The Government has responded to stakeholder concerns regarding undirected proxy votes cast by the chair on executive remuneration resolutions.
The Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011 passed last year provides for greater transparency and accountability in relation to remuneration for company directors and executives. Specifically, the Act addresses conflicts of interest in the remuneration setting process by prohibiting key management personnel from voting on remuneration matters.
However, an exception was provided where shareholders give an undirected proxy to the chair of an annual general meeting and the shareholder provides their informed consent for the chair to exercise the proxy. Concerns were raised as to whether this exception applies to the non-binding vote required under section 250R of the Corporations Act 2001.
Last year, the Government acted to address these concerns by introducing an amendment into Parliament through the proposed Consumer Credit and Corporations Legislation Amendment (Enhancement) Bill.
However, the Parliamentary Secretary to the Treasurer, Bernie Ripoll, has intervened to fast-track an amendment through separate legislation, the Corporations Amendment (Proxy Voting) Bill 2012, which was introduced into Parliament today.
The amendment will clarify that the chair of an AGM, who is a member of the company’s key management personnel, will be able to exercise undirected proxies on the non-binding vote on remuneration in cases where a shareholder provides their informed consent for the chair to exercise the proxy.
The Government has listened to the concerns of business and acted promptly to clarify the law in time for the end of the financial year and upcoming AGM season. These changes will provide certainty for many companies currently preparing their notice of meeting papers and will strengthen the Government’s remuneration reforms.
24 May 2012