The 2019 AGM Season is now well underway, with more than 60 ASX 200 companies having already held their AGMs. After a tumultuous 2018 AGM season which saw 12 of the ASX 200 companies receive first strikes on their remuneration reports, the timing of which coincided with the Hayne Royal Commission, the results from AGMs this year appear to be following similar trends. Strikes have already been reported against the remuneration reports of several large Australian companies, including CSR Limited, WorleyParsons Limited, Carsales.com.au. Strikes have also been reported against Iluka Resources, CYBG, Speedcast and Adelaide Brighton.
AGMs are scheduled to continue throughout the remainder of 2019/early 2020, with many top companies facing possible board spills on the back of receiving first strikes in 2018, including NAB, Westpac, ANZ, Harvey Norman, Goodman Group and Healthscope. Telstra, Computershare and Tabcorp are among the companies who have already held their 2019 AGMs and have avoided a second strike on their remuneration reports. Myer and the Commonwealth Bank of Australia have held their AGMs and successfully passed their remuneration reports.
Reflecting on the 2018 AGM season, ASIC released a report in early 2019 which identified a number of key themes arising, including:
- Increased strikes by shareholders on remuneration reports, coupled with an upsurge in the number (92) of material ‘against’ votes (see also our 2018 article on the ASX 300);
- Tightening of board accountability, particularly following the Hayne Royal Commission;
- A strong focus on environmental, social and governance (ESG) issues, particularly sustainability and climate change risk; and
- The need for improvements in gender diversity.
In relation to the votes against remuneration reports, it appears that there may be an underlying trend towards using votes not only to express discontent regarding remuneration, but also to send a message to key stakeholders about company performance more broadly, particularly share price falls. ASIC reports that where companies received strikes against their remuneration reports, these generally resulted from the company’s share price performance, remuneration amount and/or structure, or conduct issues. Shareholder discontent with remuneration itself focused on the amount of pay, the lack of consequence on pay for poor performance, the complexity of the remuneration structure, combined or tailored incentive plans or the lack of transparency about incentive plan operation.
Of particular interest this AGM season is the issue of how companies, particularly those in the Financial Services sector, respond to APRA’s July 2019 recommendation that financial measures in relation to short- and long-term bonus incentives should be limited to 50 percent of the criteria, with the remaining fifty percent to be measured against non-financial goals. Investors, proxy advisors and directors, including the Australian Shareholders Association, Ownership Matters and ISS, have reportedly voiced their concerns regarding the interplay between non-financial metrics and the two-strikes rule. NAB, Westpac and ANZ reportedly all received investor strikes after championing moves toward non-financial metrics for bonus payments.
Overall, it appears that the magnitude of votes against remuneration reports so far is less than in 2018, where some companies received more than 50% of votes against. The exception thus far is Thorn Group, which reportedly received more than 87% of votes against its 2019 report. So far, there have been no second strikes in 2019.
The 2019 AGM season has seen a rise personal protest votes against individual directors. Those facing re-election in 2019 have had demonstrably higher votes against their candidature, however to date, all candidates have secured or retained their positions, with Tabcorp directors the latest to secure their roles.
In the 2018 AGM season, four ASX 200 companies received requisitions on ESG issues, particularly in relation to climate change and human rights. In 2019, there is a continued focus by activists including Market Forces and the Australasian Centre for Corporate Responsibility on using shareholder-requisitioned resolutions to pursue environmental, social and governance issues, however to date, no such resolution has received more than 2.5% of votes.
It is reported that in 2019, BHP and Origin are being targeted by climate change activists. BHP in particular is reportedly being pressured by superannuation funds and Atlassian co-founder Mike Cannon-Brookes to improve its stance on climate change, for example by cutting ties with associations including the Minerals Council of Australia. Origin reportedly has five climate resolutions proposed for its 2019 AGM. In relation to human rights, it is reported that Qantas, Coles and Woolworths face shareholder queries over contracts for supply chain workers and involuntary transportation.
Finally, gender diversity was highlighted as an important issue in the 2018 season and remains a key focus in 2019. It is reported that TPG Telecom Ltd will be targeted by industry super funds for the lack of women on its board, together with ARB Corporation Ltd and Tassal Group Ltd which also had no female board members in 2018. In the 2019 AGMs held thus far, it appears that the proportion of female candidates nominated for elections has been significantly higher than the proportion nominated for re-election. Although only preliminary findings, these suggest steps towards greater gender equality.