New guidelines on how to mitigate risk of ‘second strike’

Monday, 24 September 2012

With more than 500 directors on the boards of the 108 listed companies facing the potential risk of a ‘second strike’ on the remuneration report in the current AGM season, Chartered Secretaries Australia (CSA) has released new guidelines to assist those directors and companies to mitigate the risk of a ‘second strike’ and a board spill.

The guidelines step companies through how to set out the notice of meeting and voting form, which have to put to shareholders a resolution to move to a spill meeting, even though such an EGM might not eventuate.

Adding to the confusion is the fact that the chair may have to call a poll to vote on whether to spill the board before it is even known if shareholders have voted yes or no on this year’s remuneration report. How companies explain to their shareholders that the results of such a poll might end up being irrelevant will be a challenge.

“While 2011 showed that many more companies understand that they need to consult their investors in order to inform them as to the rationale for remuneration, not all companies fully comprehend how important this is,” CSA’s chief executive Mr Tim Sheehy said.

“It is likely that the companies that received a first strike last year will have engaged their shareholders and will see their remuneration report approved by shareholders. But there is no guarantee, so they have to make sure they provide for all possible outcomes, including a spill meeting and even voting on spilling the board,” he said.

“Meanwhile, every other company faces the prospect of a first strike if they have not engaged investors,” he added.

“There are some key risks companies need to manage and not just those facing a second strike,” Mr Sheehy said. “Companies and boards need to engage early, both with those holding voting power or with the power to influence voting outcomes. Getting to know the share register is essential. Engagement can lead to mutual trust and understanding between companies and their investors.

“The reality is that companies that are proactive are more likely to find their shareholders supportive of plans for growth and success, including on the remuneration front,” Mr Sheehy said.

The guidelines set out detailed practical measures for dealing with issues that arise following receipt of a first strike, including the implications for what has to go into the notice of meeting and voting form; the potential for confusion as a result of all the complex possible outcomes that have to be put before shareholders; voting; and when to hold the spill meeting if the spill resolution is passed. They help companies to understand what to ask and shareholders to understand the ramifications of their response.

Note to editors

Noted below are dates for the more high profile companies with a first strike. The companies on the list attached were all classed as ASX300 for 2011. The date in the right hand column is the date in which the companies issued their notice of meeting / proxy forms to the ASX. It is reasonable to expect that they will follow a similar pattern this year.

Company name AGM results released to ASX Notice of AGM/proxy form
Globe International Limited 26/10/2011 23/09/2001
Crown Limited 27/10/2011 23/09/2011
Pacific Brands Limited 25/10/2011 23/09/2011
Arafura Resources Limited 28/11/2011 21/10/2011
G.U.D Holdings Limited 20/10/2011 15/09/2011
Bandanna Energy Limited 24/11/2011 24/10/2011
Cabcharge Australia Limited 17/11/2011 14/10/2011
Linc Energy Limited 24/11/2011 21/10/2011
Bluescope Steel Limited 17/11/2011 17/10/2011
NRW Holdings Limited 24/11/2011 19/10/2011
Fleetwood Corporation Limited 11/11/2011 03/10/2011
Tassal Group Limited 26/10/2011 26/09/2011
Aspen Group 29/11/2011 27/10/2011
Nexus Energy Limited 17/11/2011 17/10/2011
Integra Mining Limited 15/11/2011 14/10/2011
Silex Systems Limited (SLX) 22/11/2011 21/10/2011
Watpac Limited 25/10/2011 23/09/2011
UGL Limited 27/10/2011 22/09/2011
Gryphon Minerals Limited 25/11/2011 14/10/2011
Carbon Energy Limited 24/11/2011 21/10/2011
Dexus Property Group 31/10/2011 26/09/2011
Cudeco Limited 24/11/2011 25/10/2011
Austin Engineering Limited 25/11/2011 24/10/2011
Perpetual Limited 03/11/2011 30/09/2011
Focus Minerals Limited 29/11/2011 31/10/2011

For further information contact Viv Hardy at CallidusPR on (02)9283 4113/ 0411 208 951, Tim Sheehy at Chartered Secretaries Australia on (02) 9223 5744/r 0419 490 594.

About Chartered Secretaries Australia

Chartered Secretaries Australia (CSA) is the peak body for over 7,000 governance and risk professionals. It is the leading independent authority on best practice in board and organisational governance and risk management. Our accredited and internationally recognised education and training offerings are focused on giving governance and risk practitioners the skills they need to improve their organisations’ performance and are ‘first-choice’ options for those intent on pursuing a C-suite career. CSA has unrivalled depth and expertise as an independent influencer and commentator on governance and risk management thinking and behaviour in Australia.


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