The House of Representatives has now passed but the Senate has yet to consider a bill to amend the Corporations Act to make it clear that the chairman of a listed company AGM is able to vote undirected proxies in the non-binding vote on the remuneration report where the shareholder provides express authorisation for the chairman to exercise the proxy.
The Corporations Amendment (Proxy Voting) Bill 2012 was introduced to urgently fix the problem, in response to criticism that delays to this amendment will disenfranchise shareholders and contribute to unnecessary remuneration report “strikes”. The delay in fixing this problem was originally attributable to the government’s insistence on including the proxy voting amendments in a more controversial consumer credit reform bill, which has been subject to a high level of Parliamentary scrutiny (see HERE).
The belated urgency may cut things too fine, as the Senate is on a break until 18 June, so some quick work will be required to pass the legislation for the 2012 AGM season.
The amendment was required because of confusion with the drafting of the original 2011 governance amendments. Section 250BD(1) prohibits KMP and their closely related parties voting undirected proxies on resolutions ‘connected directly or indirectly with the remuneration’ of a KMP. Section 250BD(2) provides an exception to this prohibition for the chairman where the shareholder appointing the proxy expressly authorises exercise of the proxy on a remuneration-related resolution. Section 250R, dealing with the non-binding vote on the remuneration report, contained a similar prohibition, and an exception in relation to directed proxies, but not for the chairman to exercise undirected proxies. It was certainly not clear that the section 250BD(2) exception for the chairman applied in relation to the non-binding vote on the remuneration report under section 250R.
The uncertainty about the ability of chairmen to vote undirected proxies on the remuneration report resolution is thought to have been a factor in many of the 107 ‘first strike’ votes in 2011, the great majority of which were at small companies (with a median market capitalisation of $26 million. It will be interesting to see if the 2012 voting results support this suggestion.
If the proxy voting amendments are not passed for the 2012 AGM season, ASIC has previously indicated that the options for companies are to:
- Ensure the chair does not vote any undirected proxies on the remuneration report resolution
- Modify the company’s proxy voting form to encourage more directed proxies, which can be voted by KMP;
- Encourage shareholders to nominate a proxy other than a member of KMP; or
- Apply to ASIC for relief.