Remuneration Report Strike?

October 13, 2025

AGM season can be a stressful time for Remuneration Committees and their Chairs. As we enter the 2025 AGM season, following the proxy voting trends in 2023 and 2024 many expect another year of strikes against remuneration reports.

Picture this: you are Chair of the Remuneration Committee (RemCo). The Remuneration Report and Notice of Meeting (NoM) has been published. The directors’ time and effort on ensuring executive pay is right for the company and the strategy are now up for testing. Judgement looms. A proxy advisor or major investor poses a question, and you are made aware of an issue not previously considered. Voting on the remuneration report is about to be lodged. It is safe to say this is something every RemCo Chair wants to avoid, yet many find themselves in this position.

The objection may relate to an error of fact or disclosure. If so, swift action through an ASX release and/or direct engagement with your key investors can change potential negative votes against the remuneration report. Crisis averted.

You may be less fortunate. The objection has merit. Or, it is not well grounded but is based on a proxy advisor guideline, or an expected practice that defies critical thinking and does not consider the specific circumstances. In either case, the Board cannot win, and you may end up with a strike.

Remember, a strike itself is not the end of the world and is, in fact, becoming more common. It is how you respond to it that is defining. The following checklist provides an action plan to effectively respond and minimise the fallout.

1. Do not jump to respond

A calculated and considered response is imperative. It may feel as though the work the RemCo has done has been overlooked and undervalued. Take a breath. Perhaps take yourself to the pub. Shareholders should feel they have been listened to. This means taking time to consider the issue and your response. A hasty and impetuous response leaves room for more errors or invites similar from shareholders.

2. Confirm if the issue has merit

Confirm the specifics and if the issue has substance. Once confirmed, the next question is, what to do about it. Here are some common examples to help to confirm if the issue is valid:

  • Excessive pay – proxy advisors and investors consider remuneration against peers at maximum. You should be aware of how executives are positioned from benchmarking – consider if you have a strong rationale for high pay. This may include executives being based in and/or competing for talent with higher paying overseas listed and domiciled companies, or even higher paying private companies not subject to pay voting in any geography. Check that your benchmarking methodology is sound, and based on more than simply market capitalisation. A robust benchmarking can, and has, been used successfully to rebut less robust data used by others.
  • Too different – proxy advisors have rigid guidelines and expectations. When a framework does not tick any of the usual boxes, it can raise concerns simply because it is unfamiliar or hard to compare. This will be easy to confirm. While proxy adviser and investor guidelines invariably fail justify why they have a particular requirement, you can (or should).
  • Use of restricted share units (RSUs)– while growing in prevalence, some proxy advisors in Australia are opposed to restricted stock on principle. Consider whether the issue raised is in relation to RSUs not being right for your company, or is simply a result of a rigid application of guidelines.
  • Previous feedback not taken on board – if your company received a strike the prior year, action is expected this time. Consider the extent of changes made after the strike and if issues have been appropriately addressed.
  • Disconnect between pay and performance – confirm if executives are being rewarded while the business is underperforming. Check your vesting and payout data against peers to verify.
  • Weak performance hurdles – compare targets to consensus, market guidance, peer companies’ hurdles, and your own past performance. What was the market view at the time targets were set?
  • Large STIs paid out when TSR is in the red – proxy advisors and investors can take issue with large executive incentive payments when TSR is negative. Even though TSR can be poor when lagging fundamentals are strong (such as earnings), many can miss this point. Confirm if the TSR truly reflects management performance or is merely a reflection of an industry outlook.
  • Approach to exclusion of measures not in line with circumstances – many companies use underlying measures adjusted to exclude expenses like depreciation or impairment charges. The intention would be to remove the effects of genuinely unusual items over which management has little direct influence, not to inflate results. This can be an issue even with a statutory measure. Targets may be set artificially low due to the impact of a one-off expense, such as M&A costs, affecting the base year.  Assess whether exclusions are valid or have not occurred when they should have done.
    • It is also worthwhile checking the board’s historic practice on making adjustments. Have you been consistent in the application of the principles for making adjustments, both positive and negative?
  • Significant non-financial issues ignored – issues such as serious safety incidents, reputational damage, cyber breaches, or poor conduct at the executive level should factor into remuneration decisions. Consider if any incidents in the year are appropriately reflected in outcomes.
  • Challenges across jurisdictions – challenges can arise when pay structures reflect a jurisdiction’s norms, but shareholders are based elsewhere and expect something different. Assess where your shareholders are based and if the differences can be explained.

3. Make a judgement

Judge if what your company has done is right, wrong, or a bit of both. Is what has been said about your remuneration confirmed? Or does it not have substance? Does your remuneration framework need to change?

  1. Admit the facts

You were right: the objections did not have substance, but may not have been explained in the Remuneration Report or NoM clearly enough. It would have been preferable to have clear disclosures prior to the AGM, but the strike has happened and all you can do now is set the record straight. This is not reason to let any disdain show for investors and proxy advisors that misread your disclosures. Instead, be forgiving and consider that some investors and all proxy advisors have thousands of resolutions to consider during AGM season. Show humility and apologise that the company failed to explain the remuneration approach in straightforward language. An independent review of disclosures can help ensure this issue is avoided next time.

You were wrong: the objections had substance. Evaluate the cause and materiality of the failure. Identify ways it can be rectified. In this case, you tell the proxy advisor or investor that they were correct and thank them for bringing this oversight to your attention. It takes humility, but it is the right thing to do, and your admission and accountability will be well received.

5. Take action – decide if you need to change it

Sometimes, a decision to adjust remuneration frameworks to keep investors and proxy advisors happy is less trouble than sticking steadfastly by your original plan.

For example, consider the majority of the ASX that use relative TSR. Many investors, directors and executives believe it is ineffective at incentivising a focus on levers of value. Yet, companies use it because they get less grief ticking an external stakeholder’s box.

6. Get help

Remuneration is complex. To strike the right balance, the RemCo must integrate business strategy, financial measures, investment market positioning, accounting, finance, behavioural economics, legal compliance, taxation, communications, measurement, and co-ordination.

A RemCo chair can rarely cover it all in enough detail. Many companies possess internal resources that can be consulted, others may not. Regardless, independent advisors have expertise and can provide tailored solutions. Some RemCo chairs may prefer an advisor not employed by the company’s management to provide an alternative perspective and avoid conflicts of interest.

7. Change it, or leave it.

If you need to change the framework, be aware that this will mean you must measure something differently, pay for it differently, vest it differently, tax it differently, account for it differently, disclose it differently, and seek support for it differently. It can be a lot of work. There is also the risk that you mess up one of these things on the journey and wind up no better off than you were before in the eyes of your shareholders.

If you do not need to change it, perhaps it just needs some refinement. This may be in how the remuneration is disclosed, explained, and supported. Get a fresh pair of eyes to look at how it was done last time and identify improvements.

8. Communicate it better.

Pick a time when stakeholders are not distracted with hundreds of other resolutions and engage with them. Carefully explain the ‘what’, ‘why’, and ‘how’. Directly respond to their issues and concerns. Tell them how you have changed the framework to accommodate their wishes, or if no changes, how you will improve your disclosure next time.

All the best, RemCo Chairs!