Call for submissions to resolve shareholder resolutions deadlock

Given the increase in Australia and overseas in the number of shareholders seeking to put resolutions to Annual General Meetings (AGMs) on a range of issues — many of which relate to environmental, social and governance (ESG) matters —submissions are being called for Shareholder resolutions: Is there a case for change? released today in a determined bid to break the deadlock.

By way of background, Governance Institute partnered with global knowledge provider LexisNexis in May this year to host a roundtable of key industry stakeholders (list below) to determine if in fact there is a case for change.  This was in response to the Australian Council of Superannuation Investors’ (ACSI) Shareholder resolutions in Australia, Is there a better way? which outlined its concerns about the current framework and proposed a range of options. They are:

• Option 1 – a general right to move non-binding resolutions on a broad range of topics
• Option 2 – a non-binding vote on the annual report
• Option 3 – a non-binding vote on a sustainability or ESG report
• Option 4 – a right to move binding, directive proposals.

The Governance Institute and LexisNexis roundtable discussion confirmed that there is currently no consensus as to whether reform of the current framework for shareholder resolutions is required, or if required, what form should this should take.

In its opening remarks at the roundtable, ACSI maintained that its asset managers, many of which represent institutional and retail investors, are of the strong belief that the current system is not optimal.

“However, other participants consider that shareholder resolutions are here to stay, but acknowledged they are a blunt instrument. There was much discussion about the best ways to deal with them more effectively. Most agreed that the requirement for a constitutional amendment is an artifice that could be removed if the threshold for bringing these resolutions were higher. Governance and risk professionals and institutional investors were concerned that these resolutions should not be used by special interest groups to ‘hijack’ the AGM to pursue societal issues,” points out Governance Institute Chief Executive Mr Steven Burrell.

Roundtable participants also discussed the thresholds for bringing shareholder resolutions extensively. Various permutations were canvassed: increasing the threshold from 100 members to one per cent or five per cent of members or setting the threshold at the greater of five per cent of members or the aggregate of directors’ holdings. There was also a level of support for introducing a time period for holding shares before bringing a resolution to discourage ‘5 minute’ shareholders, but some potential practical difficulties were noted. Support was also expressed by both governance and risk management professionals and investor interests for legislative amendments to allow companies to deal with these resolutions.

There is also a recognition that retail investors do not have the same ‘voice’ or access as institutional investors and there was discussion about how this imbalance might be corrected

“Despite robust discussion and debate, the roundtable did not achieve consensus either about the case for change or what that change might look like. There was some feeling that the current system needs streamlining, but no consensus on what form that streamlining might take, indicating that significantly more engagement and consultation is required to ensure the right policy settings are in place to adequately address this significant shift in shareholder engagement.

“We now look forward to receiving submissions to see if indeed a consensus view can be achieved to break this deadlock,” Mr Burrell added.

To provide your submission, download the Green paper from and complete the submission form and email it to Catherine.maxwell@governanceinstitute.com.au

Submissions are due on 10 August 2018.

Below is the list of roundtable participants and link to Shareholder resolutions: Is there a case for change?

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Media contact: media@governanceinstitute.com.au