Below are key takeaways from ISS’ recently released 2022 Proxy Season Review – Australia & New Zealand. 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.
- An easing in the number of “strikes” against remuneration reports: The trend of a higher level of “strikes” (25 percent or more votes against a remuneration resolution) at ASX300 companies emerged in 2018, and continued in 2020 and 2021, with 28 strikes in each year. In 2022 the number of strikes fell to 24, being the lowest level since 2017. A larger number of strikes occurred among the smaller companies in the ASX300 index. Elevated votes against remuneration arrangements were mainly due to boards awarding one-off retention bonuses or exercising discretion for bonuses which were inconsistent with performance, governance or integrity failures, and poor shareholder returns.
- APRA CPS 511 Remuneration standard comes into force in 2023: Compliance with the standard will be required from 1 January 2023, although there is a staggered timeline. The standard applies to banks, insurance companies and certain other APRA-regulated financial services providers. Under the standard, entities will be required to give ‘material weight’ to non-financial performance measures in each component of variable remuneration. Risk adjustment mechanisms will be required to reduce bonuses to as low as zero.
- Board governance issues more prominent towards the tail end of the ASX300 Index: Elevated votes against director elections were especially prominent where multiple corporate governance issues are apparent. These issues are most common in the smaller companies in the ASX300, with 65 percent of companies identified in this group. Only 16 percent of companies with elevated votes against directors are in the ASX100. Gender diversity at board level is highest amongst ASX100 companies where boards are larger. Overboarding is also less prominent in ASX100 companies with directors generally accepting the greater time commitments in larger, more complex and geographically diversifies companies places a limitation on their external commitments.
- Management-endorsed “say on climate” resolutions versus shareholder proposals: The ‘say on climate’ initiative took hold in 2022 with 8 large ASX 100 companies submitting a management endorsed say on climate resolution. Shareholder proposals were almost exclusively focused on climate, and isolated to a small group of high profile ASX 100 oil & gas, mining and energy companies. The Big 4 banks and certain insurers were also targeted by shareholder proponents, given that they provide financial services to the energy and extractive industries.
- Divergent voting outcomes in E&S-related resolutions: The management endorsed say on climate proposals proceeded to their non-binding votes at 2022 AGMs, garnering a high level of shareholder support at an average of approximatley 80 percent. Conversely, shareholder proposals continued not to be voted on in 2022 with boards again relying on legal precedent to deny the vote taking place. Disclosure of proxy votes cast ahead of each meeting indicates a substantially lower level of support for E&S-related shareholder proposals at an average of approximatley 10 percent.
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By: Vas Kolesnikoff, Isabelle Castaneda, Mark Fenol, Daniel Qi
