Executive compensation and remuneration resolutions
The Remuneration Report continues to be the key focus of investors and activists alike. We continued to witness investors using their vote as a vehicle to express discontent, not only with pay practices but with overall board and management performance. Activists leveraged remuneration resolutions to spotlight issues related to equitable pay, transparency and the questionable alignment of executive incentives with long term company performance.
The push for more rigorous standards in executive compensation as partly driven by the influence of proxy advisors advocating for greater accountability and adherence to Environmental, Social and Governance principles, especially the governance aspect, which often receives less attention.
The votes cast by shareholders are sending a clear and powerful message to corporate boards. There is a growing intolerance for any misalignments between pay and performance, and shareholders are becoming increasingly vocal about their expectations for more stringent standards and greater accountability.
S&P/ASX 100
88.57% of ASX 100 companies had a ‘FOR’ Vote of over 90% - up 24.05% from 2023
Strikes in 2024
The 2024 AGM season featured an increase in the number of both first and second strikes against the remuneration report of companies, influenced largely by the recommendation of proxy advisors. This trend indicates that that the remuneration report is often used to express dissatisfaction with Board and Management performance rather than specific issues with the remuneration policies alone, though these aspects are frequently interrelated.
The concept of a “second-strike” occurs when a company’s remuneration receives a negative vote of 25% or more from shareholders for two consecutive years. This second strike can trigger a Spill Resolution, which calls for a vote on whether to hold a Spill Meeting. In such a meeting, all board members except the Managing Director must stand for re-election.
Despite the gravity of spill resolutions, they are rarely successful. Even in instances where a remuneration report is overwhelmingly rejected for a second time, the subsequent spill motion often fails to pass. This outcome suggests a complex dynamic where shareholders may desire to signal their discontent without necessarily wising to unseat the entire board, reflecting nuanced views on governance and performance accountability.
In 2024, 30 of our issuers received a first strike, with 9 additionally receiving a second strike.
