Primary Health Care‘s annual meeting on Thursday presents something of an acid test for how much chairman Robert Ferguson has improved his communication skills.
The diagnostics and medical centre group was hit by a first strike against its remuneration report last year, setting up the prospect of a motion to spill the board if another strike is recorded on Thursday.
“I take it as a message that we’ve got to communicate better. We’ve got that message loud and clear through these votes,” Mr Ferguson said in the wake of last year’s AGM.
“Some people say that we’re hard to communicate with and they’ve been trying to get points over. I think we do listen but we have got to try harder in those areas.”
It has not been an easy year for Primary Health Care shareholders.
The company downgraded earnings in July due to “subdued patient volumes”. It issued a second profit warning last week and said that its three key businesses – pathology, medical centres, and diagnostic imaging – were all suffering revenue pressure.
Primary Health Care shares are down 32 per cent since the start of January to $3.18.
A strike is triggered if more than 25 per cent of shares are voted against a company’s remuneration report. Two consecutive strikes can set up a motion to spill the board of directors.
After last year’s strike Primary has made a number of changes to its remuneration policy, including paying a greater proportion of bonuses to chief executive Peter Gregg in the form of shares rather than cash.
The company also restructured its board to address concerns that the majority of directors were not independent.
As part of the reshuffle executive directors James Bateman and Henry Bateman, the sons of late company founder Edmund Bateman, stepped down from the board.
Major governance advisory firms ISS and CGI Glass Lewis have advised clients to support the remuneration report and all directors up for re-election.
“I wouldn’t say they have a clean bill of health but we thought on balance that the measures deserved support,” CGI Glass Lewis research director Daniel Smith said.
In its report on Primary, CGI Glass said the company had taken positive steps to improve its pay and governance structures but the firm criticised the disconnect between pay and performance at Primary.
“The company paid more remuneration to its CEO than the median CEO remuneration for 42 similarly sized companies … more than a sector group 11 healthcare companies; more than an industry group of 11 healthcare equipment and services companies,” CGI Glass said.
“Overall the company paid moderately more than its peers but performed worse than its peers.”
ISS said that Primary needs to do a better job on disclosure relating to short-term bonus payments.