Shareholders in retailer Woolworths Limited will be asked at a November extraordinary general meeting (EGM) to vote on a motion demanding the company limit the poker machines they own to AU$1 bets. GetUp, the activist group behind the campaign to curb gambling, will turn its attention to persuading investors to back the motion, meaning that superannuation funds will have to decide how to vote on a social issue that impacts on Woolworths’ reputation and its bottom line.
Grassroots community organisation GetUp organised the push for an EGM. To bring an EGM, there must be a call from 100 shareholders or 5% of the total number of shareholders. Initially, GetUp had called for an EGM to be held before the AGM, a move Woolworths contested in court. In a court decision last week, a judge ruled that the EGM should go ahead, but should occur on the same day as the AGM.
Woolworths’ exposure to gaming comes through its stake in the ALH Group. Accoriding to a Responsible Service of Gaming statement on their website, Woolworths is a 75% shareholder in the ALH Group, which operates 294 hotels in Australia. The other 25% is owned by the Mathieson Group. According to the statement, “Woolworths (ALH) only operates around 4% of Australia’s total hotel and club gaming venues” and “Woolworths (ALH) only operates around 6% of Australia’s poker machines.”
Now that the date of the EGM has been set, GetUp will turn to lobbying investors for support on the motion. As part of the EGM, Woolworths will have to contact all 432,000 of their shareholders with a 1,000 word letter from GetUp members outlining their case for limiting the company’s poker machines to $1 bets. The shareholders will vote on a motion to change the company’s constitution to enforce such a change.
For its part, Woolworths said they opposed a separate EGM on the issue because of the extra cost involved in organizing an EGM separate to the AGM, and because the timing of GetUp’s proposed change.
“The change GetUp is suggesting would not come into effect until 2016, so there was no immediate imperative to hold a separate meeting before our AGM in November,” a Woolworths spokesperson said. “Woolworths has met with GetUp and offered the opportunity to work collaboratively. Unfortunately they declined this opportunity.
“When it comes to corporate, responsibility, openness and transparency, Woolworths has a proud track record. We have extensive engagement and collaboration with a large number of NGOs and for the past five years we have taken expert independent advice from a Corporate Responsibility Panel. Woolworths’ commitment to openness and transparency was recently recognised when our Corporate Responsibility Report again achieved an A+ rating from the Global Reporting Initiative. Our hotel operational standards go well beyond regulatory requirements and we regret GetUp declined the opportunity to be fully informed about our approach. Should GetUp change their approach and opt for constructive dialogue, our door remains open.”
Institutional investors will be contacted by GetUp as part of this push, said Rohan Wenn, GetUp spokesman.
“We’re reaching out to our members and we have been lobbying quietly behind the scenes w/ institutional investors,” Wenn said. “We are dealing directly with the funds and we are going to the advisor groups as well.”
Woolworths is under pressure from reputational risk as a result of this issue, said Amanda Wilson, managing director of Regnan, a firm that provides advisory, engagement and research services around environmental, social and governance (ESG) issues.
“Our issue from an ESG perspective is the propensity for reputational risk when you have the “fresh food people” [Woolworths’ logo] exposed to problem gambling. … We see it as a reputational risk that potentially could impact their social license to operate, and given that it’s such a hot issue, we’d want to see how they’re managing it. Woolworths would have to presenting that case at the EGM that way. … I’d want to be hear from Woolworths their case as to why are they are putting the brand “fresh food people” at risk. The minute you get an emotional anti-gambling ad, that can undo a lot of the brand.”
Despite their utilisation of the GRI framework for disclosing ESG issues, Wilson noted that it is difficult to see exactly how much gambling revenue contributes to Woolworths’ overall business, and said the company should provide more clarity around the issue to allow investors to judge if gambling revenue is worth the reputational risk.
“I think [Woolworths] do have to be more transparent,” Wilson said. “Besides being just companies and money making enterprises, they have a responsibility to the community. The actions that they’re taking that could be harmful, they have to either diminish those concerns or disclose more about how they manage them. We take a long term view at Regnan. We don’t want to see short term profits at the expense of long term values. Being heavily into problem gambling, or selling cigarettes, or doing environmental damage, it might be good for short-term shareholders, but we would take a view that this is a risk that diminishes long term value and our research would show that.”
With GetUp looking to work directly with institutional investors, superannuation funds and other institutions should be prepared to face questions from stakeholders including civil society groups and members about their investment decisions. With There are 34 Australian asset owners that are signatories to the UN Principles for Responsible Investment, and 76 investment manager signatories. Being a PRI signatory brings responsibilities to manage ESG risks, and disclose how they manage those risks and engage with invested companies.
“As our superannuation system ramps up and there’s more and more money under investment the amount of latent power of the industry, will also grow, and where there’s power there’s an opportunity to influence,” Wilson said. “I think superannuation funds recognise this, but while the industry is changing, it is characterised by a level of passivity from embers. It’s not top of mind – members go for the default option. They might talk about, say, deforestation of old growth trees or what have you at a barbeque, but they don’t look at their superannuation investments. But as you’ve got groups like GetUp getting more active and joining the dots, some of the superannuation funds are readier than others for that. Some have been thinking about this, but it’s a work in progress, for sure.”
GetUp will look to more corporate campaigns in the future, Wenn said.
“We haven’t done a lot of corporate stuff in the past,” he said. “But we did a survey of our members and nearly 90% said they wanted us to do more stuff in the corporate sphere. This is an important campaign because there are a lot of nominated shareholders in Woolworths.”