Below are key takeaways from ISS’ recently released 2023 Proxy Season Preview – Australia. 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.
- A material decline in governance over executive remuneration practices: Early indications show a rise in upward board discretion for bonus determinations, use of opaque non-financial performance measures, and poor and absent disclosure of targets. All of which point to an increase in discretionary assessments of performance by boards being misaligned with shareholder expectations and returns.
- High director turnover and focus on board accountability intensifies: Over recent years, there has been a rising trend of shareholders holding directors accountable for governance and performance failures, resulting in substantial board turnover. In 2023, there exist a number of continuing and emerging controversies regarding problematic pay practices, failures of board oversight, regulatory intervention and governance failures. As a result, elevated votes against directors’ elections may continue, and potentially more board refreshment after the conclusion of the AGM season.
- Pause in shareholder activity on climate-related proposals: The ‘Say on Climate’ initiative in 2022 saw 8 large ASX 100 companies submit a management-endorsed say on climate resolution to shareholders. In 2023, there appears to have been less shareholder activity in climate lobbying, possibly after the prior year which saw those companies receiving a relatively high level of shareholder support for their action plans. Pre-season activity by the proponents of shareholder proposals has also been subdued compared to prior years. In contrast to the high support levels for the say on climate resolutions, climate-related shareholder proposals were generally met with low levels of support in 2022. Fewer climate-related shareholder proposals are expected in 2023.
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By: Vas Kolesnikoff
