2018 - a year of shareholder voting strikes on corporate remuneration

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It's not surprising given the raft of allegations concerning the conduct of Australian banks at the Royal Commission into Banking, Superannuation and the Financial Services Industry' plus various scandals with other corporations, that shareholders are showing their displeasure at the level of remuneration paid to senior executives and directors on ASX listed companies.

Under the Australian Corporations Act 2001 (Section 300A), companies listed on the Australian Stock Exchange (the ASX), must present a remuneration report at every Annual General Meeting which sets out the policies for the amount of remuneration paid to key management personnel as established by the company's governing Board. Key management personnel are typically the Chief Executive Officer and senior executives including directors on the Board itself. The report must show the nature of the remuneration and exact value including salary, bonuses, short and long term incentives, options on shares and an explanation on performance hurdles which apply.

Since an amendment to the Act in 2011, there is now a two strikes voting power and re-election process for the Board itself should shareholders find the remuneration report repeatedly unacceptable. What this means is that for the first strike, a 'no' vote of 25 per cent or more of the votes cast rejecting the adoption of the remuneration report at the Annual General Meeting is needed. Should this occur the Board is required to provide an explanation on the proposed action the Board will take or a reason for taking no action on the remuneration report. If, in the following year at the next Annual General Meeting, a 'no' vote of 25 per cent or more occurs again, there must be a 'spill' motion of the positions of all members of the company Board responsible for the remuneration report at that meeting. 

For the spill motion of the Board to succeed, the resolution must be passed with 50 per cent or more of eligible votes.  Should the 'spill' motion succeed, within 90 days the directors must stand for re-election to the Board.

In 2018 there were a record number of first strikes for many companies -

Company Name and % of votes against the remuneration report:

National Australia Bank  88.1%
Mineral Resources  63.62 %
AMP  62.20%
Telstra Corporation  61.98%
Harvey Norman  50.63%
NRW Holdings  49.05%
Westfield Corporation 47.50%
QBE Insurance  45.60%
Goodman Group  45.46%
Tabcorp Holdings  40.40%
Myer Holdings 38.17%
Austal Limited  37.24%
Karoon  37.05%
Computershare  31.89%
Healthscope  29.29%
APA Group  24.96%

Many other companies received a high level of 'no' votes but not sufficient to reach the 25% threshold of a first strike. These include Ramsay Healthcare, MYOB, Japara Healthcare, Challenger Limited, JB Hi-Fi, Seek, Qube Holdings, IOOF Holdings, APN Outdoor, Coca-Cola Amatil. All of the companies with a first strike will need to work hard to avoid a second strike in 2019.