AMP Capital is one of Australia’s largest investors, with about $200 billion assets under management (AUM). As such it is an influential investor, whereby its votes can be critical to avoiding a “strike” on a remuneration report, or majority support for an equity grant.

AMP Capital recently released a review of its 2020 voting, reporting voting statistics for the AGM season gone by as well as new themes and issues it has encountered.

Remuneration reports

AMP Capital voted against 18 reports, down from the 20 reports it voted against in 2019. It also abstained from voting on 2 reports, one less than 2019. Overall, it voted against 12% of the remuneration reports in 2020, the same percentage as 2019. One company saw AMP Capital abstain from voting in both years. AMP Capital voted against the remuneration reports of seven specific companies in both years.

Its reasons for these votes included one or more of:

• Overly generous retention benefits coupled with generous new grants
• Low or poorly structured performance hurdles, e.g. hurdles that are: purely absolute, insufficiently challenging, too short-term, purely accounting-based, allowing too many opportunities for re- testing, or reward performance that is well below earnings guidance. If, on reading this, you see that AMP Capital still retains a strong preference for relative TSR incentive plans you would be right.
• Retrospectively changing performance hurdles and/or start dates or using board discretion to vest incentives when hurdles were not met
• Overly generous quantum
• Poor alignment with shareholder interest
• Conflicts of interest when non-executive directors participate in executive incentive plans
• Structural concern that potentially incentivise behaviour contrary to the best interests of shareholders
• Unlimited board discretion for incentives to vest on a CEO’s termination.
• Overly complex incentive structures.
• Poor disclosures.

Incentive grants and new plans

AMP Capital seeks to invest in companies that will provide its clients with the best relative share market performance over the long-term. Hence it is one of the major investors that has an expectation that companies use a relative TSR measure in incentive plans.

AMP Capital voted against incentive grants or plans at 16 companies, down from 22 companies. Seven companies AMP Capital voted against were repeat offenders. It did not abstain from voting against any company, whereas it abstained from 3 incentive related resolutions in 2019. AMP did not support 10% of the grants put forward, the lowest since 2015.

The underlying reasons for voting against grants or plans include:

• Poor disclosure of terms
• Performance period is under three years
• Plan has no performance hurdles or hurdles that are not aligned with shareholders
• Proposed plan amendments would increase value to employees without corresponding benefit to shareholders
• NED participation in executive schemes
• Plans showed no improvement despite the company having received comments and the plan not being supported previously

AMP Capital also continues to consider how incentive plans should be treated upon change of control to ensure executives and directors are aligned with shareholders.

NED fees

AMP Capital supported all non-executive director fee pool proposals. In 2019, it voted against one company’s resolution for an increase of the fee pool for non-executive directors. Prior to voting, AMP Capital considers the size of the company, its complexity, performance, board composition and whether options or retirement benefits are paid to directors (neither of which AMP Capital supports). Fee pool increases need to be justified in disclosures.

Non-remuneration resolutions

The focus on this year’s report is on sustainable and responsible investing. AMP Capital aims to have more active engagements to create a more sustainable future. This puts focus not on just combating and reversing the effects of climate change, but also on improving gender diversity and combating human rights issues and supply chain issues, particularly with modern slavery issues within AMP Capital’s invested universe. Other social themes it seeks to tackle are social media, obesity and nutrition and access to medicine.

AMP Capital points out that it is important that all shareholders have the ability to hold companies accountable for their actions, as long as this is done in a constructive manner.  The 2020 AGM season saw a focus on the escalation of ESG issues with shareholders increasing to exercise their rights to lodge their own resolutions.

In 2020 AMP Capital voted on a total of 40 shareholder proposals, and it voted against management on 21 proposals (53%). This is an increase in 2019, where it voted against management on only 15 of 32 shareholder proposals (47%).

For shareholder proposals relating to the environment, AMP Capital supported four of the 11 resolutions. It supported proposals where it found would further encourage discipline and a commitment from companies towards the reducing their carbon output. It also voted for resolutions where increasing the climate related disclosure of the company would help with its reputation. In this regard, AMP’s focus reflects other large investor trends, such as those of Blackrock (see HERE ), and ACSI industry funds (see HERE).

It voted against resolutions that were considered prescriptive or beyond the company’s control.

See the report HERE.

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