AMP Capital reviews its 2021 remuneration and governance voting

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

AMP Capital recently released its review of its 2021 voting, reporting voting statistics for the AGM season as well as ESG themes.

Remuneration reports

AMP Capital voted against 13 reports, one more than in 2020. It voted against the remuneration reports of three companies in both 2020 and 2021. AMP Capital also abstained from voting on 16 reports, an increase from 2 reports the previous year.

Two of the 16 companies (Polynovo, Premier Investments) that received abstain votes in 2021 received against votes in the previous year. Overall, it did not support 14% of remuneration reports in 2021, up from from 12%.

The reasons for voting against the remuneration reports included one or more of:

  • Overly generous retention benefits
  • 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 concerns 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 disclosure.

Incentive grants and new plans

AMP capital voted against 11 equity grants or plans in 2021, down from 16 the previous year. Four (Corporate Travel Management, Megaport, REA Group, Cedar Woods Properties) were voted against by AMP Capital again this year. AMP Capital abstained to vote on 9 companies this year, up from 0 the previous year. AMP Capital did not support 8% of the grants put forward, being the lowest percentage since data was available in 2005.

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 incentive plans in the case of changes of control to ensure continued alignment between company management and shareholders.

NED fees

In 2021, all increases for non-executive director fee pool was approved. AMP Capital considers a range of factors such as the size of the company, the company’s complexity, performance, board composition (number of directors and balance of independent directors), payment of options and retirement benefits (neither of which AMP Capital supports) and other issues put forward by the company. It is in favour of non-executive directors investing their own capital into the company or acquiring shares by sacrificing a portion of their fees.

Shareholder resolutions

The focus areas include sustainability, climate change, diversity and human rights. This year had an increase in importance for indigenous rights due to incidents occurring at Juukan Gorge in 2020. AMP Capital is engaging in more discussions with companies around cultural importance covering stakeholder expectations, reputation, social licence, social justice, Aboriginal and Torres Strait Islander employment programs and reconciliation action plans.

In 2021 AMP Capital appeared more aligned with activists than management. It voted on 37 shareholder proposals, voting against the company’s recommendation on 25 of these proposals (68%). This is an increase from 2020, where it voted against 21 out of 40 proposals (53%).

For shareholder proposals related to the environment, AMP Capital supported 11 of 19 (58%) with all proposals relating to greater alignment with the Paris Agreement. Although these companies already had emissions targets and net zero goals, AMP Capital supported proposals that encourage more ambitious target setting and commitment to reduce carbon output.

See the AMP Capital report HERE.

© Guerdon Associates 2024
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