Is there going to be a gunfight at the AGL corral?

Things are heating up… pun not intended.

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Key points

  • More proxy advisors have recommended shareholders vote for the election of Mike Cannon-Brookes' nominations onto AGL's board at its upcoming AGM 
  • ASA has told investors "the Cannon-Brookes skill matrix appears to make more sense to an organisation that has to change itself completely"
  • ASA also recommends shareholders vote for AGL’s Climate Transition Action Plan 

The AGL Energy Limited (ASX: AGL) annual general meeting (AGM) is fast approaching and major shareholder groups increasingly appear at a stand-off with the company's board.

It seems likely more and more shareholders will vote against AGL's recommendations when it comes to the directors' election.

Key proxy advisors are encouraging investors to vote in favour of numerous nominations put forward by major shareholder and tech billionaire, Mike Cannon-Brookes.

The argument boils down to whether AGL's current board houses the talent needed to transform it from Australia's largest emitter to a renewable powerhouse.

So, who might walk away from the shoot-out seemingly coming to the AGL corral victorious? Let's take a look.

The stage appears set for an AGL AGM showdown

The Australian Shareholders' Association (ASA) has revealed its voting intentions for the upcoming AGL AGM, to be held on Tuesday 15 November. In summarising the issues at hand, the proxy advisor commented:

The coal-fired power stations that have generated electricity and profits for AGL, are being closed down. AGL needs to change its business model to stay profitable, and this will require fresh ways of thinking.

So, does that mean the company's board needs four fresh faces? Well, that's the argument put forward by Cannon-Brookes.

Having snapped up an 11% stake in the company earlier this year, the billionaire nominated Mark Twidell, Dr Kerry Schott, John Pollaers, and Christine Holman for election to its board.

The four are said to "bring different and much needed skills to undertake the urgent transformation of AGL". The most important of which are said to include people and transformation skills, stakeholder engagement, and business model innovation.

But chair Patricia McKenzie vehemently disagrees, supporting Twidell's nomination alone. She said the board already houses plenty of energy market and transition experience.

Instead, the company needs "directors who possess priority skills … such as ASX listed experience, mergers and acquisitions, and customer, digital and emerging technologies expertise", its chair continued.

What do proxy advisors advise?

So, which gunslinger does ASA side with? It told investors:

The Cannon-Brookes skills matrix appears to make more sense to an organisation that has to change itself completely, because its business model has to change.

The proxy advisor, like the AGL board, supports the election of Twidell. It says he's previously worked to roll out new technologies and understands culture and its importance.

It disagrees with the board in its decision not to endorse Schott, saying:

We feel that Kerry Schott is so undeniably impressive, and so widely acknowledged as such, that it would be a mistake not to have her on the board.

The advisor remains unsure whether it will support the election of Pollaers and Holman. It will decide based on their addresses at the meeting. It also noted Holman would need to promise to resign from one of her other commitments to win its support.  

Meanwhile, Institutional Shareholder Services has reportedly recommended shareholders vote to elect all four of Cannon-Brookes' nominations while Ownership Matters and CGI Glass Lewis have been said to support all nominations except Pollaers'.

AGL's history to repeat itself?

If Cannon-Brookes' nominations to AGL's board are elected, it would mark a second consecutive win for the investor.

The campaign launched by the billionaire to halt AGL's demerger likely remains in the minds of market watchers. That led to the departure of former-CEO Graeme Hunt, former chair Peter Botten, and former directors Jacqueline Hey and Diane Smith-Gander.

Additionally, the meeting will see shareholders vote on the company's climate plan.

Last year, the majority of shareholders went against AGL's recommendations, demanding greater carbon cuts.  

Cannon-Brookes' investment vehicle Grok is urging shareholders to vote against AGL's Climate Transition Action Plan later this month. It said:

AGL requires more accelerated decarbonisation ambitions to secure and maintain the market-leading position as Australia's largest, greenest, and most reliable energy retailer, in turn delivering higher shareholder returns.

ASA, meanwhile, supports the plan, saying it's a "step in the right direction" for now.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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