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At the conclusion of the 2016 AGM season, we conducted our annual survey of remuneration report voting for S&P/ASX 1001 entities.
First strikes were at an unprecedented level for S&P/ASX 100 remuneration reports – 7 strikes, compared to 4 in 2015.
There were seven ‘first strikes’ on remuneration reports in 2016, compared to four in the previous year. First strike recipients were AGL Energy Limited, Boral Limited, carsales.com Limited, Commonwealth Bank of Australia, CSL Limited, Goodman Group and Woodside Petroleum Limited. In particular:
For the fifth year in a row, no S&P/ASX 100 companies on a first strike received a second strike.
In response to first strikes in 2015, measures taken by entities included:
Over 20 companies in the S&P/ASX 100 sought and obtained approval to increase their non-executive director fee pools. This included first strike recipients AGL, Boral and CSL. Query whether these entities will utilise these approvals in the new financial year, or freeze non-executive director remuneration other than for new board members.
These results are discussed further below.
Under the ‘two strikes’ rule, if a listed company receives a ‘no vote’ against its remuneration report of at least 25% at two consecutive AGMs, the company must, at the second of those AGMs, put to the vote another resolution that another meeting (the spill meeting) be held within 90 days, at which the company’s directors will be subject to re-election.
Table 1 details the 7 first strikes in the S&P/ASX 100 in the 2016 AGM season, together with the percentage of votes cast against the remuneration report and the voter turnout percentage in each case.
Table 1: S&P/ASX 100 – entities receiving First Strikes in 2016
AGL Energy Ltd
Commonwealth Bank of Australia
Woodside Petroleum Ltd
In undertaking our survey, we observed that:
None of the entities in the S&P/ASX 100 that received a first strike in 2015 (of which there were four – see Table 2 below) received a second strike in 2016.
Table 2: ASX S&P/ASX 100 - 2016 results for entities which received First Strikes in 2014
41.24% (for previous stapled group)
9.9% (for new company, post-restructure
Downer EDI Ltd
Each of these entities conducted their 2016 AGM voting on the remuneration report by poll.
In response to the first strikes received in 2015:
Until the 2016 AGM season, we had seen relatively stable levels of first strikes on S&P/ASX 100 remuneration report votes.
The 2015 season saw an increase in near misses and high protest votes for bank remuneration reports, but that did not prepare us for the unprecedented seven first strikes for S&P/ASX 100 entities in the 2016 AGM season.
Entities cannot be complacent in structuring their remuneration arrangements, with incentive structures being the subject of particular scrutiny.
1Based on searches of Thomson Reuters’ Connect 4 subscription service.
2Commonwealth Bank of Australia media release “Commonwealth Bank withdraws Resolution 4 from 2016 Notice of Annual General Meeting”, 9 November 2016.
The amendments to the Corporations Act1 to broaden the ‘safe harbours’ for directors on an insolvency were passed by Parliament on 12 September 20172 and are awaiting a date for commencement.
The Federal Court has released its judgment in favour of Brickworks Limited and Washington H. Soul Pattinson and Company Limited, in its proceedings with Perpetual.1
Draft legislation will soon be released to implement the reforms stemming from the Productivity Commission inquiry.