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Dec 22, 2021

Proxy season preview: Australia

Executive compensation, the Covid-19 pandemic and climate change: what to expect from investors in 2022

The key theme of Australia's proxy season was executive remuneration. ‘We had some companies taking government aid and, while doing that, they paid bonuses and dividends,’ says Jana Jevcakova, managing director for corporate governance at Morrow Sodali. ‘Investors said government money is not there to subsidize bonuses and dividends.’

Jevcakova explains that there is a two-strike rule when it comes to remuneration in Australia: if a board receives 25 percent of shareholder votes cast against its remuneration package in two consecutive years, it could be forced out by a subsequent 50 percent vote recommending its dismissal. ‘That has only happened to one board since the rule was implemented in 2015, which shows how seriously Australian boards take remuneration,’ she says.

Jevcakova says Morrow Sodali is looking to see which companies took government aid in 2021 and had first-strike votes. ‘Investors are very skeptical about bonuses being paid out to executives,’ she says.

‘They are often skeptical of the structure of compensation related to performance – they think targets are not challenging enough and executives don’t demonstrate enough value creation.’

Investors are looking for boards to take leadership on climate change and set incremental targets on a path to eventual net-zero emissions. ‘Many companies have aspirational goals of net-zero by 2040 or 2050, and investors are going to be looking for incremental targets to meet on the way to net-zero,’ Jevcakova says. ‘They want to see short-term targets because these directors will not be around in 2040 and 2050.’

Climate change is an issue that will remain at the fore in Australia, and Jevcakova says eight firms are expected to have say-on-climate proposals on the agenda in 2022. Companies will take their cues from the COP26 Climate Conference in Glasgow, UK.

‘It will send a stronger signal to investors that have already started tightening scrutiny of investments and voting regarding climate,’ Jevcakova says. ‘Climate change and human capital management are gaining increasing attention in the Asia-Pacific region. There is a big change happening right now.’

This is an extract of an article that was published in the Winter 2021 issue of IR Magazine. Click here to read the full article.

Mike Schnitzel

Mike Schnitzel is a freelance writer and editor based in New York. In addition to being a contributor to IR Magazine , he is the technical editor at Refinitiv Lipper and freelances regularly for many different outlets. His articles have appeared in...