Remuneration concerns still on the agenda at AGMs

The 2015 AGM season to date has seen eight first strikes lodged against the remuneration reports of listed companies, and three second strikes. The resolution to spill the board passed at one of those three companies’ meetings — the company was from the troubled resources sector. But other companies in that sector facing a second strike had strong votes in favour of their remuneration reports, showing that shareholder engagement is key, given that each of them had spent time with investors discussing their remuneration frameworks. One of the companies receiving a first strike this year had met with its institutional investors and all proxy advisory firms save one, and it was the vote of the proxy advisory firm it had not met with that engendered the strong against vote.

The companies to receive a first strike in the 2015 AGM season to date are Ansell, Downer EDI, Macmahon Holdings, Pacific Brands, ImpediMed, Cardno, Prime Media Group and Deep Yellow. UGL and Mortgage Choice saw second strikes lodged against the remuneration report, but the resolution to spill the board did not pass at either meeting.

However, at Samson Oil & Gas’s AGM, the board spill resolution did pass — the company now has 90 days from the AGM to hold another general meeting. The uncertainty as to who will be running the company in the future may have a negative effect on the share price and the company’s culture and operations, creating instability for the company. But it also provides a ‘cooling-off’ period for shareholders in which they can consider if they are seeking the dismissal of the board or just wishing to send a strong message to the board to heed their concerns. It provides an opportunity for the company to canvas major shareholders and understand their concerns with directors and also for existing directors to determine whether they wish to remain on the board and face re-election at the spill meeting.

Another five companies, Paladin Energy, Harvey Norman, Primary Health Care, FlexiGroup, and Cabcharge, also face a possible second strike on the remuneration report. Their AGMs are scheduled for later in November.

Of concern is that some companies held the vote on the remuneration report on a show of hands and the resolution passed, but the proxy voting position disclosed to ASX showed that there was more than 25 per cent of votes cast against the remuneration report. If the vote had been taken on a poll, the companies would have received a first strike. ASIC has expressed its concern with voting on a show of hands where the proxy votes received indicate that a resolution is likely to fail. Governance Institute released guidance on this following the 2014 AGM season.

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