Five trends proxy advisors are expecting in AGM season 2021

  • Published  28 Sep 2021
  • Renee Walker
    Renee Walker
    BWD Alumnus - Head of Sustainability Services

As AGM season rolls around for another year, organisations are facing mounting pressure to take ESG seriously. CEOs are also struggling to keep up with the demand for better ESG reporting. Institutional investors and proxy advisors are behind much of this pressure, supported by the increasing evidence that ethical business is good business.

In this article, we’ve compiled the top five shareholder concerns that proxy advisors expect to dominate the Australian AGM landscape

Board diversity

While we are seeing green shoots with respect to gender diversity in Australian boardrooms (in August, every company in the ASX200 had at least one female board member), the pace of change continues to underwhelm investors. Proxy advisors have increased their advocacy, issuing protest votes against companies with inadequate female board representation, and pushing for gender targets of 30-40% to weed out any tokenistic appointments.

Corporate culture

Bullying, harassment and executive behaviour are also under the spotlight this year. The recent Royal Commission into corporate culture, the National Inquiry into Sexual Harassment in Australian Workplaces, as well as the #metoo movement have encouraged women to come forward regarding allegations of sexual assault in the workplace. Whistleblower complaints are also under close review, as investors dig deeper into potential corporate misconduct.

Remuneration

There’s been an increase in remuneration strikes during AGMs held in H1 2021 (five strikes compared to only one during the same period last year). Remuneration strikes occur when shareholders vote against bonuses for executives, either because performance has not met guidance or for unethical business practices.

Executive pay rises are set to return for those businesses that have maintained profits and market share through the pandemic. Last year, only 25% of senior executives received pay increases and boards will be looking to reinstate these rewards to retain their best talent.

Climate risk and reporting

Shareholders continue to ask Australian organisations to commit to the Paris Agreement and report on climate risk in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations. This is a global trend and these climate-related campaigns are beginning to target individual directors for allegedly breaching their fiduciary duties. The Australian Prudential Regulation Authority (APRA) initially drew the link between directors duties and climate risk back in 2017, and has continued to underscore the need for financial institutions to take the issue seriously. Laggards in this space will increasingly find an investor target on their back.

Oversight on lobbying and political payments

More than ever, shareholders are seeking to ensure that corporate lobbying activities match the company’s public position on key ESG issues. Shareholders have put forward more than 40 resolutions asking for more disclosure on lobbying payments, policy and political contributions (with almost all of these proposals filed in the US). Concerns over lobbying practices by big tech firms like Facebook and Amazon are behind shareholder requests for more disclosure – resolutions on lobbying have increased year-on-year since 2017.