More companies are choosing to focus on remuneration practices following the introduction of the controversial ‘two-strikes’ rule, according to the latest AMP Capital Corporate Governance Report.
Passed by Parliament in June, the rule gives shareholders the right to spill the board (remove the directors) if there are two successive years of protest votes against remuneration.
AMP’s latest Corporate Governance Report examined the impact of two strikes. Before a spill meeting can be called, a board would need to receive an ‘against’ vote of at least 25 per cent in one year, the report stated. A second against vote of at least 25 per cent must then be reached in the second year. In addition, 50 per cent of all eligible votes need to be cast in support of a board spill meeting.
AMP Capital’s head of sustainable funds Dr Ian Woods said while the 25 per cent threshold may have been set too low, it remains unlikely that entire boards will be removed over remuneration concerns.
Dr Woods also noted that AMP Capital had seen an increase in the number of companies choosing to engage with shareholders on remuneration and voting.
The Corporate Governance Report found that several companies with negative votes had subsequently received endorsement after engaging with shareholders to improve their remuneration structures.
The report, released twice a year, provides a summary of AMP Capital’s corporate governance activity. The latest release includes an analysis of the first half of the 2011 proxy season, detailing the votes cast and the governance issues considered.
