Magellan has come up against the “first strike” rule of the Corporations Act after receiving shareholder pushback to its remuneration report.
At the fund manager’s annual general meeting (AGM) on 8 November, 58.1 per cent of shareholders voted against the approval of the remuneration report.
“Given more than 25 per cent of votes cast on Item 2 were against the adoption of the 2023 Remuneration Report, this constitutes a ‘first strike’ for the purposes of the Corporations Act 2001.”
In the report, it stated David George would receive $2.5 million in the 2023 financial year, non-executive chair Hamish McLennan would receive $283,000, non-executive director Robert Fraser would receive $270,000, and chief financial officer Kirsten Morton would receive $1.4 million, among others.
The “no” vote is particularly interesting given former chief executive David George called for a vote last year to increase board remuneration by $1 million to attract new talent for its board renewal process.
This would bring it in line with industry peers after finding it was “significantly below” other businesses, a vote which was later approved by 94 per cent of shareholders.
According to the Australian Institute of Company Directors (AICD), the two strikes rule requires a company to explain whether shareholders’ concerns were taken into account in its subsequent remuneration report, if the first was not approved by more than 25 per cent of shareholders.
If two consecutive remuneration reports receive a “no” vote of 25 per cent or more, shareholders will vote at the AGM to determine whether the directors will need to stand for re-election within 90 days.
If this passes with 50 per cent or more eligible votes, then a “spill meeting” will take place within 90 days where individuals who were directors when the remuneration report was considered will be required to stand for re-election.
However, financial services organisations, such as Magellan, have special requirements around aligning remuneration with prudent risk-taking and must include adjustment to their remuneration policies to reflect the outcome of business activities, the risks related to those activities and the time for them to be measured.
Earlier in the meeting, executive chair Andrew Formica discussed what the firm is seeking in its new CEO as its seeks a replacement for David George.
“David and I spoke about the immediate priorities for the business to move forward along its growth plans. Through these conversations, it was clear to us both that the business would be better suited by a new leader whose expected tenure would be aligned to the needs of the business, and had a proven track record in the recruitment of new investment teams, especially through the skill set of negotiating and acquiring founder-led firms.”
