Under the new amendment to the Australian Corporations Act, if 25% or more of votes cast at two consecutive AGMs oppose the adoption of a remuneration report, then the company must formally respond by asking all board members except the managing director to stand for re-election within 90 days. In addition, key management personnel whose remuneration is disclosed in the remuneration report are excluded from voting, ensuring those with an obvious interest in the outcome cannot vote.
And we thought directors were concerned with say-on-pay in the US! Here directors face a bigger threat from proxy access, particularly the model proposal from the USPX.
While we are a long way from proxy access proposals being submitted to any company based on simple accepted good governance, directors at companies with recognized corporate governance issues should be concerned. The first proxy access proposal using the USPX model was filed at a company where share price has dropped by more than 50%, more than half the board owns no shares and CEO pay issues are obvious. Companies at such companies should be almost as concerned as companies in Australia getting their second 25% level rejection of their remuneration report. Shareowners should be even more concerned and should support our initiative.