Are some director positions magnets for adverse votes?

ASX Listing Rule 14.4 requires directors to seek approval from shareholders for re-election at least every 3-years.

Whilst election support is usually high, some directors face higher opposition than others.

We analysed director election votes in calendar year 2024 to find what makes shareholders vote against a director. If a vote or recommendation was recorded as ‘Withhold’ this was treated as an ‘Against’ vote.

Of the 810 director election votes during the year, 68 (8.4%) received a low ‘For’ vote, defined as 85% or less.

Only 4 votes did not pass the resolution to elect the director. These were all from non-board approved candidates.

Impact of long tenure or overboarding?

A regression was performed to examine the relationship between the director election voting outcome and director tenure or the number of additional boards a director served on. No significant impact was found for either variable and the voting outcome.

Does membership on particular committees lead to more no votes?

Figure 1 shows the breakdown of low director votes by committee chairship. ‘Other’ committees are a combination of less common committees, typically sustainability or technology committees.

Figure 1: Breakdown of low director votes by committee chairmanship and membership.

The board chair and remuneration or remuneration and nomination committee chairs were the most likely chair positions to have adverse vote outcomes.

Audit committee chairs did not commonly receive high no votes.

Conversely, audit committee membership attracted the highest number of 15% + no votes over membership of other committees.

Investor concerns

Based on review of a subset of investor rationale for votes against director elections, the most common reasons stated (in order of prevalence):

• Lack of diversity
• Director independence
• Concerns on sustainability
• Remuneration concerns
• Overboarding
• Lack of relevant skills

This aligns with a pre-Trump 2.0 push for DEI on boards by in ISS guidelines, see HERE for our coverage.

For one director election, some investors raised concerns on the director’s performance at other boards. We discussed whether battle scars on boards were good or bad at our recent annual forum meeting HERE.