Divergence or Convergence? A Comparison of UK and Australian Proxy Voting Guidelines

Following the end of AGM season, it is time for proxy advisor Glass Lewis (GL) to publish its voting guidelines for 2024 (see HERE). At the time of writing, the Australian guidelines were yet to be published. However, we can look at the United Kingdom (UK) guidelines and infer what might be included in the 2024 Australian guidelines.

The comparison reveals the effect of tighter corporate governance regulations and international trends on proxy advisor recommendations. Understanding these distinctions sheds light on the multifaceted nature of board governance and remuneration votes.

Director Election / Re-election

In comparing the board governance guidelines, it is evident that Australia and the UK share similarities in determining the best practice for corporate governance. However, the UK adopts a more stringent approach compared to Australia. Here is where we see divergent considerations in the two countries.

Board Size

In the UK, companies listed on the FTSE 350 are required to have a minimum of five directors on their boards, promoting diversity and varied expertise. Additionally, shareholders are advised to consider voting against the nomination committee chair if the board exceeds 20 directors without adequate justification. GL stated that “too many cooks in the kitchen” leads to difficulty in reaching consensus and timely decision.

Meanwhile, in Australia’s ASX 200, boards are recommended to maintain a minimum of five directors, with a similar caution against exceeding 14 directors without justification. Similiarly, the reason for the caution is the “presence of too many voices also makes it difficult to draw on the wisdom and experience in the room”.

Director Tenure: Independence & Board Refreshment

In the UK, a keen focus on board refreshment has led to the consideration of nine years as a lengthy tenure. It is generally recommended to vote against the re-election if the director tenure exceeds nine years and there is no disclosed succession plan or definitive retirement timeline. Consistent with US practices, this approach underscores the importance of injecting fresh perspectives and maintaining a dynamic board composition.

On the other hand, in Australia, the emphasis is on the independence of directors. While there is no specific designation of lengthy tenure, the Australian guidelines review the independence if director tenure surpasses 12 years.

Interlocking Directorship

Following international regulatory pressure, GL has included the examination of interlocking relationships into voting guidelines in the UK, US, and Canada for the first time this year.  GL will recommend an against vote on directors maintaining interlocking board membership to ensure the promotion of shareholder interest. We expect to see similar guidelines in Australia this year.

Board Diversity

Board diversity is another area where stricter guidelines were observed in the UK. In the UK, it is required to have at least 33% gender diverse representation (at least 1 gender diverse director) and strive for 40% female representation by 2025. There are also requirements for at least 1 director from an ethnic minority group by the end of 2024.

ASX Corporate Governance Council Principles currently suggest that ASX300 companies should not have less than 30% female representation on the board. GL also recommends voting against the chair of the nomination committee if the board has not implemented nor addressed the issue.

Unlike UK or US, we are yet to see guidelines about gender diverse or ethnically diverse directors in Australia. Mirroring the international trend of diversity and inclusivity, it is anticipated that this will begin to influence Australian boards in upcoming years.

Remuneration Report

In the voting recommendation for the remuneration report, we observe some stringent changes in the 2024 UK Benchmark Policy Guidelines. Below is a summary of nuanced differences between the UK and Australia:

Table 1: Comparative Analysis of Remuneration Voting Guideline

Global Convergence

Glass Lewis UK 2024

Glass Lewis Australia 2023

Increase in Quantum

Recommends against vote on “increase in quantum” without sufficient rationale

Recommends against vote on “significant increase” without sufficient rationale

Dilution Limits

Limit dilution from all plans to 10% of total issued capital in any 10-year period

Continue to limit plan dilution to 5% of total issued share capital (after Corporations Act Division 1A)

Deferral of STI

Support deferring specific portions for multiple years (generally delivered as a mix of cash and deferred shares)

“Support but not expect deferral of a significant portion of STI for a period of years.”

Increase in LTI vesting period

Extend vesting period of LTI to 5 years after granted 

LTI Structure

No retesting, two or more performance measures (at least one being relative), opportunities expressed as a percentage of base salary

“Recommends voting against inappropriate incentive plan terms” which will be assessed on case-by-case and fit-for-purpose bases

Shareholding requirement

2 year of post-employment shareholding requirement

Acquire and hold throughout their employment

Disclosure of peers

Encourages disclosure of peers for executive benchmarking and selection process (less common in UK practices)

Guideline for Financial Institutions 

Remove bonus cap for financial institutions

No specific guidelines for financial institutions


With the regulatory mandate under the Corporations Act, Australia is ahead in the disclosure of performance metrics and peer groups. Recently, we observed an increasing number of ASX50 companies disclosing peers for executive benchmarking. This follows US and UK practices and is expected to cascade down in future years.

Despite issuance cap relief in Division 1A of the Corporations Act, GL continues its dilution limit for equity grants in Australia. This is a stricter approach compared to international practices. In areas such as incentive structure and shareholding requirement, proxies generally recommend less flexibility from their voting recommendations.

An analysis of the remuneration report votes among ASX100 this year shows quantum increase remain an important consideration for against vote by shareholders, despite limited voting recommendations by GL made in this area.

Future outlook

Accountability on Climate issues

Following the publication of the first two IFRS Sustainability Disclosure Standards, we expect to see different levels of climate-related disclosures (IFRS S2) being adopted into local reporting requirements across different jurisdictions this year. Although GL is yet to incorporate climate reporting into voting recommendations, we do observe the inclusion of board accountability for climate-related issues in its 2024 guidelines in the UK, US, and Canada.

In October, the AASB released an exposure draft for the climate-related disclosures to be required as part of general financial reporting starting July 2024 for some companies (see HERE). We expect this international trend to cascade down to all ASX-listed companies in the following years, and proxies to include board accountability on climate issues to be part of future voting guidelines.

Given GL holds a neutral view towards the inclusion of Environmental and Social metrics in incentive plans. It is less likely we will see changes in actual remuneration voting recommendations due to such adoption in Australia in 2024.

Cyber Risk Oversight

This year, GL clarified the potential voting recommendation over directors to hold the board accountable for cyber-attack risk in its UK, US, and Canada voting guidelines. During this AGM season, we observe discussions and shareholder votes concerning technology advancement and cyber security. We expect this to be further addressed in the upcoming Australian voting guideline.

© Guerdon Associates 2024
read more Back to all articles