'Damning report' on Zespri proxy voting

Following the recent revelations in the National Business Review, the Independent Kiwifruit Growers Association (IKGA) is again calling for an independent inquiry to be launched into the repeated misuse of confidential shareholder proxy votes before Zespri's annual general meetings.
IKGA chairman Marcus Wilkins says it was clear from the reported breaches of shareholder confidentiality and the company's attempts to cover up the extent of the breaches that an independent inquiry is the only way for shareholders to regain confidence in the Zespri board.
"Sound democratic processes and robust corporate governance go to the heart of shareholder confidence in any company.
"Zespri is not a co-operative (as mistakenly reported in the NBR article). We believe as many as 30 per cent of growers are not shareholders and an unknown but significant number hold less shares than their production.
"Given the fact that all kiwifruit growers (and not just Zespri shareholders) have to supply a company with monopoly powers conferred on it by the Government, these revelations are more serious."
The NBR article describes what it calls a 'damning report' by barrister David Connor into the accessing of proxy votes which was never disclosed to kiwifruit growers, or Zespri shareholders.
"It would appear from this report the re-election of Craig Greenlees at successive AGMs is seriously called into question. Even if he did have the votes to regain his seat on the board, he should have resigned because, according to the article, he received confidential shareholder proxy vote information before the AGM's in 2005, 2006 and 2008 in breach of a confidentiality agreement he negotiated."
The report said Mr Greenlees had significant personal interests in the kiwifruit industry and said "Mr (Murray) Denyer's choice of Mr Greenlees as the person to whom he divulged the 'no' vote information also lacked care as Mr Greenlees was the person who could make use of it and had a variety of interests in it".
"Zespri chairman, John Loughlin refused to agree to an independent inquiry on this matter when IKGA raised the issue at the last AGM and his continuing role as chairman must now be in doubt, given his role in keeping these matters from shareholders and attempting to justify the reason Mr Greenlees was not immediately forced to resign.
"Mr Loughlin seems to justify not requiring Mr Greenlees resignation by stating Mr Greenlees is a "key board member" and a "strong contributor" to the board.
"Does Mr Loughlin have one standard for Mr Greenlees and another standard for the rest of the board?
"This has the unpleasant whiff of an old boys' club where directors interests are put above those of shareholders and growers."
A IKGA press release states that it is even more extraordinary that Mr Loughlin's apparent justification for his failure to act decisively on what is a clearcut breach of trust and confidence by stating the board needs to keep its focus on grower returns.
"Election to the board of Zespri is a political process and not a commercial one. Directors like Mr Greenlees are politicians who need grower support for their re-election, which is why the integrity of the voting system is of great interest to growers.
"Mr Loughlin is, of course, right to point out the need for a clear focus on grower returns because if the board of Zespri get it wrong they get it wrong for the whole industry, including those growers who are shut out of holding shares by growers who have shares in excess of their production.
"That is not an excuse for the inexcusable and IKGA wonders what other governance failures the board may be 'excusing' and what other information the board may be 'managing' under this guise.
"This concern is highlighted by comments posted to the NBR website www.nbr.co.nz.
"We think growers are getting tired of statements like this that are designed to either shut down debate or achieve popularity at the expense of genuine accountability and transparency.
"That Mr Loughlin attempted to shut down any debate on this issue at the last AGM raises further questions about what appears to be a cover-up of how serious and widespread this has been and underlines the need for an independent inquiry."
IKGA considers the following steps must be immediately taken in order to restore shareholder and grower confidence:
1. That there be an immediate independent inquiry into the matters with the results made public.
2. The damning independent 'Connor' report paid for by Zespri with grower funds be made public.
3. NZKGI (NZ Kiwifruit Growners Inc) must make available to growers all information it had on the accessing of proxy votes in breach of the confidentiality agreement, including the full content of the legal opinion that NZKGI obtained on this matter.
IKGA was established in May last year to provide an independent voice for kiwifruit growers.
The association says it has no confidence in the ability of KNZ or NZKGI to act as effective watchdogs on the activities of Zespri. It also believes there are unanswered questions not being asked about the activities of Zespri, the way it operates and how grower funds are dealt with by Zespri.
The association is also concerned Zespri lacks proper accountability to growers.
ZESPRI REPLIES
Zespri spokesman Dave Courtney was happy to speak to this matter on behalf of the company.
"This is a historic issue dating back to 2008. It was dealt with in an open manner at the time and a number steps were taken to stop it happening again, he said.
"Zespri has had independent confirmation via statutory declaration from our share registrar that this issue has not happened since 2008," Mr Courtney says.
"Shareholders were first told about this in 2008 and have been communicated with on the issue in 2008, 2009 and 2010 through annual reports, AGMs, newsletters and notice of meetings."
He sent copies of the 2008/09 annual report and the December 2008 Kiwiflier, which is a monthly newsletter that goes out to shareholders/growers.
The attachments showed clearly this issue has been well canvassed with shareholders in an open manner, as have the steps taken to stop it happening again.
Some points made are as follows:
* The incident was investigated by the board in 2008 and it was found that although the action was not contrary to the Companies Act 1993 or Company Constitution it was in contravention of a Confidentiality Agreement between Zespri and its share registrar.
* Shareholders were made aware of the incident and the steps taken to resolve it through various communications (for example annual Reports, AGMs, newsletters) on several occasions in 2008, 2009 and 2010.
* In 200, clauses were added to the Zespri Group constitution to ensure that no voting or proxy information is received by directors or employees before the shareholder meeting, and that individual voting preferences are not available to directors after any such meeting.
* Before subsequent annual general meetings a statutory declaration was made by Zespri's share registrar to confirm that no voting or proxy information was made available in line with the confidentiality agreement.