Australia’s sovereign wealth fund, the Future Fund, has total funds under management of more than $300bn. Of this, more than $29bn is invested in Australian equities.

The Future Fund’s FY25 Proxy Voting and Engagement Activity report includes details on how it exercised its voting rights at Australian shareholder meetings.

During FY25 the Future Fund voted:

• Against 22.2% of remuneration reports (out of 212 resolutions); and
• Against 14.1% of director equity grants (out of 291 resolutions).

This is an increase from the Fund’s FY24 voting where it voted against 18.9% of remuneration reports and 9.5% of director equity grants.

Why the high votes against remuneration resolutions?

Voting decisions are shaped by the Future Fund Corporate Governance Principles and voting recommendations from Future Fund investment managers and proxy advisers. The Fund’s stewardship framework directs focus toward Australian companies that are:

• Largest holdings by value or ownership concentration, due to impact on portfolio performance/stakeholder interest and where the Future Fund can exert greater influence on governance;
• Facing significant corporate governance concerns, presenting both reputational risks and opportunities for improvement;
• Of heightened interest for historical or other specific reasons.

Under this approach, equity holdings are grouped into three categories:

• Strategically managed,
• Actively-managed, and
• Rules-based holdings.

Voting for strategic and actively managed ASX holdings is undertaken in-house by the Fund’s responsible investment team with support from external investment managers, proxy advisers and internal asset teams.

Investment managers exercise the ownership rights for the remaining rules-based Australian holdings and all international holdings.

The Fund’s stewardship report notes that the number of remuneration reports receiving a strike has persisted, and continues to be driven by “persistent concerns, including disconnects between pay and performance, inadequate disclosure or misaligned performance hurdles, and discretionary adjustments by remuneration committees”.

In FY25, the Future Fund engaged with more companies (54 companies up from 32 companies in FY24) and observations from engagement included a concern to see “some Remuneration Committees displaying a tendency to prioritise retention of key individuals – particularly where this appeared to be at the expense of rigorous accountability in the face of issues or underperformance.”

A lack of meaningful, substantive, and evidential decarbonisation or climate-related metrics/targets was another concern raised by the Future Fund.

The Future Fund’s negative voting follows the trend in the last two seasons of negative votes effectively doubled over the historic average of negative votes. This increased shareholder scrutiny on executive pay is not going away. Guerdon Associates expects the voting this AGM season will see a similar number of strikes to those in the last two years (around 40 strikes). Compared to prior years, the number of strikes against remuneration reports in the ASX 300 increased significantly in FY23 and FY24. For an analytical deep dive into recent strike trends, see our newsletter article HERE.

As AGM season is upon us, it is worthwhile for boards, especially those with a large Future Fund holding or having experienced governance concerns, to understand the Future Fund’s guiding principles. Future Fund’s FY25 Proxy Voting and Engagement Activity report can be viewed HERE.

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