2019 Australian annual general meeting season review

  • Despite expectations of a volatile AGM season, voting reveals a case of same-old, same-old.
  • This article provides a review of voting season outcomes and hot topics for S&P/ASX 200 companies.
  • Executive pay for performance alignment continues as a persistent topic of discussion of the Australian AGM season.

Amidst swirling news headlines highlighting the heightened awareness regarding environment, social and governance (ESG) investment impact considerations by global equity investors, the increasing staff counts amongst proxy and governance representatives of global institutional asset owners, and the continued mainstreaming of ethical investment mandates, the 2019 Australian shareholder voting season was expected to be considerably contentious. 

Shareholder grievances linked to externalities associated with the banking and financial services sector persisted, climate change deniers are finding themselves increasingly isolated in the face of observable realities, whilst shareholder opinion on the appropriateness of pay-for-performance remuneration structures remains wide open. 

It is within this context that Jean-Baptiste Alphonse Karr’s most frequently quoted phrase comes to mind: ‘plus ça change, plus c'est la même chose’, which roughly translates to ‘the more things change, the more they stay the same’. When reviewing aggregate shareholder voting outcomes over the 2019 AGM period (and generally over the 2019 calendar year) one might easily conclude that, with only a handful of exceptions, the ESG investment and engagement considerations of institutional shareholders are doing little to materially alter the status quo for their voting directions.  

In reflecting upon 2019 Annual General Meeting (AGM) voting season1 outcomes we focus on the Australian domiciled constituents of the S&P/ASX 200 index2. For comparative purposes, a select group of companies have been excluded, and the index constituents are held constant for comparable periods.

S&P/ASX 2003 Index — Statistical parameters


2019 Season

2018 Season

2019 Annual

2018 Annual

Number of AGM voting resolutions4





Number of resolutions to approve the Re-election of Directors





Number of resolutions to approve the Election of Directors





Number of resolutions to approve the Annual Remuneration Report





Number of resolutions to approve Executive Equity Incentives





Number of resolutions to approve an increase to the Non-Executive Director Fee Cap





Number of resolutions to approve the Issuance of Securities / Share Capital





Number of shareholder proponent resolutions5





Source: Sovereign Governance Advisory analysis


Taking it easy

Institutional shareholders and their governance representatives continue to emphasise in their engagements with companies their focus on enforcing non-executive director accountability. 

Traditionally a vote against a director has often been cast to signal concern for ‘tick the box’ structural deviations from board composition recommendations of the ASX Corporate Governance Council or proxy adviser policies. This governance engagement strategy could characteristically be described as the ‘offer you can’t refuse’ approach. Consider director independence quotas for example; ‘if your board does not constitute X per cent of independent directors — under our definition of director independence — we will consider voting against the Chair of the Board (or Nominations Committee).  

How boards have responded to this engagement approach is variable, but this tactic came about due to continuing disclosure transparency (or rather lack thereof) regarding the suitability of non-executive director candidates. What remains limited to brief resume-like biographies or uninspiring and often opaque board skills matrix disclosures provides challenges for shareholders in developing an independent and informed opinion on director suitability and their performance in a non-executive capacity.  

By contrast, one now tends to observe alternative messaging when shareholder representatives are engaging directly with company directors, which has translated into an increased willingness to bring operational and financial performance considerations into the governance conversation. Australian governance engagement teams and proxy advisers are spending more discussion time focusing on strategic and investment matters, sometimes spending the bulk of engagement sessions considering targeted questions anchored in the abyss of the annual financial statements notes; ‘Mr. Chairman, in regards to Note 28, this amount for (X) million dollars in provisions, compared with this balance in the previous year, and you communicated (Y) in this announcement, can you please explain?’ Where these questions are not sufficiently satisfied, Australian company directors are increasingly aware that they may fall subject to the shareholder firing squad. 

It is therefore intriguing to observe little, if any, year-on-year variability in director voting dissent lodged by institutional shareholders during the 2019 AGM season and that would have otherwise been consistent with a growing emphasis on director accountability.

Number of director voting resolutions — 2019 AGM Season (S&P/ASX 2006) 


Number of director (re)election voting items vs shareholder voting dissent — (S&P/ASX 2007)


Source: Sovereign Governance Advisory analysis

Of the 372 director (re)election resolutions put forward to S&P/ASX 2008 company shareholders during the 2019 Australian AGM season, only three resolutions received more than 20 per cent of votes cast against. Although the total number of director (re)election voting items that received greater than one per cent of votes cast against more than doubled, from 24 for the 2018 AGM season9 to 53 for the 2019 AGM season[ii], this merely amounts to 14 per cent of director (re)election resolutions put forward to shareholders that received some discernible level of dissent. 

If held to a voting count standard, the figure implies that shareholders are overwhelmingly content with the performance of nine out of every ten company directors.  

With such minimal change and relatively low rates of voting against director candidates, and given that not one board-endorsed director candidate across the largest 200 companies in Australia was stood down on a majority vote of shareholders in 201910, shareholder voting on board nominees is not the most desired method that institutional shareholders are currently leveraging to express their dissatisfaction. Plus ça change, plus c'est la même chose. 

Shareholder money talks

There has yet to be a successful spill of an S&P/ASX 200 board of directors under the 'two strikes' legislation since its introduction to the Corporations Act in 201111. Irrespective of this, executive pay for performance alignment continues to remain a thematic of the Australian AGM season, with 12 of the 14 remuneration report ‘strikes’ observed amongst the S&P/ASX 200 occurring during the 2019 peak voting period12 (for 2018 this was 13 and 15 strikes, respectively). 

Of those companies that received a second strike during the 2019 AGM season, Harvey Norman Holdings Ltd observed 11.2% of votes cast in favour of a board spill. Westpac Banking Corp. was the other S&P/ASX 200 company to receive a second strike with 8.7% of votes cast in favour of a board spill. Shots fired — no casualties.  

Number of ASX200 companies vs remuneration report voting dissent

Source: Sovereign Governance Advisory analysis

What the general consistency in remuneration report voting dissent across 2019 and 2018 does indicate is that (a) companies continue to struggle to keep pace with the demands and wide expectations around executive compensation arrangements, and (b) some shareholders continue to leverage the unintended consequence of the 'two strikes' legislation by voting against the annual remuneration report when displeased with aspects beyond remuneration and often in the presence financial or share price underperformance. 

With proportionate rates of dissent on individual director elections remaining generally negligible, the remuneration report vote nevertheless continues to exist as a motivator for open and extensive engagement between company directors and governance stakeholders. Oftentimes these engagements move beyond remuneration aspects and encompass a wide variety of ESG considerations. 

Rates of shareholder dissatisfaction regarding resolutions seeking shareholder approval for equity incentives grants to senior executives were similarly materially unchanged for the 2019 AGM season. Plus ça change, plus c'est la même chose.

Number of ASX200 companies vs executive equity incentive grant voting dissent

 Source: Sovereign Governance Advisory analysis

When it doesn’t count 

It is baffling to observe some companies continuing to disregard the principle of ‘one share, one vote’ when conducting an AGM. Shareholder democracy and governance best practice dictates that all votes should be conducted by a poll and not upon a show of hands. Those companies that continue to apply this archaic voting method do so at substantial reputational risk. 

Companies that allowed for a vote passed on a ‘show of hands’ in respect of the shareholder vote to approve the annual remuneration report across the S&P/ASX 200[i] during the 2019 AGM season includes: Codan Ltd, Freedom Foods Group Ltd, IDP Education Ltd, IPH Ltd, New Hope Corporation Ltd, Pro Medicus Ltd, Perseus Mining Ltd and Zip Co Ltd. In fairness, it should be noted that as indicated by the proxies received, none of these companies would have otherwise incurred a remuneration strike.  

It’s called climate change $%@#&$!

There was a total of 19 shareholder proponent resolutions put forward by environmental and social activist groups and co-signatories to select ASX/S&P ASX 200 constituents during the 2019 AGM season14. Of this – 17 resolutions related to climate change considerations and the balance covered supply chain and human rights risks. It should be noted that the resolution put forward to the Origin Energy Ltd 2019 AGM regarding industry association memberships was withdrawn before the meeting was held, indicating that some compromise had been reached between the company and the Australian Centre for Corporate Responsibility (ACCR). 

Number of shareholder resolutions and voting support — 2019 vs 2018 AGM season (S&P/ASX 200) 


Source: Sovereign Governance Advisory analysis

Irrespective of the observable increase in voting support for ESG-related shareholder resolutions in 2019, no resolutions received more than 35% of votes cast in favour. The highest vote recorded was in favour of a climate change transition plan for AGL Energy Ltd., which was voted down by 68% of votes cast. Plus ça change, plus c'est la même chose.

Never say never 

As institutional investors often remind their clients, ‘past performance is never a predictor of future performance’. There is scope for 2020 to mark a turning point in how institutional shareholders (and their external proxy advisers) refine their governance engagement tactics with company representatives to better reconcile with their voting directions (or recommendations). Otherwise, company directors are right to remain sceptical of shareholder voting intentions in an environment where the more things change, the more they stay the same.   

  1. Defined as AGMs held between 1 Sept — 31 Dec.
  2. S&P/ASX 200 index defined as at November 2019; Australian domiciled companies only; excludes non-voting investment trusts, ASX secondary listings, and companies that do not hold consecutive AGMs over 2019 & 2018 (e.g. – IPOs, internalisations). Total sample size = 175 companies. For comparative purposes, company constituents are held constant for 2019 & 2018 periods.
  3. The following companies are excluded for comparative purposes: A2M, AIA, AMC, AOG, AVN, BWP, CIP, CLW, CMA, CNU, COL, CQE, CQR, CYB, FBU, FPH, JHG, JHX, NWS, RMD, SKC, SM1, SPK, URW, VEA.
  4. Excludes non-voting AGM resolutions: to receive and consider Financial/Director/Auditor Reports
  5. Excludes precedent resolutions related to the requirement to amend the Company Constitution under the Australian Corporations Act to allow a shareholder proponent resolution to take effect.
  6. S&P/ASX 200 index defined under this report (Footnote 2 & 3).
  7. S&P/ASX 200 index defined under this report (Footnote 2 & 3).
  8. S&P/ASX 200 index defined under this report (Footnote 2 & 3).
  9. And included 2 and 1 non-board endorsed shareholder director nominees for 2019 and 2018, respectively.
  10. S&P/ASX 200 index defined under this report (Footnote 2 & 3).
  11. The two strikes rule is designed to hold directors accountable for executive salaries and bonuses. It means an entire company board can face re-election if shareholders disagree with how much executives are being paid. The law is an amendment to the Corporations Act and came into effect on July 1, 2011. The 'first strike' occurs when a company's remuneration report — which outlines each director's salary and bonus — receives a 'no' vote of 25% or more by shareholders at the company's annual general meeting. The 'second strike' occurs when a company's subsequent remuneration report also receives a 'no' vote of 25% or more. When a 'second strike' occurs, the shareholders will vote at the same AGM to determine whether all the directors will need to stand for re-election. If this 'spill' resolution passes with 50% or more of eligible votes cast, then a 'spill meeting' will take place within 90 days, and all directors must stand for re-election. 
  12. Fortescue Metals narrowly missed a ‘first strike’ with 24.7% of votes cast against its 2019 remuneration report.
  13. S&P/ASX 200 index defined under this report (Footnote 2 & 3)
  14. Does not include precedent resolutions related to the requirement to amend the Company Constitution under the Australian Corporations Act to allow a shareholder proponent resolution to take effect.

Michael Chandler can be contacted by email at mchandler@sovereigngovernance.com.au.

Material published in Governance Directions is copyright and may not be reproduced without permission. The views expressed therein are those of the author and not of Governance Institute of Australia. All views and opinions are provided as general commentary only and should not be relied upon in place of specific accounting, legal or other professional advice.