Shake-up at AWB as lawyers move in Geoffrey Newman February 10, 2006 LAW firm Maurice Blackburn Cashman is investigating a class action against wheat exporter AWB as the company foreshadowed a shake-up of its much-criticised governance structure.
The law firm said it was clear that shareholders had been victims of the company's failure to disclose its true dealings with the Iraqi government, with the share price falling 30per cent since the first revelations at the Cole inquiry.
"There is little doubt that information not disclosed to the market was material and that the market has been misled by AWB," said principal Ben Slade.
"Shareholders who have suffered loss as a result of AWB's conduct are entitled to recover those losses through the instigation of a class action."
AWB signalled yesterday a shake-up of its corporate governance structure as a leading governance consultant attacked the company's inherent conflicts of interest.
In the same statement announcing managing director Andrew Lindberg's resignation, AWB said it had asked professional services firm KPMG to review the governance, internal reporting structures and practices of the company.
"The board is committed to ensure that any recommendations made by KPMG will be assessed and responded to as quickly as possible," AWB said.
It also said it would appoint two subcommittees, covering stakeholder management and governance, to help manage the company. The decision coincided with a report from consultants Corporate Governance International that gave AWB a rating of zero out of five and lashed the federal Government for letting loose a fundamentally flawed company on the share market.
"No other ASX200 company has such a flawed governance structure written into its constitution," the report concluded.
"That those bad governance seeds have spawned a disastrous crop should not surprise."
CGI director Sandy Easterbrook said there was a clear conflict between the economic interests of the wheat growers, who hold most of the shares and elect nine of 11 board positions, and B-class shareholders who want the highest rate of return on their investment.
The company's constitution clearly resolved that conflict in favour of the growers and had created in the company a "sell at any cost" culture when it came to wheat exports.
Similarly, AWB's claim that its non-executive directors were independent, as required by good governance practice, was clearly untenable given most were elected by growers whose interests were in conflict with B-class shareholders.
"When you've got people running the business with no consequences for their hip pocket, but who are actually representing the interests of the supplier to the business, that's fraught with danger," Mr Easterbrook said.
"The question should be asked of governments and regulators how they ever let this governance Frankenstein loose on the largely unsuspecting investment public."
Shareholders were incapable of fixing the problem because growers controlled the board and because of the 10per cent shareholder cap for B-class owners, designed to prevent AWB being taken over.
"You add all these things up and the normal market sanctions aren't working," Mr Easterbrook said.
CGI also recommended shareholders vote against a motion at the annual general meeting on February 23 to increase the pool of non-executive directors' fees by 33per cent to $1.6million as a protest against the company's poor governance.
AWB shares rose 6c to $4.48 from $4.42 after the resignation announcement and closed up 24c on the day at $4.49.
ABN Amro Morgan's senior client adviser Roger Chandler said Mr Lindberg's resignation was not a surprise.
"You can't have a managing director that's been called to fault by a million people without sacking him, or him resigning," Mr Chandler said. "I think resigning was the easy way out or the most intelligent way out."
AWB Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
