Lessons from the 2017 AGM Season

The Australian Securities & Investments Commission issued Report 564 in January this year.  The Report provides a comprehensive insight into the outcomes of the 2017 AGM reporting season and is a useful overview of the key trends observed across the ASX 200 during the recent reporting period.ASIC observed a significant decline in the number of first strikes on the Remuneration Report, from 11 in 2016 to 5 in 2017.  Only one company received its second strike.  The pie charts below highlight ASIC’s research.

Change in ‘for’ votes on remuneration reports from 2016 to 2017 (ASX1-100 and ASX 101- 200)

ASIC’s report encourages all companies to:

  • adopt incentive structures designed to achieve long term company value, which may involve the use of non-financial targets;
  • ensure remuneration structures are sufficiently transparent to allow objective measurement of performance;
  • avoid unnecessary complexity in the design of the incentive structures and in the disclosure made in remuneration reports. This should assist shareholders to understand the bases on which performance-based payments are to be made (or have been made), including whether these payments are (or were) actually at risk.

The Report acknowledges the increasing influence of proxy advisers, including their influence on Director election, with more than 13% of Director resolutions not being supported by proxy advisers and more than 16% of resolutions in relation to KMP remuneration in the remuneration report having a negative vote from proxy advisers.

In the context of the increasing influence of proxy advisers, ASIC encourages companies to:

  • understand the engagement practices of proxy advisers;
  • engage early and proactively with proxy advisers as an extension of a company’s ongoing active engagement with their shareholders;
  • release notices of meeting to the market early and ensure disclosure to the market is clear and not overly complex.

ASIC’s report is comprehensive.  The total report is available online through ASIC – Report 564 – 2017 AGM Season.

Click here to find out more information on annual remuneration reviews and benchmarking.