RemCo End of Financial Year Checklist

June 6, 2025

Most ASX listed companies have a financial year ending on 30 June 2025. Accordingly, work on the remuneration report should be nearing completion. To support this process, consider this checklist.

1. Ensure the remuneration report is almost complete

By financial year-end, a near-final draft of the remuneration report should be in place. While certain elements – such as final financial results, incentive payments, and LTI vesting—may remain pending, the majority of the content should be known and in place. Placeholders can be used where necessary.

2. Address any prior strikes or significant “no” votes

If the most recent AGM resulted in a remuneration report strike by law the report must include a clear explanation of how the board has responded, or why they concerns will not be addressed. This requires input from HR, finance, legal, investor relations, and the executive team. However, the ultimate responsibility rests with the board, which will rely on the remuneration committee to ensure the report is prepared in a timely manner and aligns with both regulatory requirements and investor expectations.

3. Include a chair letter

A draft of the remuneration committee chair’s letter is not a requirement, as is most of the remuneration report, but it is advisable. It need not be long. This letter provides clear and concise commentary on remuneration issues and outcomes for the financial year, setting the tone for the report that follows. If there is not much to say in terms of issues, then it can be very short, to the effect of “no changes from last year, nothing to see here”. For many investors, it serves as a quick guide to the key points to consider when determining their vote.

The RemCo chair’s letter typically includes:

  • Key changes to KMP remuneration during the year;
  • Relevant financial and non-financial performance highlights (and if there was a lowlight, better to confess upfront);
  • Specific matters of interest to investors;
  • Notable events that have influenced remuneration outcomes, either positively or negatively, and the reasons for these impacts;
  • A summary of incentive outcomes; and
  • Whether board discretion was considered or applied, and if so, in what manner and why.

Clarity is essential – avoid obfuscation. Present the information in a straightforward and digestible format. During a compressed and high-pressure proxy season, investors and proxy advisers have little patience for ambiguity or excessive narrative. They go to the introductory letter to quickly identify any differences to prior.

4. Carefully consider disclosure around board discretion

There remains a widespread misconception about the scope of discretion boards can exercise over remuneration matters. Contrary to what some reports suggest, board discretion is not broad. Assertions to the contrary are often inaccurate (see HERE).

This year, given ongoing geopolitical and sector specific volatility, unadjusted remuneration outcomes may not reflect underlying results in difficult times. Where results are not appropriate, discretion may be justified but must be clearly disclosed and explained.

When assessing or applying discretion—whether positive or negative—ensure careful consideration is given to the nature and rationale of discretion exercised, treatment of awards in change-of-control scenarios, and compliance with ASX Listing Rule 6.23 (see HERE).

All instances of exercised discretion must be disclosed, including the rationale behind them. Unreported instances are likely to be uncovered during analysis.

Where discretion has not been exercised, a statement to that effect along with any factors that were considered before making the decision not to exercise discretion can emphasise and increase investor comfort in the board governance process.

5. Be careful about what you flag for the year ahead

Given ongoing geopolitical and sector specific volatility, boards may be revisiting  remuneration structures to ensure they remain appropriate and defensible (see HERE). While investor preferences are generally that pending changes to remuneration are flagged, this can sometimes lead to votes on what will be rather than the year that was. This can also pre-empt engagement with investors on potential changes. Remember that the law only requires companies to report on remuneration applicable to the financial year just ended. To avoid investors getting the wrong end of the stick because you have said too much and yet not enough on your post financial year remuneration, say nothing or very little. Therefore if changes after the financial year end are being implemented note them, if at all, in a sentence or two in the introductory letter. Even if you anticipate a strike, describing how you are going to fix things is unlikely to offset the expected high “no” votes.

6. Anticipate reactions to policy changes

If there have been changes to the remuneration framework during the year, consider how these will be received by proxy advisers and shareholders. Even where changes were flagged in advance, the actual outcomes may differ from stakeholder expectations. Also, remember that some proxy advisers and investors are busy, tired, and bit punch drunk during the height of proxy season, so repetition of the positive aspects of remuneration is worthwhile.

Particular areas of concern include:

  • Significant increases in fixed remuneration
  • Reduction in incentive plan targets
  • Adjustments to the incentive mix
  • Increases in potential incentive opportunities

These changes raise red flags , so need to be transparently explained to mitigate negative response.

7. Schedule engagement meetings

Remuneration committees that proactively engage with proxy advisers and key investors prior to finalising the remuneration report are generally better equipped to address concerns in a timely and constructive manner.

Following a review of the year’s key issues, assess whether a round of engagement meetings with investors and proxy advisors is necessary. Avoid unnecessary meetings on immaterial matters, which can be counterproductive.

If engagement is required, consider the following:

  • Who are the key stakeholders to meet?
  • Who will represent the company in those meetings?
  • How will international investors be engaged?
  • When would be best to meet – after disclosures for Glass Lewis and some investors, prior to disclosures to avoid the rush for others.

8. Set the agenda for FY26

If not already done, begin planning for the coming year by considering the following questions:

  • Are there any impending regulatory changes?
  • Is there a strategy change that needs to be complemented by an amended remuneration approach?
  • Have competitor practices changed?
  • Is the current remuneration framework still appropriate and effective?
  • When was the last framework review conducted?
  • Are current remuneration practices aligned with emerging trends?
  • What are the expectations of key investors?
  • What feedback have proxy advisers provided?
  • What are executives saying about the framework’s effectiveness?
  • Are there challenges related to attracting or retaining talent?
  • Should executive or NED remuneration be reviewed?

The answer to these questions may guide the content of engagement meetings.