More companies are choosing to focus on remuneration practices following the introduction of the controversial ‘two-strikes’ rule allowing shareholders to force a boardroom spill, according to the latest AMP Capital Corporate Governance Report.
The half year report looks at the impact of the rule, passed this year by Parliament, which gives shareholders the right to remove directors once 50 per cent or more vote for a board spill following a 25 per cent vote against a company’s remuneration proposals in two successive years.
AMP Capital’s Head of Sustainable Funds Dr Ian Woods said AMP Capital had seen an increase in the number of companies choosing to engage with shareholders on remuneration and voting. “AMP Capital has long been a supporter of companies having a transparent remuneration policy that is aligned with shareholder interests, thereby addressing any concerns before the need for a spill motion. We continue to encourage companies to focus on good disclosure and our preferred approach is to engage with those companies where we have concerns well before the AGM.”
Dr Woods said while the 25 per cent threshold may have been set too low it is unlikely entire boards will be removed over remuneration concerns.
“It is unlikely we will see entire boards spilled as a result of this rule, but we hope the expected improved focus and disclosure will serve to benefit shareholder interests.”
AMP Capital found several companies in recent years with negative votes had subsequently received endorsement after engaging with shareholders to improve their remuneration structures.
The Corporate Governance Report, which is released twice a year, provides a summary of AMP Capital’s corporate governance activity. AMP Capital takes seriously its responsibilities as an investment manager, as an agent of shareholders in companies and as a steward of its clients’ assets. The latest report includes an analysis of the first half of the 2011 proxy season, detailing the votes cast and the governance issues considered. The report also examines the impact of the proposed carbon tax on companies in the short term.
At one-third of company meetings in the first half of 2011, at least one resolution was not supported by AMP Capital. Of all individual resolutions tabled at those meetings, 15 per cent were not supported, including 25 per cent of remuneration reports.
