AMP Capital has released its 2018 voting review, reporting voting statistics for the AGM season gone by as well as new themes and issues it has encountered.

The following details its voting patterns for key resolutions.

Director resolutions

AMP considers board composition to be one of the most important corporate governance issues for shareholders.

It determines its votes against director elections based on:

• Performance issues and lack of accountability
• Too few independent directors
• Evidence the board has taken actions contrary to shareholder interests
• Poor gender and/or skills diversity
• Poor board attendance, and
• Broader issues related to poor governance

Consistent with these guidelines, the report named 14 companies where it had voted against directors, and 5 companies where it abstained from voting, which it did where improvements were being made or AMP Capital had only just raised the issue of board composition with the company.

Remuneration reports

AMP Capital supported 83% of remuneration report resolutions. It voted against 26 reports, double the number of reports it voted against in 2017.

Its reasons for these votes included one or more of:

• Overly generous retention benefits in conjunction with generous new grants
• Low performance hurdles, e.g. where equity vests well below earnings guidance
• Retrospective adjustment of performance hurdles or start dates or using board discretion to vest incentives if hurdles weren’t met
• Overly generous quantum
• Poor performance pay alignment
• Structures that potentially incentivise behaviour contrary to the best interests of shareholders (e.g. making acquisitions.)
• 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 voted against incentive grants or plans at 24 companies, up from 9 companies in 2017.

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 only voted against one company’s resolution for an increase of the fee pool for non-executive directors. When voting, it 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.

Termination payments

AMP’s biggest issues with approving termination payment resolutions generally relate to change of control provisions and board discretion around vesting of payments. It voted against resolutions at two companies.

Shareholder activism

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 2018 AGM season saw a greater scrutiny of the role of directors, and the shareholder proposals were mainly related to governance issues.

In 2018 AMP Capital voted on a total of 23 shareholder proposals, and it voted against management on 17 of them (74%). This was a big swing in management support from 2017, where it voted against management on only 7 of 23 shareholder proposals (30%). For comparison, AMP Capital supported 91% of management resolutions in 2018.

See the report HERE .

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