AMP Capital has about $153 billion of mainly Australian sourced funds under management, making it about the 5th largest fund manager of Australian sourced funds in the country. Because of its size it has to hold a good proportion of most ASX 200 companies across its portfolios and, unlike European or US fund managers, does not have the luxury of walking the whole of its investment out of one company into another. Therefore, like most large Australian investors, it has no choice but to seek out better governance of locally listed companies for an improvement in risk adjusted returns.

As many ASX 200 directors have experienced, its active corporate governance team is not averse to using its proxy votes to express displeasure with a remuneration report or director equity grants.

Included in AMP Capital’s March 2015 ‘Corporate Governance Report’ is a summary AMP Capital’s proxy voting for the six months to December 2014.

In that period AMP Capital voted on 1,351 resolutions at 241 meetings, voting against 6% of these resolutions, primarily due to concerns about overly generous incentives, long-term incentives with immediate vesting, or board independence.

AMP Capital favours remuneration structures that align rewards with long-term performance. It expects remuneration reports to be concise and facilitate a clear understanding of the company’s remuneration policy, providing evidence that the policy is both fair and reasonable and aligned with shareholder interests. In particular, it looks for criteria such as the clarity of disclosure, satisfactory short- and long-term incentive and termination arrangements and also appropriate non-executive director remuneration.

AMP voted against adoption of remuneration reports 16% of the time, primarily due to concerns regarding non-salary compensation, poor disclosure and unsatisfactory director retirement and executive termination benefits. This proportion greatly exceeds the number of companies that recorded a 25% or greater “strike” against their remuneration report, reinforcing a widely held view that AMP Capital holds directors to higher standards than many other institutional investors.

AMP Capital also voted against 17% of resolutions concerning equity related compensation because of incentives with poor or no hurdles, remuneration structures with too much emphasis on short-term performance, overly generous compensation packages, having both non-executive director directors and executives in the same plan, non-recourse financing and automatic vesting on change of control.

AMP Capital acknowledged that it can be difficult for shareholders to determine whether they have the rights boards governing their companies, with an effective mix of skills, knowledge and independence, and only voted against 4% of director election resolutions. Reasons included too many affiliates, lack of independence, poor committee composition, the need for more relevant board skills and excessively large boards. Candidates not supported were predominantly self-nominated, non-board-endorsed candidates considered not to be ideal candidates.

Only 2% of NED fee pool resolutions were not supported.

In the six months to December 2014, only nine companies held in portfolios managed by AMP Capital could potentially have incurred a second remuneration report vote ‘strike’ and been required to submit a subsequent motion to spill the board. AMP Capital supported the adoption of the remuneration report for all but one of these companies and also voted in line with company management and rejected the board spill resolution.

In their experience, most first-strike companies had engaged with shareholders and/or had also demonstrated sufficient progress toward addressing concerns and ensuring pay was indeed fair and aligned with shareholder interests.

To read the full article, ‘Proxy voting: Australian equities’and others released by AMP Capital see HERE.

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