Proxy Voting Report July to December 2012

1. Proxy Voting in Australia

1.1 Overview

In the six month period to 31 December 2012:  CSC’s votes were exercised on 1,310 resolutions at 264 company meetings.

  • The majority of contentious resolutions continue to relate to the elections of directors and incentive issues, including remuneration.
  • CSC supported 87% of resolutions put to shareholders.
  • CSC supported all resolutions at 66% of meetings.

 

 Figure 1.  CSC Proxy Voting in Australia Jul to Dec 2012

CSC Proxy Voting in Australia Jul to Dec 2012

Key Statistics

Number of company meetings where votes were submitted   264
Number of resolutions voted on 1,310
Percentage of meetings where all resolutions were supported 66%
Percentage of meetings where remuneration reports were considered 89%
Percentage of remuneration reports that were not supported by CSC 29%
Total resolutions for a board spill (in the event of a "second strike") considered 21
Resolutions for a board spill supported by CSC 1
Percentage of resolutions where director elections were supported 91.3%

1.2 Remuneration

Remuneration Reports

Non-binding resolutions to adopt remuneration reports were introduced in 2005.  In assessing these reports CSC expects to see clear and concise remuneration reports that disclose all relevant information, facilitate understanding of the company’s remuneration policy and are aligned with shareholder interests.

Hurdles against which this expectation is assessed include:

  • clear disclosure
  • sufficient detail of total remuneration for executive and non executive directors including the level of aggregate fees paid, appropriate retirement benefit accruals and any participation in short and long term incentive schemes
  • clear disclosure of total remuneration of chief executives including short and long term incentives, details of performance hurdles and termination benefits.

While the payment of dividends on unvested shares all but disappeared from the S&P/ASX200 this voting season, the use of adjusted earnings and payment of bonuses for performance below guidance remained at issue, along with vesting on incentives upon a change in company control.  These concerns attracted CSC’s votes against the recommendations of company management at several companies last year.

In the period Jul to Dec 2012 CSC ‘s votes were exercised in respect of 237 resolutions seeking support for remuneration reports.  CSC voted against 54 reports for failure to meet the expectations outlined above.

Corporations Act Amendments (Improved Accountability on Director and Executive Remuneration) Bill

Second strikes and subsequent resolutions to spill the board

Amendments to the Corporations Act passed the Senate in June 2011, giving shareholders the right to vote on whether an entire board should stand for re election where a company receives more than 25% of votes against its remuneration report in two consecutive years.  The reforms also prohibit key management personnel from voting on the remuneration report, any two strikes board spill and from hedging incentive remuneration.  These changes have removed the ability for executives to vote and approve their own pay.

Shareholder approval is now also required for a declaration of “no vacancy”,  previously used by boards to limit the number of directors on boards and the ability of shareholders to determine board size and composition.

CSC voted on 21 spill resolutions including 1 against the recommendation of company management at an ASX 200 company, where a second strike did not eventuate and the spill resolution was therefore not put to the meeting.  In this instance CSC accepted advice from ACSI against all 8 resolutions on the agenda which represented material departures from best practice standards adopted by CSC voting policy.

Non-Executive (NED) Director Remuneration

Investors were asked to approve an increase in the maximum aggregate level of fees that could be paid to the company’s non-executive directors at 39 meetings during the period.  CSC found insufficient support for 5 (13%) of such proposals .

Incentive Plans

CSC’s votes were submitted on a total of 217 proposals (not including an increase in the NED fee cap or remuneration reports).  CSC voted against 40 (18%) of those proposals for reasons including poor disclosure and opaque and unexplained performance metrics  .

1.3  Director Elections

CSC considered 591 proposals for director elections during the period.

  • CSC supported the election of directors to 540 board seats and  voted against 50.
  • 1 proposal was not voted upon following a last minute change in candidature.
  • Reasons for voting against the election/re election of directors included poor board composition, poor performance, inadequate disclosure on financial and governance matters and a failure to address concerns raised upon engagement.  CSC staff and advisers have focused particular scrutiny on board members who undertake commitments to multiple boards (‘overboarding’) and on the activities of affiliated directors, particularly on key governance committees.

1.4   Constitutional matters

Seventy eight resolutions relating to constitutional matters were considered by CSC during the period, most of which were routine. 

  • CSC rejected a resolution brought by the board of an ASX 200 company to limit the size of the board. 

2.  Proxy Voting at meetings of international companies

CSC’s international equities managers are mandated to vote CSC’s holdings wherever practical and consistent with CSC’s ESG policy.

International voting trends increasingly support:

  • advisory votes on remuneration
  • independence of board chairs and CEO succession planning
  • removal of CEOs from compensation committees
  • conditions for the awarding of stock options
  • reduction of supermajority voting requirements.