First strike as investors sting Crown Resorts

Shareholders vent anger at an apologetic Crown by voting down remuneration report and registering unprecedented protest votes against some directors.

Helen Coonan in front of the Crown Sydney building. Picture: Adam Yip

Shareholders have vented their frustration at the James Packer-backed Crown Resorts by voting down its remuneration report and registering unprecedented protest votes against some directors, as chairman Helen Coonan apologised for the gaming company’s governance and risk management failings.

Crown on Thursday suffered a historic “first strike” against the adoption of its remuneration report at its first ever virtual annual general meeting, with 34.34 per cent of shareholders voting against it.

The voting threshold for a “first strike” is 25 per cent and if such a vote is repeated at next year’s AGM, it could trigger a board spill.

The voting down of the report was driven by the decision of Crown’s 37 per cent shareholder, Mr Packer’s Consolidated Press Holdings, to abstain from the vote. But CPH’s support was crucial in ensuring the re-election of CPH chief executive Guy Jalland to the Crown board.

Mr Jalland justified CPH’s abstaining as “the appropriate, conservative approach to take,” but acknowledged what he called the “significant and serious” 41.39 per cent protest vote against his re-election.

“I, like my colleagues, are doing everything I can at the Crown board to have the company do better. The protest vote is recognising shareholders are unhappy with the company’s performance,’’ Mr Jalland said.

Crown director Helen Coonan appearing at the NSW Independent Liquor and Gaming Commission inquiry. Picture Supplied

An inquiry into the company by the NSW gaming regulator has heard that Crown management on many occasions failed to inform the board of several known risks relating to the safety of its staff in China, its exposure to money laundering, and the criminal connections through gambling promoters or “junkets” that the company dealt with.

“The inquiry has heard evidence of certain governance and risk management failings which do not reflect our values and expectations. Let me say clearly that I unreservedly apologise for these failings,” Ms Coonan told the meeting.

“As a board we will take all the steps necessary to make sure we learn from these mistakes.”

She said the company would strengthen its risk management procedures, as well as its anti-money-laundering and compliance departments.

But she appeared to back away from comments made under oath in the inquiry on Tuesday that Crown had “enabled” money laundering due to the “ineptitude” and “lack of attention” by some employees.

At Thursday’s AGM she declared that while there had been some “suspicious matters at Crown, that doesn’t prove that there’s money laundering.” Mr Barton took the same position on the issue.

Ms Coonan also pledged that “changes will be made” to the composition of the board as long-time director Professor John Horvath revealed his intention to step down after receiving a protest vote at the meeting of 31.27 per cent.

Professor Horvath, who was once Kerry Packer’s physician, has sat on the Crown board since 2010.

“In the area of board renewal, the board accepts that there needs to be an injection of new perspectives and expertise on our board,” said Ms Coonan, who took over as Crown’s first independent chairman from John Alexander in January.

“These changes need to be undertaken in a considered and thoughtful manner to ensure an orderly transition.”

Former senior public servant Jane Halton received 75.20 per cent of votes in her favour and 24.60 per cent against.

She revealed she also considered resigning given the proxy vote against her, but considered that overall she had “sufficient support” from shareholders.

In addition to the NSW inquiry, Crown is facing fresh inquiries by the Victorian gaming regulator, a class action flowing from the China arrests and a formal investigation by the financial crimes regulator Austrac.

Its former chairman Robert Rankin is also facing the prospect of being referred to the Australian and Securities and Investments Commission for breach of his director’s duties.

Further recommendations could be made against other Crown directors following the release of the NSW Inquiry report.

Ratings agency S&P said on Wednesday that the multiple investigations into Crown’s compliance processes and suitability as a casino license holder increased downside pressure to the credit ratings on the company.

“Our negative outlook on Crown incorporates the downside risks associated with the various proceedings currently underway. The company has acknowledged the need for significant reforms and has committed to strengthening its accountability and transparency, compliance culture, and protections against criminal elements. We also expect changes at the Board and senior management level,” S&P said.

Crown shares closed 2 per cent higher at $8.55 on Thursday.

At the AGM Ken Barton also apologised for an incident at last year’s meeting that featured prominently throughout the inquiry, which has been examining Crown’s fitness to hold a NSW casino licence.

Shareholder activist Stephen Mayne last year asked if James Packer was receiving financial information ahead of any other shareholder – and Mr Barton said he was, through a services agreement with Mr Packer’s company, CPH.

However, he neglected to mention a separate shareholder protocol that allowed Mr Packer to request information.

“It was never my intention to mislead or provide a ”non-answer” in response to this question,” Mr Barton said on Thursday. “My intention was simply to answer the question within the realms of information available to me that was in the public domain.

“In hindsight, I recognise that my response was not a complete answer to that question

and I could have chosen a clearer way to answer this question.

“I apologise for this.”

Crown CEO Ken Barton.

Crown announced on Wednesday evening following its first board meeting for several months that it had terminated both the protocol the separate services agreement with CPH.

Mr Barton confirmed that Crown was still planning for a December 14 opening date for the Barangaroo Casino in Sydney, before the NSW inquiry hands down its report on Crown’s suitability to hold the licence.

Crown also revealed at the meeting that its Perth casino’s main floor gaming revenue was up 16 per cent on the prior corresponding period from July 1 to October 18, while non-gaming revenue was down 21 per cent.

Crown’s wagering and online social gaming revenue increased 34 per cent on the previous period, with revenue growth driven by its online betting company Betfair.