Orient’s new report, Understanding ownership trends in Australia – 2018 Key insights, examined key trends from the Australian market, with the firm looking at annual general meetings (AGMs) and the lead up to them.
The research found there was a significant increase year-on-year in terms of engagement from its clients around proxy campaigns, where shareholders have voted against management at AGMs and garnered an increased focus on director remuneration and elections.
“One of the key things we saw in 2018, which we expect to continue into 2019 and beyond is asset owners voting against management,” Justin Ellis, general manager, Australia/NZ, Orient Capital, said.
“AMP has gone through and reduced fees for directors as well as managed their bonuses a lot more aggressively, and they’ve announced that only this week. Their AGM is in May.
“Considering the current environment, there’s going to be more and more activity, similar to what AMP’s doing, to try and cut off any second strikes before they emerge.”
He added that companies will be trying to actively engage with larger investors, with his firm tracking how asset lenders will respond.
Looking at larger investors, direct investment by superannuation funds in the ASX200 has doubled from $35.8 billion to $78.3 billion over the last five years, the report said, with trend for funds bringing investment management capabilities in-house.
“Not only are super funds increasingly owning the vendor and controlling the vote for AGMs and other activity but the actual control of where they’re investing, how they’re investing and who do they engage with is managed,” Mr Ellis said.
“My personal opinion is not only we will see this consolidation of super funds continue, but these larger funds will increase their power and sway.”
He said there is a lot more awareness among super members about where their money is going, which Orient expects to continue.
Another concern among investors lay in executive remuneration, with the report noting assessing if executive pay outcomes are a result of observable company performance, “making sure shareholder outcomes are reflected of a stretch or a fall, rather than just whatever they do in their day job”, along with a direct increase in accountability.
Underlying the rise in investor concern was the banking royal commission, Link Group said.
“Not surprisingly, banks and financial services companies were at the receiving end of a number of strikes, with a significantly high percentage of ‘No’ votes,” Link said.
NAB had received the record for the highest “No” vote in December, with a strike of 88.4 per cent of shareholders rejecting the organisation’s remuneration.
The report showed 68 per cent of market capital is from Australia, with it consisting of around 35 per cent institutional and 33 per cent retail investors.
In terms of issued capital, Australia still remains the largest holder base, the study found, totalling 70 per cent with institutional investors making up 43 per cent and retail falling to 27 per cent.
North America was found to make up the next largest share on both counts, at 16 per cent of market capital and 15 per cent of issued capital.
Investment in the ASX200 from North America was found to increase by 22 per cent over the last five years, from 12 per cent to 14.6 per cent, predominantly due to index investors.
The majority of this investment, Orient said, is held through the big three managers, Vanguard, BlackRock and State Street, which together account for nearly 90 per cent of the North American region.
Meanwhile, Asia reduced its exposure to the ASX200, while the UK and Europe remained steady.
