Australia - 2023 AGM season in review

Australia - 2023 AGM season in review

The 2023 AGM season has certainly been a fiery one. From chairs utilising guillotine closure mechanisms to one of the highest number of strikes on remuneration reports since the two-strike rule came into effect, we outline below the key issues arising from this year's AGM season:

1. Remuneration

Key Takeaway: Be prepared for a strike to occur if there is general shareholder discomfort, even if your remuneration structure is clearly explained, defined and appropriate.

Once again, remuneration was a key focus for shareholders. We saw an increase in strikes against remuneration reports this year which were not necessarily linked to remuneration matters. The strike mechanism continues to be used as an indication that shareholders are generally unhappy rather than as an indication that shareholders are upset with the remuneration being paid by the company – this is evident when comparing votes on executive compensation which are being passed by comfortable margins even where a strike occurs on the remuneration report. We have also yet to see a spill meeting occur.

Strike numbers ranged from a high of 83% through to 25%. The number of entities receiving significant strikes (of more than 30%) was notable.

2. Support for director re-elections

Key Takeaway: Be prepared to answer questions on cross-directorships: remember, your election or re-election to a board may not be dependent upon your performance on that board.

We have seen some significant decreases in support for director election/re-elections where those persons hold directorships across multiple high profile companies – some directors are receiving protest votes north of 30% which are not necessarily reflective of actions taken by the directors themselves. Some shareholders are using AGMs to question director candidates about their roles on other company boards rather than confining their questions to the company whose AGM they are attending. We have also seen some directors choosing not to stand for re-election where it is clear that the director will not be re-elected.

3. Lack of ESG resolutions

Key Takeaway: Don't assume that ESG resolutions have gone away for good.

This year there were less ESG resolutions moved by shareholders more broadly. This is likely to be reflective of shareholders being focussed on other matters such as the cost of living pressures including the rise in interest rates. Whilst there were certainly some resolutions put to AGM's by the usual suspects, shareholders seemed to have lost focus on this for the time being - but directors should not assume that this will continue to be the case.

This was not just the case in the Australian AGM season – the USA saw an increased focus on pay equity resolutions this season and a drop in resolutions seeking sustainability reports and "say on climate" reports. Interestingly, there appears to have been an increase in "human rights" related resolutions – for example, freedom of association proposals, which seek to guarantee employees’ right to form trade unions. With the UK also seeing a rise in resolutions seeking a "living wage", this needs to remain a watch point for all directors.

4. Chair's use of discretionary powers

Key Takeaway: Understand your powers as chair and use them as appropriate.

This year we saw chairs clearly using discretionary powers to properly control meetings including the guillotine closure of questioning, points of order being raised from the floor for consideration and strict limits on numbers and length of questions. This year was a good reminder for chairs to refresh their knowledge of their discretionary powers to ensure they are confident in their use of those powers.

Author: Miriam Kleiner, Partner, Legal Governance Advisory.