Strikes Against the Remuneration Report – 2017 AGM Season

Among the top 300 listed companies by market capitalisation*, there were six companies that experienced a significant shareholder vote against their Remuneration Report during the final quarter of the 2017 Annual General Meeting season. A further eleven companies received a negative vote above 20% and an additional twelve received a vote against their Remuneration Report above 15%. The top 300 companies exclude overseas-based companies and trust fund companies.

Below is a summary of the disclosed commentary on those companies that received a strike in the most series of Annual General Meetings.

  1. Ainsworth Game Technology
  • 28% of shareholders voted against the Remuneration Report.
  1. Cromwell Property
  • 84% of shareholders voted against the remuneration report.
  • Proxy advisors recommended a vote against the Remuneration Report due to the limited proportion of reward which was at risk.
  1. Mineral Resources
  • 41% of shareholders voted against the Remuneration Report.
  • Concerns expressed reflected the use of a single financial measure under both the annual and long term incentive plans (12% return on invested capital – ROIC). We note that ROIC was calculated using normalised net profit after tax excluding impairments.
  1. Myer Holdings
  • 23% of shareholders voted against the Remuneration Report.
  • Concern was expressed in relation to Directors’ reward given the performance of the company.
  1. Reliance Worldwide Corporation Limited
  • 82 % of shareholders voted against the Remuneration Report.
  • Concern was expressed in relation to senior executive bonuses under the annual incentive plan, particularly the CEO who received a bonus of $2.5 million.
  1. TPG Telecom
  • 81% of shareholders voted against the Remuneration Report.
  • The response appears to be closely related to the company’s share price performance and its more recent investment in mobile and fibre infrastructure.

Companies on the cusp of the top 300 list receiving a strike included Isentia Group, Karoon Gas and Mortgage Choice.

We observe, in relation to the vote, that Directors of the affected companies, in addressing shareholders, expressed the view that their prevailing remuneration arrangements were appropriate given the circumstances of the company and that a substantial proportion of the noise, which influenced the negative vote, was influenced by other factors.

Company’s Response to their 2016 AGM Strike

Instructive of the influence of shareholders, including institutional shareholders and guidance received from Proxy Advisers, is the response of those companies which received a strike in the 2016 AGM round.

The Boards of the leading companies most directly affected in the 2016 round of AGMs clearly addressed concerns expressed by shareholders.  The table below sets out the vote against the Remuneration Report at the 2016 and the 2017 AGMs.

We also observe that a number of organisations outside the ASX 300 received a strike in the most recent round of AGMs.

*  20 trading days smoothing as at 22 December 2017.

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