Below are key takeaways from ISS’ recently released 2020 Australia Proxy Season Preview. The full report is available to institutional subscribers by logging into ISS Link then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.
- The Australian market is a “tale of two economies” and pay-for-performance likely to be contentious: Some S&P/ASX300 companies have been hard hit by the COVID-19 pandemic and have announced restructures, including reductions in fixed and variable remuneration, and director fees. Other companies have performed well and will likely continue to pay high bonuses.
- Key remuneration and performance issues pointing to governance concerns: More boards are expected to exercise upward discretion over remuneration outcomes when results and prospects are poor, targets have not been met and/or redundancies have taken place in the workforce; some boards are canvassing amongst stakeholders a desire to remove performance targets in favor of time-based incentives; and some companies are contemplating a higher weighting to non-financial metrics (“day job” duties) in the STI and LTI, through opaque metrics such as employee engagement, customer satisfaction or undisclosed strategy.
- Increased capital raisings and restructures to respond to COVID-19: Since March 2020, there have been more capital raising proposals seeking retrospective approval to refresh companies’ future placement capacity. On the whole, investors have responded positively in recognizing fairness and need of capital to address real business challenges due to COVID-19.
- Companies pressed by investors and other stakeholders to respond to ESG issues: The trend of companies being asked to take responsibility for a range of ESG issues continues to rise. The mini-AGM season saw high levels of shareholder support for environmental shareholder proposals at larger mining and energy companies, including Santos, Woodside and Rio Tinto. Proposals may again be seen at AGL and Origin Energy. This year, shareholders may also see an increase in socially-focused proposals, as a result of the pandemic and a range of social issues that have come to the fore in 2020.
- Increased shareholder participation in virtual meetings: The Corporations Act does not allow virtual-only meetings; rather only a “hybrid” combination of in-person and virtual meetings. ASIC has provided regulatory relief and guidance for conducting virtual AGMs this year, as long as shareholders are provided with a mechanism to participate, including through an ability to ask questions. Feedback from some directors after the mini AGM season is that there has been a higher level of institutional and global investor participation through increased online attendance in the AGMs.
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