Australia: New AGM rules fail to excite shareholders

New AGM rules fail to excite shareholders

Thursday 22 December 2011

Following the 2011 AGM season, AGMs are seen as becoming more complex and less relevant to shareholders as a platform for engagement with company directors.

There was no evidence of better attendance at this year's AGMs despite hopes that the new executive remuneration rules would revive interaction between companies and their shareholders.

In an attempt to boost shareholder participation, the Parliamentary Secretary has referred AGMs to the Corporations and Markets Advisory Committee (CAMAC). The CAMAC review will explore how the AGM may operate in the future and how new technology could be used to counter the challenges posed by foreign ownership and the dual-listing of companies.

The review follows the introduction of the "two strikes" test and "no vacancy rule" in July this year. Read our eAlert! on this ruling here.

Middletons has surveyed the top 50 ASX-listed companies (ASX 50) and a sample of Middletons' ASX-listed clients to see how the new executive remuneration rules were applied in practice in the 2011 AGM season.

Key findings of the Middletons survey

• Of the companies holding AGMs after July 2011, two of the ASX 50 and three of the Middletons clients surveyed received their first "strike" in 2011. Of those companies, the average vote in favour of the remuneration report was 59.3%. The relatively low level of disapproval may have implications for any "spill" resolution following a possible second strike.
• Only 53% of the companies surveyed disclosed the two strike rule in the explanatory memorandum accompanying the notice of AGM. But almost all (95%) included a voting exclusion in the explanatory memorandum with regards to key management personnel.
• The survey also revealed a divergence in market practice regarding proxy forms. A significant number of companies (44% of the ASX 50) opted to streamline the proxy form by including only one "tick box" to both appoint the Chairperson as proxy and authorise the Chairperson to vote undirected proxies in favour of the remuneration report.
• The ASX 50 overwhelmingly (87%) conducted the vote on the remuneration report by poll.

Where to from here

With several companies facing their second strike in 2012, focus is shifting to how those companies will prepare for the possibility of their directors facing a spill.

Further, amendment to the Corporations Act is expected to settle uncertainty over the issues raised by the new rules, such as whether the Chairperson can vote open proxies on the remuneration resolution.

However, unless the CAMAC inquiry produces fresh ideas, a tweaking of the new rules may do little to revive shareholder participation in AGMs. The discussion paper and dates for submissions on the CAMAC inquiry have not yet been published. If you are considering making a submission on the future of the AGM, we can assist you.

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