know they made an acquisition in the U. S. and it

[00:51:44] Steven: isn’t going as well as they’d hoped at this point. So we’ll see how that one plays out. I think that, as an example of,the Bunnings. expansion into the UK, isn’t there, that didn’t go as well.

[00:51:55] Steven: So there’s, there’s lots of war stories, I think, isn’t there, of Aussie companies that have either tried to expand [00:52:00] internationally or made acquisitions internationally that, that haven’t gone well. I think that there seems to be more bad news stories, doesn’t there, than good news ones. So,

[00:52:07] Steven: so yeah, I know, back to Nick Scali for a second.

[00:52:10] Steven: I did listen to Nick’s, oh, sorry, Anthony’s, Last Earnings Call, which I thought was a masterclass in how to deal with analysts. if anyone, wants to, you can listen to it on Open Briefing that I mentioned earlier. But, there were four or five different analysts on the call that, asked him some questions around the business and they were really cheap, inch deep questions, very, very minimal research, I think, that the analysts had done before they jumped on the call with him.

[00:52:33] Steven: And I thought he did a great job kind of swatting them away and just, giving them some pretty blunt common sense answers, which was, which was good. Thank you. but he did mention that he’s been in the UK and

[00:52:44] Steven: that they’re, they’re looking,

[00:52:46] Steven: looking at the

[00:52:46] Steven: uk. so that’ll be interesting to watch. As I said, I’m

[00:52:50] Steven: a, I’m a shareholder and I’m a big fan

[00:52:51] Steven: of,

[00:52:51] Steven: Anthony Scali personally and the way he is, been running the business.

[00:52:55] Steven: And they have

[00:52:55] Steven: done an excellent job with the PLA plus acquisition, it looks like, so that that [00:53:00] has, um, delivered lots of. Cost savings it looks like to the business as he’s merged them and they’re getting,

[00:53:05] Steven: the sales growth that

[00:53:06] Steven: they kind of expected and then some. So, he does look like he might be a good capital allocator, at least domestically.

[00:53:13] Steven: And he’s, he’s done a good job there it seems. But yeah, the UK one will be one to watch if they do decide to

[00:53:17] Steven: expand or acquire someone

[00:53:18] Tony: Yeah, especially if it’s an acquisition, they’re the ones I worry about, yeah.

[00:53:22] Steven: Yeah, so stay, stay tuned. He wasn’t making a formal announcement.

[00:53:26] Steven: He was just kind of teasing that he’d been in

[00:53:28] Steven: the UK and he’s been looking around there, they’re interested in further

[00:53:31] Steven: expansion, basically.

[00:53:33] Tony: But plus also too at this

[00:53:34] Tony: stage, whatever the company

[00:53:36] Tony: like the UK companies are now

[00:53:38] Tony: worth

[00:53:38] Tony: twice as much given the exchange rate.

[00:53:40] Steven: yes,

[00:53:41] Tony: it’s not the time to be investing overseas.

[00:53:44] Steven: yeah, good point. Good point. Yeah, I guess we’ll stay tuned and see what happens there. But yeah, I think you

[00:53:48] Steven: make an excellent point. There’s lots of lots of

[00:53:50] Steven: bad

[00:53:50] Steven: news or war

[00:53:51] Steven: stories there over the years.

[00:53:53] Tony: Yeah. Well, look, I’ve probably derailed

[00:53:54] Tony: you from what you wanted to talk about. I did want to circle back. You’ve spoken about, a little bit

[00:53:58] Tony: about being approached to talk about [00:54:00] Qantas. What, what have you been asked about Fortescue Metals Group? That’s another QAV stock and it’s been topical lately.

[00:54:08] Steven: Yeah, I mean, all the

[00:54:09] Steven: obvious questions

[00:54:10] Steven: there at the moment that people have probably read in the

[00:54:13] Steven: press just around, board

[00:54:15] Steven: oversight and,is, is the board, they’re

[00:54:19] Steven: A well run and well governed board, or is Twiggy kind of, running things his way and hiring and firing people without, good oversight?

[00:54:28] Steven: And it’s really difficult to know that, isn’t it? If you’re not in the board meetings or you’re not internal in the company, it’s very difficult to know. How those meetings or those conversations might be going. You can only really base your assumptions on, on the actions or the announcements that, that come out.

[00:54:42] Steven: So, so we haven’t taken any kind of, firm position on Fortescue yet. The, the only report in the AGM is still to come and we’ll, we’ll work our way through that, but there’s certainly some concerning things I would think as an investor seeing, lots of management turnover and lots of short 10 years of management.

[00:54:57] Steven: It does, it does raise some concerns [00:55:00] because when you think about it, a board’s core job, one or one of their really core jobs is to appoint and then to, to succession plan for CEOs. So if you’re having a, a significant amount of turnover in the C suite, it is, something’s going wrong.

[00:55:16] Steven: Either you’re not You know, finding the right candidate in the first place, or you’re not managing them well when they’re there, or,you’re not all aligned, there could be, myriads of things going on, but, but really, a good board typically has, a high performing CEO on a very sensible, well aligned remuneration plan, and they deliver, good results for all the stakeholders along the way.

[00:55:38] Steven: And then at some point in time, the board, plans a succession along with management, tries to, hopefully, replace the CEO with someone, as good or better in due course. I mean, that’s, that’s the ideal scenario, isn’t it? But it, it looks from afar that, maybe that’s not what’s happening at the moment at Fortescue.

[00:55:52] Steven: So, so we’ll, we’ll obviously go and meet with the company and we’ll ask them these questions and we’ll see if there’s anything else we can figure out. And then we’ll put that in our [00:56:00] You know, voting intentions. We’ll ask some of those questions at the AGM, but I doubt we’ll be the only ones asking those questions.

[00:56:05] Steven: I’m sure there’ll be lots of others that are putting those points to

[00:56:07] Steven: Twiggy as well.

[00:56:09] Tony: I think the question I’d be asking, apart from the cultural issues, and I’m, as you say, we’re not present at board meetings, so we don’t know exactly what’s going on, although it does seem to be, around how aligned C Suite is to the vision for Fortescue. Um, my question would be… When is FFI going to be demerged?

[00:56:28] Tony: ’cause what the trigger is the Green Energy Company doing in a iron ore minor? and then the, the follow

[00:56:33] Tony: up question would be is given that Twiggy Forest himself has

[00:56:37] Tony: come out and said he doesn’t expect the returns from F f I to be as strong as the iron ore company. Why is he investing in F F I and not iron ore?

[00:56:46] Steven: Yeah, that’s right. I mean, they’re, they’re excellent investing questions. And I

[00:56:50] Steven: did

[00:56:50] Steven: see some announcements this week

[00:56:53] Steven: that, I think previously they were, they’re allocating about 10 percent of,the iron ores business profits to FFI.[00:57:00] but I noticed, I think this week they, they announced that they’re not going to be doing that as a default position going forward.

[00:57:05] Steven: They’re now going to start to look at, kind of an internal rate of return for the FFI projects, but it’s going to be a much lower internal rate of return than the iron ore business. So as a shareholder, again, that’s something you’ve got to think about, isn’t it? It’s like if they’re going to divert investment or profits to a, a lower margin or a lower return business, Is that going to come at the cost of, the growth and future of the iron ore business?

[00:57:27] Steven: So I think as an, now ASA wouldn’t give you a, an opinion on that because we’re not trying to tell you to buy or sell individual shares necessarily. That’s where, you need QAV to, to help you with that part of it. but obviously we’ll ask them, any appropriate questions around those kinds of things if they’re relevant to, to directors or remuneration for example.

[00:57:45] Steven: So, Yeah, I think if anyone hasn’t read those and you are holding Fortescue or, looking at Fortescue, there was a couple of your interesting announcements this week, I think, about the future of how they’re going to allocate the capital between those two [00:58:00] divisions for what it’s worth. and I think while we’re talking.

[00:58:04] Steven: Qantas and Fortescue. Chairs, one of the things that ASA is very strong on is workload for directors and, are the directors in general and particularly the chairs able to fulfill You know, all of their duties, if you like, to the company and stakeholders, shareholders, etc. And, one of the key things we look at there is how many other positions they hold, do they have, so many other directorships that when something goes wrong, it might be difficult for them to, to really, Or, can they do all of the other kind of soft or non financial type things that you might want a great director to do?

[00:58:41] Steven: So, for example, if we look at Qantas, Richard Goyder is the chair there. He’s also the chair of the AFL. Now, they’re not listed, but they’re a pretty big organization. And he’s also the chair of Woodside. So… When you think about that, he’s chairing three of the biggest organizations in Australia, really [00:59:00] complex, really big, big businesses.

[00:59:02] Steven: Um, and my chairing a small not for profit, I’ve got to say, it takes a lot of time. It’s a lot of time and effort and mental energy that you devote to it. if you want to do a really good job of it. And I would question personally, and it’s certainly ASA position that you should not be chairing three organizations of that size at the one time, because when something happens like it is at Qantas now, That must be consuming all of the board’s time.

[00:59:27] Steven: So what happens then at Woodside or the AFL if there’s something going on in parallel? He’s, he’s human, right? He’s not going to be able to do all of those things to the best of his ability in the same time frame. COVID was another example. if you were running a two or three, or chairing two or three different organizations at the same time and COVID hits, can you imagine how difficult that would have been for most businesses to try and navigate their way through?

[00:59:50] Steven: So it’s not when things are going great, But it’s the problem where everything’s humming along and the strategy is working well. It’s when something goes pear shaped or, when the so called black swan [01:00:00] comes out of the, out of the left field to derail you, that’s when we think it’s a big issue. So we would typically vote against a director, if they held more than five positions at the one time, and the chair, in our opinion, counts for two.

[01:00:15] Steven: So we will seriously consider, next time Richard Goode is up for election, whether we would support his re election at one of those three organi not the AFL OMC, but the other two organisations, because we think he’s probably overloaded. Now most of the time the directors say, oh we’re not, you don’t understand, it’s really easy, like, we’ve got heaps of time, we’ve still got time to walk the dog on the beach, that’s the kind of response you get from.

[01:00:37] Steven: Some of those directors, and I’m not saying that’s what Richard Goyder has said to us, but I mean some of the directors we push back on workload, they tell us that

[01:00:43] Steven: it’s fine, it’s not a problem. But,

[01:00:45] Tony: so do you say we’re paying you too much then? Mm-hmm.

[01:00:48] Steven: yeah, well that could be the next thing, couldn’t it? But, um, yeah, we’ll typically, yeah, typically vote

[01:00:54] Steven: against

[01:00:54] Steven: a director’s election or re election if they’ve got more than five listed positions at the one time. [01:01:00] Now that, that might be wrong, maybe it should be three, maybe it should be six, I mean who knows, but we do think workload’s an issue.

[01:01:06] Steven: and that if you’re spread too thin, you really can’t do lots of the, the softer things that a good director should do. So for example, you can say I’ve got enough time to attend all the board meetings. Well, that might be true, but do you have enough time to go into the organization and really see what’s going on?

[01:01:23] Steven: Do you have time to go and talk to staff? Do you have time to go and talk to customers? There’s a, it was a good example when,Star Entertainment imploded a couple of years ago. where, there were lots of things apparently happening in the High Rollers room that, that were not,were not legal and, there’s been regulatory action taken against them.

[01:01:42] Steven: And there were some very smart, intelligent, well credentialed directors on that board at the time. My suspicion is, though, looking at them, most of them were pretty heavy workloads. Most of them had multiple board positions. I think one of the ladies, Dr. Sally Pitkin, She’s also chairing Super Retail.

[01:01:59] Steven: She’s one of [01:02:00] the,the kind of key educators at the AOCD, which is kind of the, lobby or club for, for independent directors. And my suspicion is she probably hadn’t been into the high rollers, right? Well, she probably hadn’t been looking at what was going on inside Star on a daily basis, um, allegedly, even, even at a really low level, right?

[01:02:20] Steven: So, um. I think that’s the worry for ASA or for small shareholders around director workload. Do you really have the time to, to get under the hood and see what’s going on in your organization beyond just the board meetings? And that’s, that’s where we’d say to them, well, you know, our risk assessment is different here.

[01:02:36] Steven: Our risk to the organization we think is higher than yours. if you don’t think that five or more positions is too many. and we can agree to disagree on that obviously, but, but that’s an official ASA position around how many

[01:02:48] Steven: jobs you should take as a director.

[01:02:49] Tony: I wholeheartedly agree with that because I think you’re right if, if, if things go swimmingly for a couple of years, the director forgets the fact that they’ll be very busy when things don’t go [01:03:00] swimmingly. but I wanted to ask you, do you have a position on director workloads? I guess if, if a number of directorships is the horizontal approach, do you have one on vertical on how much workload is being demanded in a particular company?

[01:03:13] Tony: cause I have heard of. Examples where, in some cases management either through incompetence or by design loads the directors with lots and lots and lots of work. So pre readings, minutiae going to the board, and it’s a way of, hiding things from the board if you, if you flood them with a thousand papers they have to read before the board meeting.

[01:03:35] Tony: So, I’m thinking of like, you think of Yes Minister where they used to, uh, Give them in as the three red boxes. And the thing that was important was at the bottom of the third red box. I have heard of management teams who play that same sort of game with, with directors. So

[01:03:48] Tony: does the ASA have a policy on the size of board

[01:03:51] Tony: packs, the amount of pre reading that’s involved,the the kind of workload a director has just, just being a natural

[01:03:58] Tony: member of that, of that board.[01:04:00]

[01:04:00] Steven: Yeah, no, we don’t formally. I think the challenge obviously would be how do you find that,

[01:04:05] Steven: information out in a, independent, verifiable way? I mean, you can obviously ask them, but I’d be surprised if many directors said, Oh,

[01:04:12] Steven: we’re overloaded. So I agree with you. I agree. It’s probably an issue, but I doubt you’d get much,

[01:04:18] Steven: transparency or admission that that’s an issue at that particular company.

[01:04:23] Steven: We do,we do ask for a really good skills matrix. So we say we want you to, as a company, publish a good skills matrix that shows the different skills of each of the directors and how many directors you’ve got with each of these skills. And companies are doing that to a different level at the moment, but it is becoming more and more the norm that you’ll get a good skills matrix in the annual report showing, each of the directors and what, what they’re good at or what their skills are. we also, have increasingly been kind of asking, for directors to speak to their elections. So when they’re up for election at the AGM, we’ll ask them to get up and, share with shareholders at the [01:05:00]meeting. Why they think they’re a good fit and what value they think they’re going to bring to the organization.

[01:05:04] Steven: And that’s when you get to see what kind of communicator they’re like. If they haven’t had noticed that that question’s coming, you get to see whether they can kind of think on their feet and speak on their feet. And then also whether they’re a confident enough person to maybe challenge the chair or challenge the CEO.

[01:05:18] Steven: So it’s only a very small sliver, but sometimes you’ll have situations where the chair will not allow them to

[01:05:23] Steven: speak. The chair will say no, no, they don’t need to speak to their election. We’ve looked at them and we think they’re qualified. Well, that tells me that maybe that chair’s got a very domineering style on that board and that they’re not necessarily, having a really thorough engagement and discussion at all.

[01:05:40] Steven: at board level. So there’s some little things like that that you can pick up at AGMs with the way that you ask questions and the way you give directors a chance to, I guess, speak

[01:05:48] Steven: to their, to their elections.

[01:05:50] Tony: you have a policy on how many independent directors there should be on the board and, and how you, how would you define independence?

[01:05:56] Steven: Yeah, we do. So that, look, that’s a

[01:05:58] Steven: controversial issue because

[01:05:59] Steven: [01:06:00] there’s, there’s some school of thought, obviously, that you don’t need

[01:06:02] Steven: to

[01:06:02] Steven: be independent. You can be like

[01:06:04] Steven: Buffett and Munger and you,

[01:06:05] Steven: know, independence?

[01:06:06] Steven: doesn’t matter. And my, my personal view on that is, I agree. If you’ve got a whole board made up of Buffett and Mungers, you probably don’t need independence, but it’s not the reality in Australia, right?

[01:06:15] Steven: We don’t have a whole pool of Buffett and Mungers to, to chair or

[01:06:19] Steven: direct our

[01:06:19] Tony: and Buffet Munger have gates on their board as well. So,

[01:06:23] Steven: Exactly.

[01:06:24] Tony: PE and others,

[01:06:25] Tony: yeah.

[01:06:25] Steven: they would say, you

[01:06:26] Steven: know, we’re

[01:06:26] Steven: not independent and we don’t need an

[01:06:28] Steven: independent, we don’t need to be, I mean,

[01:06:30] Steven: and, again, if I’m Buffett and Munger,

[01:06:32] Steven: I would agree, but yeah, I just don’t think we have as many

[01:06:36] Steven: talented people as that to fill all two and a half thousand ASX companies.

[01:06:40] Steven: So what do you do in that situation? Well, what, what we recommend, and it’s also what, kind of the ASX listing principles are for companies. It’s also what the AICD, so the directors group recommends as well, is that the majority of the board should be independent. So we’re fine if you don’t have All Independent [01:07:00] Directors, but the majority of your board should be independent.

[01:07:02] Steven: Now what does independence mean? It means that you’re not, a former CEO or really materially connected to the company. You can, you can know the people, you can have, worked with them in the past in some other role or something, but you’re not, the last CEO or the last CFO or you’re not, best friends with the CEO and have been for 50 years.

[01:07:19] Steven: Like, some, obviously, pub test type rules like that. and also about tenure. So, so we have a, basically a position that after about 12 years, so that’s four terms, four three year terms effectively, we wouldn’t consider you independent anymore because at that point we think you’re so connected and part of the furniture that You’re probably not thinking like an outside, independent director at that point.

[01:07:42] Steven: Now, again, it doesn’t mean we’d vote against you. It just means we wouldn’t consider you an independent member of the board anymore at that point, because there is a lot of value, obviously, having people that really understand the business, really understand the industry, maybe have lots of shares in the business.

[01:07:57] Steven: So we’re, we’re absolutely fine with people [01:08:00] that have got lots of experience and lots of knowledge in the industry and, lots of skin in the game. but we would want the majority of you. So if you have seven directors, for example, we’d want four of them to be considered independent. You could certainly have three insiders or three that aren’t.

[01:08:15] Steven: and roughly, somewhere between seven to nine people, we think is about the right size for most, most listed board that, that seems to allow you to get. all of the skills that you need if you’re appointing people well, but not such a big group that it makes it hard to make decisions. Cause, I can, I can say at the ASA, we’ve got an eight person board at the moment and we’ve, we’ve fluctuated between six and eight over the last few years.

[01:08:38] Steven: And it is easier to make decisions when you’ve got six people versus eight. the less people in the room, the quicker it gets to a decision, obviously. so we don’t like to see the boards that have got 15 people there. We think that might be a little difficult. But equally, we don’t like to see three people on the board, because you’re probably not covering all the skills that you might need then.

[01:08:54] Steven: So just some, again, these things are judgement calls, they’re grey, people can have different opinions on them, [01:09:00] but we do try and take a, I guess a middle or a balanced type position on those things and then apply it, versus not taking

[01:09:06] Steven: any position at all.

[01:09:07] Tony: How many boards would have a majority of independent directors on the

[01:09:11] Steven: the

[01:09:11] Steven: vast majority of the ASX 200 do, and it’s because,

[01:09:15] Steven: as I said, it’s an ASX listing

[01:09:17] Steven: principle, so it’s not a if you don’t do it, you’re going to be

[01:09:20] Steven: delisted, but if they don’t do it, they have to explain why not. So there’s an if not why not clause if you like, so if you have less than a majority of independent directors, you need to explain each year why you don’t.

[01:09:33] Steven: now where that can get sticky though is sometimes the board will consider someone

[01:09:36] Steven: independent that shareholders probably don’t. and I see those examples quite often. there’s, there’s times where someone’s, been in management very recently or they’re, materially connected to the, to the people at the company and the board will declare them as an independent director, for example, and we would challenge them on that.

[01:09:55] Steven: and the ASX has some, some principles again around

[01:09:58] Steven: those things.

[01:09:59] Tony: they’ve been a,

[01:09:59] Tony: [01:10:00] long term supplier and they’re now on the board, so it’s a, it’s a reward for whatever they provided to the company and didn’t charge for in the past. Yeah.

[01:10:08] Steven: Yeah, exactly. And if you think about, why are these

[01:10:11] Steven: things important to you as a

[01:10:12] Steven: shareholder,

[01:10:13] Steven: I mean, really one of the

[01:10:14] Steven: core roles again of the board is to consider all of the stakeholders and especially the shareholders, the other shareholders outside of management. So it doesn’t mean you don’t think about management.

[01:10:25] Steven: But it doesn’t mean you only prioritize management either. The, particularly your independent directors should be thinking about, your customers, your staff, and all of your other shareholders when they’re making decisions and helping oversee the company, not just what’s good for our CEO this year.

[01:10:41] Steven: So that’s why it’s really important to you as a shareholder, we think, to have some independence on the board and to have some independent thinking and some, I guess, separation from

[01:10:51] Steven: the management or the insiders.

[01:10:53] Tony: Speaking, speaking of independence, do you have a view on or a policy on diversity on

[01:10:57] Tony: boards, gender and other, [01:11:00] other types?

[01:11:00] Steven: We do. We’ve been a big supporter of,gender diversity for a long time and ASA was one of the first groups to, to

[01:11:07] Steven: push for at least 30 percent female or male on a board. and then other groups came along like the Proxy Advisors and the ASX as well. that’s now their listing principle too.

[01:11:19] Steven: we have just moved that actually to 40 40 20, so that means 40 percent female, 40 percent male and 20%, can vary. Thanks. and I think what’s important to point out here is when people hear those targets, they think, oh, you’re trying to give someone a leg up or you’re trying to help a minority group or those kind of things.

[01:11:35] Steven: It’s not about that at all. It’s really about trying to have, different knowledge and experience in the room to make a decision and to get to a better outcome than if you have everybody who’s got the same background and thinks the same way. And I have to say personally with the, the private company that I was part of.

[01:11:52] Steven: We, we obviously had a board, we had a board of five people, and five of us that were basically exactly the same. We’re all shoe guys, we’re all [01:12:00] a similar age, we’re all white guys from Australia, and luckily it went well, but as I reflected on it later I thought, There were so many things that we didn’t know or that we wouldn’t have thought of, or problems or opportunities that if it had have come along, we didn’t have the, the previous knowledge or experience to deal with that.

[01:12:20] Steven: We were lucky, I think at times to scrape through, and I saw that when, actually I went and went, did the company directors course with the RACV, and one of the things they do there is that they put you through a mock board scenario. And basically they’ll pair you up with four or five other people in the class from normally pretty different or diverse backgrounds, genders, experience, industries, etc.

[01:12:42] Steven: And they give you a problem. They say, here’s your problem, listed company. you’re, you are the board that need to figure out how to deal with this problem. And, uh, I thought, God, I’ve got all the answers. I know exactly what to do here. And then, you then meet as your board and start to talk through it.

[01:12:56] Steven: And I very quickly realized that I did not have all the answers, or I didn’t [01:13:00] have the best answer. And in my group, we had, The financial controller from QSuper, we had the general counsel from Virgin Airlines, we had a top, military officer from Canberra, and then we had a, a surgeon from one of the top hospital systems, and then myself as a, you know, retail shoe guy.

[01:13:18] Steven: and I quickly realized that these other people’s experience from very different industries, Got us to a much better outcome than if I had have just gone at my way or done it, with people that thought the same way as me. So I think it’s really important to recognize that when you’re hearing things about gender diversity on boards, I genuinely don’t believe it’s about trying to Give someone a leg up.

[01:13:40] Steven: It’s about trying to have enough different knowledge, experience, oversight in that boardroom to get a better decision than if everybody thinks the same way. It’s like the old cliche about if everything, looks like a nail, sorry, if your only tool is a hammer, everything looks like a nail, right?

[01:13:55] Steven: That’s the problem if you have everyone with the same background or the same kind of experience and [01:14:00] something comes along

[01:14:01] Steven: that isn’t a nail.

[01:14:02] Tony: yeah,

[01:14:02] Tony: and the other dimension

[01:14:03] Tony: too

[01:14:03] Tony: is like, like you, I probably would have approached that same situation with a tremendous

[01:14:07] Tony: amount of confidence because that’s what

[01:14:10] Tony: white guys do who’ve had corporate experience, right.

[01:14:13] Tony: in Australia. Um, yeah, and if you put five of us on the board… We’re going to have the same approach, but additionally we’re going to compete to see who is the hammer that hits the nail so we can beat our chest and say we solved that problem, whereas if we have

[01:14:28] Tony: the AICD board you spoke about,

[01:14:31] Tony: I’m not going to compete with the surgeon, like how can I compete with the

[01:14:34] Tony: surgeon on the knowledge they have, so it becomes all of a sudden it becomes a cooperative endeavor instead of a competitive endeavor.

[01:14:40] Steven: Exactly. Yeah, that’s right. And I think, it doesn’t mean that you shouldn’t have a guy like

[01:14:44] Steven: you or me on the board. It just means that you shouldn’t only have guys like you

[01:14:47] Steven: or me on the board,

[01:14:48] Tony: which is redundant anyway, you’re paying five directors fee for the same point of view, you

[01:14:52] Tony: might as well just pay one.

[01:14:54] Steven: Exactly. And I did think there was a great article

[01:14:56] Steven: in, in The Fin

[01:14:57] Steven: yesterday,

[01:14:58] Steven: with, with, an

[01:14:58] Steven: interview with

[01:14:59] Steven: Mike Henry, [01:15:00] the CEO of

[01:15:00] Steven: BHP, where he actually talked about, Some of the really significant financial improvement and operational improvements they’ve seen at BHP since they’ve added more gender diversity to their, to their management teams and their boards.

[01:15:13] Steven: They’ve seen some, some really interesting things in their life, some reductions in injury rates and, some improvements in, financial, accounting and management in different areas as they’ve added, more. female talent to some of their management teams. So I think that’s the other nice thing.

[01:15:28] Steven: This doesn’t have to come at the cost of performance. It seems to me it’s, it’s, it’s almost the opposite. You can get improved financial performance if you’ve got a much more diverse and, and it doesn’t mean they shouldn’t be qualified or experienced, obviously. We’re not suggesting that, but having that, broader and different range of experience definitely helps with decision making in my experience.

[01:15:47] Steven: So happy to say ASA is a big supporter of that and, and, pushes that with the companies.

[01:15:51] Tony: yeah, look, I wouldn’t be surprised if Four Corners comes out at some stage in the near future and does an expose on mining

[01:15:59] Tony: camps and [01:16:00] the sexual harassment that goes on there.

[01:16:02] Tony: Um, and has

[01:16:03] Tony: been overlooked because of male management

[01:16:06] Tony: for a long

[01:16:06] Tony: time and it’s just starting to come to light now.

[01:16:09] Tony: We’ve had hawk stories, but I suspect there’s a lot we’re not

[01:16:11] Tony: hearing about.

[01:16:12] Steven: yeah, that’s a great point. and that’s exactly the kind of thing you would think that, a more diverse management team and or board might pick up and then might question and might start to push back on. so yeah, that’s a, that’s a great example, TK. I mean, I hope that that doesn’t

[01:16:27] Steven: come out because it’s not happening,

[01:16:28] Tony: Yeah. No, I

[01:16:29] Steven: know, it’s probably naive to think that.

[01:16:31] Tony: Hopefully it’s fixed, fixed internally. and just on that too, does the ASA, have a policy on, I’ll call it the Director’s Club. So in terms of, even though the directors are independent, they tend to have been referred by somebody who’s already director.

[01:16:47] Tony: it’s, it’s obviously hard to get your first directorship,

[01:16:49] Tony: but

[01:16:49] Tony: after that you often get five quickly.

[01:16:52] Tony: So, how do you, how do you see new blood, I guess, coming in on fresh set of eyes coming into the Australian scene?

[01:16:58] Steven: Yeah. So there’s, there’s two, [01:17:00] obviously two ways we handle that. One of them

[01:17:01] Steven: is workload again.

[01:17:02] Steven: So obviously we don’t want people to take too many positions and we’ll push back on

[01:17:05] Steven: that. the other one is we do

[01:17:06] Steven: look at

[01:17:06] Steven: each director’s background and history. And there’s times where, there’s the directors that have been involved in significant corporate failings that we would not support when they get put up for election at another company.

[01:17:19] Steven: and we would explain, why, and if the company does choose to put them up, we’ll then ask them to explain at the AGM why they think that’s not a problem. again, you get a varying degree of, cooperation in answering that question. but, that’s one of the approaches we take, obviously.

[01:17:34] Steven: The skills matrix is the other obvious way, we really ask for much more detailed skills matrix than most companies were doing. And we’re getting that more and more so that, okay, you might be part of the director’s club, but are you actually bringing the skills that the company needs and has identified that they need or not?

[01:17:50] Steven: And again, these things are hard to always, Guarantee. but I’ll give you, I’ll give you another example there. there’s a company up in Brisbane called Technology One, ASX 100 [01:18:00] company. It’s a enterprise software type business. Does a lot of stuff for councils and, tertiary education, et cetera.

[01:18:05] Steven: Been a very successful business for a long time. Been very good for shareholders as well in terms of returns. but they’ve had a non independent board for most of that period, a founder, owner that’s run the board, very firmly in our, our observation. and I was monitoring them a couple of years ago and, they didn’t have gender diversity on their board either.

[01:18:26] Steven: So they had a bunch of insiders with lots of qualifications and lots of experience and lots of skills, no problems there, but the lack of independence. And This particular year they had a new director position that they’d appointed and he was up for election. and he was, he was a local guy that had come from one of the accounting firms and they said the skills that he was plugging were audit skills.

[01:18:48] Steven: So that was basically what they were looking for, someone with audit skills. So I put the question to the chair and said, did the, given your lack of gender diversity on the board at the moment, and that you’re not in, sync with the [01:19:00] ASX listing principles here, did you give any consideration?

[01:19:03] Steven: to finding, a female for this particular position. And he said, Oh yeah, yeah. We interviewed a couple of women, but this guy was the best. He was the only guy that really had the audit skills we were looking for. Now I find that pretty hard to believe that they couldn’t find a good female director in Australia with audit skills.

[01:19:20] Steven: but even if that was the case, he then went on to say, and by the way, It’s not our job to change the world. So really what the chair was saying is I don’t really value that, right? I don’t really believe in kind of gender diversity on my board or in management, and we’re not taking it seriously. Now, a year or two later, unfortunately, he’s been kind of pushed, I think, by the big proxy advisors to, to vacate the chair role.

[01:19:44] Steven: So he’ll still stay on, I’m sure, as a big founder and,I’m sure an advisor to the company. The company’s still doing really well. But his views are a little outdated, I think, in terms of where, many shareholders or stakeholders are these days around the way that the company should be governed and the way that, I guess females in [01:20:00] his company should be valued.

[01:20:01] Steven: So, so yeah, that’s another, kind of interesting example of when you go to an AGM and ask a question, you do get an answer sometimes from, from the chair or from the board that tells you what they’re thinking or tells you kind of their philosophy around these things. And then you can make your decision whether you’re happy with that or not.

[01:20:15] Tony: Yeah, right. do you have a position on fees?

[01:20:19] Steven: Director fees.

[01:20:21] Steven: Yeah, so we, the best thing we can

[01:20:23] Steven: do there is we just benchmark

[01:20:25] Steven: them to companies of a similar size. So if you’re, if you’re in the mining

[01:20:30] Steven: services industry and you’re in this kind of market cap range, what’s the benchmark of both management remuneration and also director fees for this particular company?

[01:20:41] Steven: And as long as they’re not wildly above that kind of benchmark, we’ll typically,support them. I’ve got to say I do find most companies are not particularly aggressive with their increases in director fees. They’re much more aggressive with the increases in management remuneration. That’s where often the remuneration is [01:21:00] going up much faster than the earnings or the market cap of the company.

[01:21:03] Steven: The director fees part of it, it typically doesn’t seem to, first of all, they need to get shareholder approval. for director fee increases, which is interesting. They don’t need to get shareholder approval for increasing a, a CEO’s pay. They just, have a non bonding vote on that, like we talked about earlier, but director fees, they do need shareholder approval.

[01:21:22] Steven: So maybe that’s one of the reasons they don’t go up as quickly sometimes as management, remuneration, but yeah, as long as they’re in that rough benchmark for the size of the company and the industry that they’re in, yeah, we’ll typically be supportive of them, increasing over, over time. yeah, it’s a different question about whether, anyone’s worth that much, I suppose, but we don’t take a judgment, make a judgment call or take a social position on that.

[01:21:44] Steven: It’s just really benchmarking them against other companies of a similar size and industry.

[01:21:48] Tony: Do you ever find, examples,

[01:21:50] Tony: of

[01:21:51] Tony: chairs who, appoint people to their boards who’ve worked for them before or worked with them before? And do you have a position on that? [01:22:00]

[01:22:00] Steven: Absolutely. And I think, again,

[01:22:01] Steven: it’s, it’s a judgment call there about whether this person’s, bringing value And skills that are

[01:22:06] Steven: going to

[01:22:07] Steven: be helpful to the company or not. Because I mean, if we, think about. I guess all of our own lives. We obviously meet people at times that we work with or that we know, whatever, that might be great additions to our company or our business.

[01:22:17] Steven: So we don’t necessarily say you shouldn’t do that. obviously the independence might be a problem if the connection is too close, or too long or too material. but again, we typically assess that based on is this director qualified and bringing good skills to, to this particular company that they need or not, rather than, Do they know the chair well?

[01:22:38] Steven: so yeah, that’s probably the, the general position we’d take there.

[01:22:41] Tony: Okay. You’ve answered all my

[01:22:44] Tony: questions. Now we can get on to the real important topic of racehorsing for the race, racehorses and coming up in the spring carnival. Yes. And how good Negroni’s is going to be.

[01:22:54] Steven: Oh, yeah. Well, hopefully, I

[01:22:55] Steven: mean, this is this is my

[01:22:56] Steven: first racing experience, TK. So, so far, I’ve paid out a [01:23:00] lot of

[01:23:00] Steven: money and I haven’t seen my horse race.

[01:23:01] Tony: Yeah, that is the

[01:23:02] Tony: racehorse experience.

[01:23:03] Steven: that’s my investment

[01:23:04] Steven: experience in

[01:23:05] Steven: racehorses so far. But, hopefully, Negronis is going to

[01:23:08] Steven: be a superstar and, and very

[01:23:09] Steven: well named by you too, TK.

[01:23:11] Steven: Negronis, we thought was a great name. And I know you

[01:23:14] Steven: talked about our other

[01:23:14] Steven: racehorses. Newer Horse Double Market the other day. So we’ve got some great QAV aligned names. So hopefully that’s a good omen. And our little horses are going to do very well over the next few

[01:23:24] Tony: Yeah, exactly.

[01:23:26] Steven: Hopefully it’ll be fun as well.

[01:23:28] Steven: I know you’ve been doing it for a long

[01:23:29] Steven: time and you’re, you’re much more

[01:23:31] Steven: experienced at that than I am, but, yeah,

[01:23:33] Steven: hopefully

[01:23:33] Tony: It is. It’s, it’s, it’s, it’s a heap of fun Yeah,

[01:23:36] Tony: absolutely.

[01:23:37] Steven: Appreciate the intro. I think, I think at this

[01:23:41] Steven: time.

[01:23:41] Tony: see. All right,

[01:23:42] Steven: Well, really good to chat to you guys. I appreciate the

[01:23:44] Steven: opportunity. And, yeah, hopefully that was helpful for people. And, as I said, you can check out

[01:23:49] Steven: the website anytime if you want to,

[01:23:51] Steven: if you want to look at any of those voting intentions or reports on the companies or, you

[01:23:54] Steven: know, reach out to us if you’ve got any questions and we’ll always be happy to help if we can.

[01:23:59] Cameron: Well, I didn’t get [01:24:00] an opportunity to ask my two questions that I had

[01:24:03] Steven: it’s very remiss of us Cam, far

[01:24:05] Cameron: shut up for the last 90 minutes, but like, let’s be quick about it though, because I want to have some lunch. The first one was, Tony mentioned that he had, I think you saw Marcus Padley on the TV the other day and he was talking about his, that a lot of people have been capitulating out of the investing markets, in recent times. I was wondering if you have any visibility of how are investors feeling? we’ve covered some, um, different stories from the Fin over the last few months about, investor sentiment. We, saw a lot of new people obviously enter the market 2020, 2021 during the bull run. are you getting a feeling that people are sort of taking their bat and their ball and going home?

[01:24:46] Cameron: I mean, the market is still down from where it was two years ago. It’s been a, been a very turbulent, tricky

[01:24:52] Cameron: period. Got any sense on market, consumer, retail, investor attitudes, Steve?

[01:24:59] Steven: Yeah, look, it’s a good [01:25:00] question. I guess the first thing I’d say quickly is our

[01:25:02] Steven: membership’s actually grown over the last 12 months quite significantly. So we’re not seeing any kind of drop off of ASA members per se. There’s, there’s been some, more people joining than, than departing the investing world, if you like.

[01:25:15] Steven: So, so that’s been good. We are going to actually do an investor sentiment survey of our own of ASA members over the next few months. That was one thing that we, we asked the members about a little while ago and they said, yes, we’d love to see an investor sentiment survey, like what other members are thinking and what they’re investing in and what they’re interested in.

[01:25:31] Steven: So. So once we’ve got that, I’ll more than happily share that with you guys, just for what the temperature is of, the ASA membership. Most of our members are kind of retired or pre retirees. So they’re kind of at that, towards more towards the end of their investing journey than the start of it, I suppose.

[01:25:47] Steven: So that might skew those results a little bit. I know we’ve got a lot of younger QAV members, obviously, which is great. but yeah, I suspect we’ll get more kind of skewed to the, to the retiree type. Mindset, and larger portfolio [01:26:00] mindset from, from a lot of our members, but yeah, once we’ve got that survey, I’ll say, but no, nothing other than that anecdotally that we’ve seen or heard.

[01:26:07] Cameron: Okay. Thanks. And the only other question was like an after hours question.

[01:26:11] Cameron: I know you’re a

[01:26:12] Cameron: lover of great TV and film. What are you watching at the moment? What’s your, what’s your number one show recommendation?

[01:26:18] Steven: Um, my, my oldest son and I have just started, well, I’m rewatching and he’s watching Mr. Inbetween. So, I’ve already seen it. Fantastic. Love it. And just yesterday he started watching it. he’s a bit of a film and media.

[01:26:32] Steven: Guy who’s doing media at school. So he’s been watching lots and lots of classic movies and I’ve been, tuning in and watching some of those with him.

[01:26:39] Steven: So we just finished The Godfather and, he’s been watching all of the Stanley Kubrick films as well. So I’ve been catching up on a few of those classics with him, which has been good. It’s good to have a, 17 year old that’s interested in some, some good TV or movies rather than, social media.

[01:26:55] Steven: So, uh,

[01:26:56] Cameron: he think of the Godfather?

[01:26:58] Steven: he’s, he’s [01:27:00] loving all of them. Like, I’ve got to say, he’s got a

[01:27:02] Steven: really mature palette, if you like, for these great films and actors, and, he even, the Stanley Kubrick films, he even went and, like, bought some of them on DVD now to keep a copy of it for, for the future kind of thing, which, with his pocket money, so, yeah, he’s really into, into the classics, it seems, which is great, but,

[01:27:19] Cameron: speaking of which, I had this realization last night, I went to, I wanted to watch Citizen Kane, and I can’t stream it, you know, I subscribe to four or five different streaming services, and I’m kicking myself now, I used to have hundreds of DVDs,and then they were sitting on my bookshelves in my garage for hours 15 years.

[01:27:37] Cameron: And Chrissy kept saying, get rid of these things. You haven’t watched them in 15 years. They’re just taking up space. If you want to watch anything, you stream it. Uh, finally, like over the last few years, I was like, yeah, yeah, fair enough. And I got rid of everything. Now, uh, I can’t watch Citizen Kane. I can’t watch the Shield.

[01:27:54] Cameron: You can’t stream that anywhere. All of these things that I want to watch that I used to have on [01:28:00] DVD. I, can’t, they’ve locked them all up. You have to rent it or buy it. You can’t stream any of these things anymore. They did a bait and switch. Now I have to go out and buy the bloody DVD again if I

[01:28:11] Cameron: want to see these things

[01:28:12] Cameron: or download it, you know?

[01:28:14] Cameron: The industry bait and switched my ass and I’m furious.

[01:28:18] Steven: Very disappointing. I, I did just finish the grade

[01:28:20] Steven: as well. I think, did you watch the grade, TK? I can’t remember if we talked about that or not, but…

[01:28:24] Tony: No, I don’t think

[01:28:25] Steven: it’s, I think it’s on Stan, isn’t it, Cam, but, yeah, very, very funny, it’s,very loose and,

[01:28:30] Steven: fiction, you know, kind of, I guess, mostly made up retelling of Catherine the Great in Russia

[01:28:34] Tony: Ah, right. Yeah. Gotcha. Okay.

[01:28:37] Steven: the, is it Elle

[01:28:38] Steven: Fanning that plays Catherine the Great, Ken?

[01:28:40] Steven: Yeah, she’s fantastic in it, it’s really,

[01:28:42] Steven: really funny, so,

[01:28:43] Steven: so, Yeah.

[01:28:44] Steven: I think there’s been three seasons of that and that’s well worth a watch if anyone, likes the

[01:28:47] Steven: comedy, I think.

[01:28:48] Cameron: Very funny, yeah.

[01:28:50] Cameron: Alright, uh, both of you heard the new Rolling Stones song, their first new song in 18 years? Angry? Just

[01:28:57] Tony: Alex and I, Alex and I watched it on [01:29:00] YouTube

[01:29:00] Tony: last night and it was just, so, we just went, this is so sexist from the eighties.

[01:29:05] Tony: It

[01:29:05] Tony: was just the film clip was horrid,

[01:29:08] Cameron: No, I think it’s fantastic. I mean, yes, it’s got the girl in the convertible Mercedes doing the sexy

[01:29:15] Tony: lying on the bonnet and Yeah. Right.

[01:29:17] Cameron: sure. But, the other, I mean the most, the coolest part of It is, she’s driving down on a sunset boulevard or something, and there’s all these billboards of the Stones from all the different eras of their career, but the, the they’re coming alive on the billboards and singing the new song, but it’s, it’s Mick and Keith and Ron going back from the 60s, 70s, Performing and singing the song on these

[01:29:46] Cameron: billboards, so they’ve used some, you know, AI, CGI, tech or whatever to animate them and make them look like

[01:29:52] Tony: And that was, and like was fantastic, right? That part of it was brilliant. So why

[01:29:57] Tony: wasn’t that

[01:29:58] Tony: just the film clip? [01:30:00] Why, why, why put a girl

[01:30:01] Steven: Is the song

[01:30:02] Steven: any good?

[01:30:02] Cameron: Look, yeah, it’s pretty good. Like, it’s a classic Stone Song. I don’t think it’s, you know, it didn’t blow me away, but it’s a great Keith riff. You know, it’s, a great Open D riff, and just, uh, you know, it’s kind of funny. Mick’s talking about, his girlfriend’s angry with him, they haven’t had sex for a week, a month.

[01:30:19] Cameron: He’s 80 years old, he’s complaining that he hasn’t.

[01:30:24] Cameron: At one point, he says he’s still taking the pills,

[01:30:26] Cameron: and he’s going to Brazil. Brazil!

[01:30:29] Steven: Okay,

[01:30:31] Cameron: Uh,

[01:30:33] Steven: I’ll have to check it

[01:30:33] Steven: out tonight.

[01:30:34] Cameron: yeah, but Tony’s trying to uh, you know, Tony’s trying to,

[01:30:37] Tony: cancel it. yeah,

[01:30:39] Cameron: cancel, cancel rock and roll. He’s trying to cancel sex, drugs and rock and roll now. It’s the

[01:30:43] Tony: sit down and watch it with your 23 year old daughter and you have a different

[01:30:47] Steven: Different perspective.

[01:30:48] Cameron: Well, that’s why I didn’t, I never had a daughter Tony. So I never had to have these conversations. Yeah.

[01:30:54] Cameron: Yeah,

[01:30:55] Steven: Fair

[01:30:55] Cameron: Chrissy, Chrissy came in, I was watching it last night

[01:30:58] Cameron: in bed on my iPad,

[01:30:59] Cameron: she goes, [01:31:00] What are you watching?

[01:31:01] Tony: yeah,

[01:31:03] Steven: You busted.

[01:31:04] Cameron: Yeah, yeah, yeah.

[01:31:06] Tony: looking forward to the album though. Paul

[01:31:07] Tony: McCartney’s on it and Ringo Starr’s meant to be on it. Stevie Wonder, Lady

[01:31:11] Tony: Gaga. Yeah.

[01:31:12] Tony: Yeah,

[01:31:13] Steven: wow.

[01:31:14] Cameron: See, Paul and Ringo were on, um, Dolly Parton’s new country rock cover of Let It Be, which is now on the top country charts. So Paul and Ringo have now got a hit on the country music charts, which they’ve never had before. So it’s a first for them.

[01:31:32] Cameron: It’s not a great cover. I mean, I

[01:31:34] Cameron: love Dolly, but it’s, you know, hard to beat the original with them.

[01:31:39] Steven: Yeah,

[01:31:39] Cameron: All right.

[01:31:40] Cameron: Thank you, Chairman Mabb. Thank you,

[01:31:42] Cameron: TK.

[01:31:43] Steven: All right guys, we’ll let you go. Thank you very

[01:31:45] Steven: much again

[01:31:46] Steven: for the chance to chat. Hopefully that was

[01:31:48] Steven: helpful.

[01:31:48] Tony: Thank you, Steve. Thanks for

[01:31:50] Steven: Thanks guys. Talk to you later.

[01:31:52] Cameron: Enjoy your week off, TK and the Goldie. [01:32:00] [01:33:00]



In this episode, Tony provides insights into recent retail sales figures, the market’s reaction, and the concept of ‘confession season’ in the corporate world. Then he conducts a detailed ‘Pulled Pork’ segment on Stealth Group (SGI), a tool retailer, evaluating its financial health, market performance, and prospects.

In the club edition, we also discuss the reasons behind varying member performances (and our own performance), and discuss the importance of sticking to a disciplined investment model.

QAV 721 – Dr No

In 721 we discuss the pain of FND, why Aussie investors keep investing in unprofitable companies, and TK does a Pulled Pork on SRV.

In the club edition only: the myth of the ‘new normal’, why LIC AFIC is selling below its NTA, how Aussie investors can benefit from the AI boom, what we should do about copper prices being up, how to interpret the number of buys going down, how often is TK is making purchases based on factors outside the numbers, and how to interpret the resignation of the PRN CFO.


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