At a November 7, 2006 AGM, the shareholders of French Pernod Ricard, the second largest spirits and wine operator worldwide, voted against Resolution 13 with the board's blessing. How did such a turn in management recommendations come about?

Resolution 13 concerned an amendment of the company's voting right ceiling. In the present version of the company's bylaws, no shareholder could vote for more than 30 percent of the company's total share capital. This means that a shareholder with a 30-percent stake, voting at an AGM with an attendance rate of 60 percent (standard attendance rate according to a Pernod Ricard spokesman) could still represent 50 percent of the number of votes cast at the meeting (30 votes out of 60 cast; excluding possible double-voting rights).The new version of the company bylaws proposed to calculate the 30 percent ceiling based on the votes actually cast at the general meeting. This could have significantly reduced the number of votes a single shareholder could cast.

As a result, a shareholder with a 30-percent stake, participating in an AGM with an attendance rate of 60 percent would vote for only 18 percent of the total share capital (18 percent = 30-percent ceiling multiplied by 60-percent cast; excluding possible double-voting rights). In this example, the shareholder would be able to vote only 60 percent of his total voting rights (18 votes out of the 30 held). Furthermore, Pernod Ricard's resolution proposed to add a new paragraph to article 32.3. This new paragraph would have made the voting right ceiling stricter because the 30% limit would apply to shareholder groups as well. All shareholders linked by a concert action would only be allowed to vote a total of 30% of votes cast at a meeting. In its report, ISS recommended voting against resolution 13.

After discussion, the board of Pernod Ricard decided to take the concerns of its shareholders into account. As it was too late to modify the agenda, the board told shareholders present at the general meeting that it would vote against its own resolution and asked shareholders to do the same. This last minute turn of the situation is a victory for all champions of good corporate governance, achieved through a constructive dialogue between interested parties.