The AGM Snapshot report has shown that there were 31 shareholder resolutions made in the past year, rising from 17 in 2018. The year before had stayed flat year-on-year from 17 in 2017.
The report also noted 47 directors received more than 20 per cent of votes against their re-election.
Super funds and investment managers in particular saw their number of “against” votes on re-elections increase by 7 per cent and 4 per cent respectively on the previous year.
Areas of concern around all directors were their independence and the resulting composition on boards, overboarding, material governance and risk failures.
The rise in scrutiny saw resolutions and questions from the floor cause around 17.6 per cent of ASX 100 AGMs run for longer than three hours, with Westpac’s meeting in particular surpassing six hours.
Behind performance or financial reports and other concerns; remuneration generated the most questions, with 13.6 per cent of queries.
However according to Link investor relations company Orient Capital, its campaigns saw an 11 per cent decrease in the number of super funds voting against remuneration resolutions compared to 2018 figures (28 per cent in 2018 against 18 per cent in 2019) and increase of 1 per cent in investment manager against votes on remuneration, up to 7 per cent.
Groups including Market Forces, Mercy Investment Services and the ACCR were seen to apply pressure on climate change, human rights and transition planning disclosure, while the banks and financial services institutions were pressed on compliance. None of their resolutions gained enough support to pass, but Link expects activism will continue to rise in 2020.
The group has forecast companies are only set to see further disruption at their annual meetings in the coming year, following increased ESG scrutiny from the bushfire season and coronavirus outbreak.
Activism the new norm
The number of strikes in the ASX 200 however did decline from the previous year’s post-royal commission AGM season: there were 11 first strikes and five-second strikes for the ASX, compared to 25 first strikes and four seconds in 2018.
But Link Corporate Markets chief executive, Asia Pacific, Lysa McKenna said the latest results demonstrated the surge in shareholder activism in the post-royal commission 2018 AGM season was not a one-off, but a new norm for companies and boards to address.
“Our AGM Snapshot reveals significant investor activism is here to stay. With the catastrophic bushfire season Australia has just suffered plus the commencement of the Modern Slavery Act and its associated reporting requirements, we’re likely to see increased scrutiny around ESG performance accelerate into this year and beyond,” Ms McKenna said.
“This applies to more than just ESG concerns, with shareholders also applying increasing scrutiny to opaque short-term incentive plans, excessive CEO remuneration and most interestingly, voting against directors on the basis of governance or performance issues arising in their directorships at other organisations.
“Director re-elections are no longer the non-events they were once perceived to be. The clear expectation now is that prospective directors address the meeting, argue for their skills and experience, and provide an explanation for poor governance or underperformance they have overseen either at the organisation in question, or in another role.”
There was also significant growth in the proportion of issued capital which casted votes in 2019, with a 10.89 per cent year-on-year increase among ASX companies, and a 6.8 per cent increase among the ASX 200. A new high of online votes was reached at 38.5 per cent, up 4.5 per cent year-on-year.
The ASX has encouraged large companies with geographically diverse registers to pull greater AGM participation through the use of technology such as webinars.
“With investors increasingly demanding transparency and accountability from boards, taking heed of the ASX’s latest corporate governance principles and introducing online AGM participation functionality [are] crucial for Australian companies who want to demonstrate initiative in these areas,” Ms McKenna added.
“But the key takeaway from this report is that investor relations teams need to comprehensively plan for AGMs, which have transformed from a procedural exercise to an opportunity for investors to strongly communicate their thoughts and feedback in a public arena. By having a purposeful shareholder engagement strategy both around the AGM and year-round, you’re far less likely to receive an unwelcome surprise.”
