Proxy Voting Report July to December 2013

1. Proxy Voting Outcome Summary

1.1 Overview

In the six month period to 30 December 2013:

  • CSC’s votes were exercised on 1372 resolutions at 266 meetings of 252 Australian companies.
  • CSC abstained on a further 11 resolutions, primarily for reasons of capital management on the advice of CSC’s investment managers.
  • The majority of contentious resolutions continue to relate to the elections of directors and incentive issues, including remuneration.
  • CSC supported 89% of resolutions put to shareholders.
  • CSC supported all resolutions at 178, or 67% of meetings.

Figure 1. CSC Proxy Voting in Australia Jul 2012 to Jun 2013

Key Statistics

 Jul to Dec 2012Jan to Jun 2013Jul to Dec 2013
Number of company meetings where votes were submitted 264 73 266
Number of resolutions voted on 1,310 364 1372
% of meetings where all resolutions were supported 66% 86% 67%
% of meetings where remuneration reports were considered 89% 66% 89%
% of remuneration reports that were not supported by CSC 29% 6.2% 12%
Total resolutions for a board spill (in the event of a "second strike") considered 21 3 13
Resolutions for a board spill supported by CSC 1 0 1
% of resolutions where director elections were supported 91.3% 97% 93%

 

1.2 Remuneration

  • CSC supports compensation arrangements for management and directors that are reasonable and fit for the purpose of attracting and rewarding talent. In assessing non-binding resolutions to adopt remuneration 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.
  • During the proxy voting period of July to December 2013, CSC‘s votes were exercised in respect of 238 resolutions seeking support for remuneration reports. CSC voted against 29 of those reports for failure to meet the expectations outlined above.
  • Along with other investors CSC observes a trend for improvement in board remuneration practices during the period. Exceptions to this trend included opposition by CSC managers to remuneration reports and payments to directors and executives due to poor disclosure, and poorly-designed policies at companies.
  • CSC also voted against specific grants to directors due to insufficiently explained performance hurdles, large payments not demonstrably aligned with performance and share grants to non-executive directors.
  • Where a company receives more than 25% of votes against its remuneration report in two consecutive years, the Corporations Act now gives shareholders the right to vote on whether an entire board should stand for re-election. These reforms also prohibit key management personnel from voting on the remuneration report and any two-strikes board spill, as well as 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 their number of directors).
  • CSC voted on 13 spill resolutions during the period, supporting company recommendations against the resolutions in all but one instance.
  • 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 38 meetings during the period. CSC found insufficient reasons to support 2 of these proposals.

1.3 Director Election

CSC considered 564 proposals for director elections, rejecting 37 resolutions during the period. Concerns about deficits in director independence continue to underlie most rejections.

A number of companies also attracted CSC’s votes against the re-election of directors whose attendance has been inadequate during the year. Relevant directors at these companies all failed to attend 75% or more of board and committee meetings without adequate explanation.

Unusually, CSC abstained from voting upon a director election during the period.

1.4 Constitutional Matters

CSC rejected proposals for 3 constitutional amendments among a field of 38 amendments sought by companies. CSC opposed these proposals because the proposed amendments were seen as attempts to limit board size without recourse to shareholder views.

1.5 Proxy Voting at meetings of international companies

Upon the introduction of a new agreement with CGI Glass Lewis (CGL) on 1 July 2013, CGL has provided a research and voting service for all unimpeded International Equities holdings in accordance with CGL voting policies in each country on CSC’s behalf. (It is noted that we do not vote in markets that require share blocking, account re-registration or any other additional steps or impediments to voting.) This service brings enhanced reporting on the voting of CSC’s interests in relevant markets.

From July 2013 CGI Glass Lewis has researched and voted upon CSC’s International Equities holdings in accordance with CGI GL’s voting policies. During this period CGI GL has voted at 511 meetings on 3,567 resolutions in 41 Countries over 7 regions (excluding Australia). Eighty nine percent of CSC’s votes have been exercised in support of management proposals at meetings held outside Australia.

Figure 2. Key Statistics for International proxy voting

CSC's International voting Jul to Dec 2013 
Issue CategoriesNo of resolutionsResolutions not supported
No.%
Director election 12772 1914 15%
Execution remuneration 250 48 19%
Non-executive remuneration 647 137 21%
Issue of new shares 89 9

10%

Remuneration Report 1117 248 22%
Financial scheme/ reconstruciton of capital 35 10 29%
Constitution/ articles of association change 901 231 26%
Appoint/ Reappoint Auditor 1388 157 11%
Takeover or merger acquisition 88 7 8%
SHP 444 294 66%
SHP - Environment 81 79 98%
SHP - Social 112 81 72%
All Other Proposals 9867 1950 20%
Total 27791 5165 19% 

Figure 3. Ballots by Region and Vote Status

Ballots by Region & Vote status