Below are key takeaways from ISS’ recently released 2021 Australia & New Zealand Proxy Season Review. The full report is available to institutional subscribers by logging into ProxyExchange 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.
- Problematic pay practices and “strikes” against remuneration reports remain at high levels: Elevated votes against remuneration resolutions in S&P ASX300 companies as represented by a “strike” (25 percent or more votes against the remuneration resolution) remain at historically high levels. In 2021, much of this was driven by companies giving discretionary bonuses, one-off retention payments, and transaction bonuses often despite weak financial results and poor shareholder returns as a result of COVID-19, contributing to the 28 “strikes” seen in 2021.
- Virtual-only meetings: Board proposals to amend companies’ constitutions to permit, or have wording that could potentially permit, the holding of virtual-only shareholder meetings were met with resistance by many shareholders. In 2021, 3 companies withdrew their resolutions, proposals at 7 companies failed to be passed by a requisite level of votes, and a large number of resolutions to amend constitutions encountered an elevated level of votes against the proposals. Virtual-only shareholder meetings have been a controversial topic in Australia, and many local market investors have sought to retain physical attendance at an AGM, being the only platform available to ensure engagement with company directors, management and auditors.
- Significant change regarding “say on climate” shareholder proposals: Legal precedent has historically prevented non-binding shareholder proposals from being formally voted on at Australian AGMs. In early 2021, four large ASX100 companies announced their support for shareholder proposals asking for shareholders to be given a non-binding vote on the company’s climate report, with other companies subsequently following the trend. BHP Group was the first company in the Australian market to present a Climate Transition Action Plan for a shareholder vote at the 2021 AGM which was well received.
- Increase in environmental issues impacting corporate activity and remuneration: A growing number of corporate M&A transactions in 2021 were driven by climate strategies and transition of emissions reductions targets. Additionally, climate strategies and emissions reduction targets are increasing emerging in executive remuneration arrangements. Increased shareholder scrutiny is anticipated going forward, in assessing disclosure or existence of any meaningful targets.
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By Vas Kolesnikoff, Isabelle Castaneda, Mark Fenol, Humyra Bristy