Proxy pedlar Georgeson tells companies to brace for more scrutiny after pay report strike spike in 2023

Listed company bosses have been warned to brace for heightened scrutiny after a near-doubling in shareholder strikes against remuneration reports. Corporate proxy and communications group Georgeson said the spike in negative votes was likely influenced by increased focus on big executive packages as ordinary workers faced inflation, rising interest rates and cost-of-living pressures. The Computershare subsidiary pointed to major Australian investors, including superannuation funds, becoming increasingly accountable to their constituents and not wanting to be seen to be supporting high executive salaries. This came on top of shareholders long being reluctant to support big executive bonuses after a company had endured significant reputational hits, workplace safety incidents or fatalities. The number of shareholder votes against remuneration reports at Australia’s top 300 companies rose to 40 in the 2023 meeting season, up from 21 in 2022, according to Georgeson. Strikes against companies from the 100th biggest to 300th biggest doubled to 28, while strikes against the top-100 rose from seven to 12. If more than 25 per cent of shareholders vote against their board’s remuneration report two years in a row, the condemned company must hold a shareholder vote on whether all of its directors be required to stand for re-election. Georgeson’s environmental, social and governance chief Paul Murphy said that although shareholders did not typically unseat directors after a second strike, companies faced a variety of consequences. These included higher public scrutiny, negative media coverage and shareholders voting with their feet. “Remuneration strikes provide a company with important information on how key investors and proxy advisers are feeling and companies are generally keen to avoid a second strike,” Mr Murphy said. Law firm Ashurst described the 2023 annual meeting season as “fiery one”, with governance partner Miriam Kleiner pointing to increase in strikes against remuneration reports that were not necessarily related to pay and package matters. “The strike mechanism continues to be used as an indication that shareholders are generally unhappy, rather than as an indication that shareholders are upset with the remuneration,” Ms Kleiner said. She said this was illustrated by shareholders voting against remuneration reports despite approving executive compensation by “comfortable margins”. Georgeson’s report said companies felt the “weight of institutional investor satisfaction” in 2023. “After 12 years of operation, the two strikes rule is still being used to remind issuers about the importance of aligning the interests of executives with those of all stakeholders, particularly investors and customers,” the report said.