to increase the number of women on listed
company boards.
COMMITTED TO CHANGE
While proxy advisers engage with companies,
individual investors rely on the company
annual report and financial statements for
information. But, largely, it is retail investors
who attend annual general meetings to ask
questions about important topics such as
what the company is doing about climate or
social risk. The regulator ASIC says that at
last year’s AGMs shareholders asked about
asylum seekers’ rights, board diversity, public
health and welfare concerns relating to business
activities, and labour and employment issues.
ASIC’s report on 2018 AGMs described
“an emerging theme of accountability from
boards in some industries”. It says a number
of chairpersons and CEOs used their opening
addresses at AGMs to acknowledge failings
or mistakes made by the company and to
commit to improving.TOOLS AND RULES
Australiahasa uniquesetof potenttoolsfor
shareholderactivists.Theyinclude:- The two-strikes rule that allows 25%
of shareholders to vote down a company’s
remunerationof keymanagementpersonnel
andtheirboard,andultimatelyspilltheboard. - Five per cent of the company’s equity is
enoughforshareholdersto forcethecompany
tocallanextraordinarygeneralmeeting. - The high profile of sharemarket activists
in the media, which can quickly affect the
reputation and share price of companies.
THE BIG ISSUES
These are the hot topics for activists in 2019:
Remuneration: Shareholders are still
furious about executive remuneration levels
and accountability that were highlighted in
last year’s banking royal commission. ASIC
says that as well as discontent about pay, votes
against remuneration also reflected poor share
price performance and lack of transparency.
ESG: Last year there was an increasing
focus at AGMs on ESG, with shareholders
requisitioning resolutions on ESG issues
from four companies. ESG made up 19% of
shareholder resolutions compared with 6%
in 2017. One company in the firing line wasOrigin Energy, with 46% of proxy votes in
favour of the company commissioning a
comprehensive review of its position on
climate change.
ASIC says climate change was the most
commonly raised ESG issue as shareholders
sought to understand the steps boards were
taking to identify and mitigate climate-related
risks to the company’s business, as well as
advocating for boards to take action – for
example, by committing to certain emissions
targets or limiting business with non-renewable
energy companies. There were 92 “material”
votes that received at least 10% or more against
resolutions that weren’t about pay rates. MTWO-STRIKES RULE
Investors who pool their votes can
unseat a company board over executive
remuneration through the two-strikes rule.
If more than 25% of investors vote against
a company’s proposed remuneration report
at consecutive annual meetings, then the
entire board faces a spill motion.
The rule was set up in 2011 after a
Productivity Commission inquiry into
executive remuneration. It seems to be
working because boards are taking notice
after receiving their first strike. For example,
AMP chairman David Murray took notice
and axed executive bonuses, cut director’s
fees and clawed back bonuses.
Shareholders made 19 strikes about
remuneration in 2018, up from six in 2017,
according to Egan Associates, a business
management consultancy. National
Australia Bank scored a record first strike
of 88% against, Westpac 64%, Mineral
Resources 63%, Karoon Gas 62%, Telstra
61%, Havilah Resources 60%, Harvey
Norman 50%, NRW Holdings 49%,
Goodman Group 45%, Jupiter Mines 45%,
Tabcorp 40%, Myer 37%, Austral 37%,
Computershare 31%, Brickworks 28%,
Automotive Holdings 27% and Emeco
26%. Another 17 companies went close
to receiving a first strike.
Not surprisingly, there is mounting oppo-
sition from corporate law firms and compa-
nies against the two-strikes rule, arguing it is
becoming a tool for disgruntled sharehold-
ers. But Australian Shareholders’ Association
CEO Judith Fox says the rule is an important
accountability measure that enhances board
engagement. “It has been really fantastic for
remuneration and one of the few proxies we
have for shareholder engagement.”