The Straightjacket of Proxy Votes

The Animal Care College – caring for people caring for animals

Let us never forget that government is ourselves and not an alien power over us. The ultimate rulers of our democracy are not a President and senators and congressmen and government officials, but the voters of this country – Franklin D. Roosevelt
When the Conservative government under Margaret Thatcher began the process of reform of company structure in the UK so that companies could compete more effectively internationally (and to make Britain more attractive to foreign investment) it also wanted to promote the idea of a shareholding democracy and furthermore, to ensure that even small shareholders could some impact on the way in which it was run.  There was also a demand to simplify the structure of companies so that they were all subject to the same rules and regulations.  There were several stages in these reforms and the process was finalised by the Companies Act 2006 – which runs to over 500 pages incidentally, and cannot be described as a ‘easy read’.

Although I was in favour of the Kennel Club becoming a Company Limited by Guarantee (partly because it had taken on too many commercial commitments to continue as a private club and partly to prevent the possibility of ‘carpet-bagging’ which had occurred in similar non-statutory organisations) one of my concerns was that proxy votes (the mechanism within the articles of any company by which every member could have a voice) became a legal requirement for meetings of members.   In theory it sounds a good, sensible and very democratic idea but it has some serious drawbacks.  My apologies if you remember my previous discussions on this subject but given the immense changes which are taking place within the Kennel Club, I think it is important to revisit the principles of proxy voting and the effect it can have.

A proxy is someone who attends a general meeting and votes in place of a member of the company. Every member of a company has a statutory right to appoint a proxy.’  This means that every member of the Kennel Club receives an invitation with their Annual or Special General Meeting paperwork which allows them to nominate another member to vote for them.  At one time (and this remains true of the vast majority of clubs and societies in the world of dogs whether or not proxy votes are enshrined in their constitution) it was possible for somebody at the meeting to propose an amendment prior to the item being voted upon.  This very sensible arrangement allows members to discuss the merits of the item and make minor changes which can make it more acceptable to those voting.  So an item that might be rejected at the meeting may be amended in a way that it allows it to be passed.

An administrative straightjacket

But the Companies Act, in theory to ensure that agenda items which are to be voted upon are the same as those which appear on the agenda papers, may not be changed or amended in any way.  In effect, this means that any discussion which takes place at the meeting cannot be reflected in the agenda item: it has to be an acceptance or a rejection.  A further ‘straitjacket’ in this arrangement is that each item may be voted upon by the member not present on the basis of the information that they have received from the board of directors which, naturally, as they have taken the decision, may largely reflect their view in favour rather than any good reasons there might be against it.

I am reminded of one of Parkinson’s Laws which explains how administrations ensure that committees vote for what they want: three or four options are presented only one of which is reasonable (the others are too expensive, too complicated or otherwise unacceptable) so the committee does not really have a choice.  Either way, discussion on any item at the meeting can only be based on a challenge to it or an acceptance of it and those who have voted by proxy are not privy to that discussion so cannot, if they have voted, change their vote.

A further difficulty is that there may be a feeling among members that because they have a proxy vote there is no need for them to attend: if the number of members attending goes down then the influence of proxy votes increases.

The next stage is who should have an absent members’ proxy vote.  If the member accepts or rejects the item their vote stands whatever the discussion at the meeting but otherwise a ‘blank’ proxy vote can be given to any other member who holds it and that person can vote as they wish.  However, proxy votes are often given to the chairman of the meeting rather than to somebody who will be: independent; will be present at the meeting; has listened to the arguments and will therefore vote on the basis of the discussion which takes place on the item.

So, proxy votes should be given to people who can be trusted: perhaps people who think as you do.  This is not for a moment to suggest that the chairman or the board members of any company cannot be trusted but, by definition, as they will have been involved in development and conclusions of the proposal, they will, understandably but almost inevitably, vote in favour of it despite any dissent from the members of the meeting

And this is important because?

You may reasonably ask why all this is important.  There was a good example of the last General Meeting of members when the question of the purchase of the Emblehope Estate was on the agenda.  Several members had serious concerns about this major investment with some having a detailed knowledge both of estate management, the estate in question and gundog and working trials.  Why, asked some members, should such a huge amount of money be spent on land which would not provide any facilities for dog shows? Others, of which I was one, wanted to know whether the estate as a whole would be self-sustaining.  By and large, the questions were answered satisfactorily and the item went through but, had those present voted against as a result of this new information which was newly available, it would have gone through anyway.  In fact, on two further items, the meeting took account of the discussion by members and voted against but the items were passed anyway simply because enough members not present had voted for them or provided proxies to members who did so.

It worries me that items may be put forward at future Annual or General Meetings of the Kennel Club which could fundamentally change the way in which it is organised and which might be passed, despite those members present having considered all the arguments, wanting to reject it.  Do not misunderstand me: change should come and, in fact, must come but it has to come with the consent of members and not be railroaded through because those members unable to attend have voted on the basis of the information they have received rather from the than from the often very perceptive comments made by those members who do make the, sometimes, considerable effort to attend.

One way in which these difficulties may be resolved is to ensure that there is plenty of time for debate well before the date at which proxies must be lodged.  Those who were present at the Welsh Kennel Club’s annual dinner in 2015 may remember that Simon Luxmoore, the new Kennel Club Chairman, in effect recognised these problems when he said that that there may be an ‘arrogant management style that used to, and in some cases still does, pervade London clubs. Perhaps this style is perceived to exist in the way the Kennel Club has conducted its business. If this is the perception – and we all know perception is more important than fact – then we should be very mindful of what our stakeholders are telling us’.

Regular readers will know that this stakeholder is of the opinion that openness, transparency and debate is the hallmark of democracy and this neatly brings me onto the question of ‘governance’ which is on the agenda for the forthcoming Kennel Club AGM in May.  From a recent letter circulated to all members from Mr Luxmoore, it would appear that this is a first step in what might be long-term and fundamental changes.  Such changes are, in the opinion of many, long overdue but the Kennel Club is not a ‘company’ in the normal sense of the word in that it has been established to make a profit: it is a representative organisation in which its members have an active role and share accountability.  It is all very well suggesting that the members install board members who are responsible for taking day-to-day decisions but if a proposal has a tendency to distance the decision-making process from the membership in the long term (as it did when the board, for what it considered to be perfectly sound reasons, decided to drop the Kennel Gazette without consultation) then it is important that everyone who has a vote, whether or not they are present at the meeting, has the opportunity to consider all the options very carefully indeed.

 

 

 

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