NAB non-executive director and chairman Ken Henry

Shareholders of ASX 200 companies voiced their displeasure at the performance of boards with record-breaking numbers of remuneration strikes during reporting season, ASIC’s end-of-AGM season report states.

The report, published on Thursday, covers annual general meetings of the nation’s top 200 companies between October 1 and November 30. It revealed a “significant” increase in ‘first strikes’ on executive remuneration in 2018 (12) compared with 2017 (5).

A first strike, as per the 2011 amendment to the Corporations Act, occurs when a company’s remuneration report – which outlines executive salary and bonus details – receives a no vote of 25 per cent or more.

If the company’s next remuneration report receives another no vote of 25 per cent or more – a second strike – the entire board goes up for re-election, which places pressure on the directors to address concerns of shareholders or face a spill.

“This is the highest first strike we have observed for an ASX 200 company since we began reviewing the outcome of ASX 200 remuneration resolutions,” the report stated.

National Australia Bank was highlighted with an ignominious case study in the report for receiving a record first strike ‘no’ vote of 88 per cent.

Unsurprisingly, ASIC identifies as a key driver for the upsurge in voter dissatisfaction “negative shareholder sentiment towards executive pay and accountability, arising from concerns highlighted by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry”.

Other reasons for voter ire the regulator cites include “remuneration amounts” and “company underperformance”.

The results come on the cusp of the public release – scheduled for 4:10pm on Monday – of commissioner Kenneth Hayne’s final report, which is expected to include a number of recommendations aimed at cleaning up the financial services industry.

ASIC states that the royal commission “cast a long shadow” over the AGM season. While the inquiry focused on financial services, the regulator states that the negative reaction was felt “more generally” across all of the top 200 companies.

“It was an impetus for heightened shareholder focus on matters such as social licence to operate and community expectations,” the report states.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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