From executive pay to gender diversity and climate change, advisers to big investors like super funds — known as 'proxy advisers' — are holding company directors to account but they could soon face government regulation that stifles their activism.
When Rio Tinto destroyed a culturally significant cave in Western Australia's Juukan Gorge containing 46,000 years of human history, its board initially didn't appear to understand the gravity of the situation.
ACSI chief executive Louise Davidson says she has frank conversations with company directors over their social license to operate. In March this year Rio Tinto's then chairman, Simon Thompson, took responsibility for the disaster and also announced he intends to stand down.ACSI is not the only investor that had frank conversations with Rio's board at the time and whose pressure resulted in the departures. But it is a particularly big player given the growing might of Australia's $3 trillion superannuation industry.
The federal government wants to regulate proxy advisers, saying there's limited transparency in how they formulate their advice and how that advice then gets used by investors to cast votes. The proposed changes are backed by corporate lobbies such as the Business Council of Australia and the Australian Institute of Company Directors.
Investors were angry about the long-term bonuses awarded to former Rio Tinto CEO Jean-Sebastien Jacques. Its purpose was to hold directors accountable for what was seen as exorbitant executive salaries and bonuses. If this 'spill' resolution passes with 50 per cent or more of eligible votes cast, then a 'spill meeting' will take place within 90 days and directors will be required to stand for re-election.
It showed that 7,426 resolutions to elect board-endorsed directors were passed, with 96.2 per cent in favour. "There are other issues that come up … but the most controversial one, the bit that gets under everyone's skin, is always [executive] pay," he says.In December, Mr Lew lashed out at proxy advisors and shareholders after 48.5 per cent of shareholders in his retail company Premier Investments delivered the company a 'first strike' over its decision to issue dividends and executive bonuses while receiving JobKeeper payments.
In 2019, Ownership Matters and CGI Glass Lewis recommended Harvey Norman shareholders vote against the re-election onto the board of chief executive Katie Page, in favour of shareholder activist Stephen Mayne. He thinks Treasurer Josh Frydenberg is being too heavily influenced by business lobbies on this issue.
Mr Paatsch says a myth is being perpetuated that proxy advisors are "cancelling capitalism", but that the vast majority of resolutions that come before an AGM are passed with flying colours.
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