When extensive amendments were made to the Corporations Act 2001, in mid-2011, concern was expressed about the lack of clarity on the right for proxy holders, who were also key management personnel (KMP) (or a related party of a KMP), to vote on KMP remuneration, in effect to take part in the non-binding vote on the remuneration report.
It has been standard practice for forms to be sent to shareholders with the notice of the annual general meeting providing for the shareholders to appoint the Chair as their proxy in regard to the matters to be put to the vote at the annual general meeting. In most cases the appointment gave the proxy an undirected right to exercise the vote. Because the Chair was in most cases a KMP there was a suggestion that these proxies would not be exercisable if the proposals were in regard to the remuneration of the company’s KMPs.
A Bill was introduced on 24 May 2012 to correct this problem, was passed by both Houses of Parliament and has recently received Royal Assent (27 June 2012, Act No 73). The way the amendments are drafted will require companies to draft proxy appointment forms appointing the Chair as proxy so as to specifically authorise the Chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the key management personnel for the company or, if the company is part of a consolidated entity, for the entity.
The structure of the Corporations Act means companies will need to obtain legal advice to ensure that the form of proxy appointments makes very clear their compliance with the Act.