Proxy Voting Activity Report for July – December 2014

1. Proxy Voting in Australia

In the six month period to 31 December 2014:

(Note: numbers for the previous six month period to 30 June 2014 are provided in parentheses for comparison)

  • CSC’s votes were exercised on 1510 (420) resolutions at 294 (85) meetings of 277 (84) companies.
  • CSC abstained on 24 (1) resolutions at 16 meetings 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% (92%) of resolutions put to shareholders.

 

 

Key Statistics Jun to Dec
2013
Dec to Jun
2014
Jun to Dec
2014
Number of company meetings where votes were submitted 266 84 294
Number of resolutions voted on 1372 420 1510
% of meetings where remuneration reports were considered 89% 59% 90%
% of remuneration reports that were not supported by CSC 12% 8% 14%
Total resolutions for a board spill
(in the event of a "second strike") considered
13 0 13
Resolutions for a board spill supported by CSC        1 0 0
% of resolutions where director elections were supported 93% 99% 95%
 
 

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.

Between July and December 2015 CSC‘s votes were exercised in respect of 265 resolutions seeking support for remuneration reports.CSC voted against 36 of those reports for failure to meet the expectations outlined above.

Over the past six months, CSC’s votes against remuneration reports have increased slightly.This reflects:  (1) poor disclosure and poorly-designed policies at small-cap companies; (2) non-transparent performance hurdles for executive directors; and (3) payments and share grants not demonstrably aligned with the performance of 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: (1)  the remuneration report; (2) any two-strikes board spill; and (3) from hedging incentive remuneration.  This effectively removes 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 board size).

In line with our investment-manager recommendations, CSC voted on 12 spill resolutions during the period, supporting company recommendations against the resolutions in all instances.

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 18 meetings during the period.   In line with our investment manager recommendations, CSC supported all 18 proposals.  

 

3. Director Election

CSC considered 645 proposals for director elections, rejecting 35 proposals. “Overboarding”, or directors considered to be overcommitted, and affiliated directors serving on key governance committees were the most common reasons given by CSC’s investment managers in support of recommendations against appointments/reappointments.

4. Constitutional matters

CSC supported proposals for 20 out of 21 constitutional amendments sought by companies.CSC abstained on one proposal on manager advice.This channel has historically been used by some companies to limit board size without recourse to shareholder views.This practice has not been generally apparent in 2014.
 

5. Shareholder proposals

Four proposals by parties external to company boards were brought to meetings during the period. Those proposals related either to: (1)  independent requests to join company boards; or (2)  to activist requests for enhanced disclosure on carbon financing, addressed to banks. CSC did not support any of these proposals. Our corporate engagement agent, Regnan, has engaged with companies on each of these initiatives, with one exception to date.

 

6. Proxy Voting at meetings of international companies

CSC contracts CGI Glass Lewis (CGL) to provide a research and voting service for all of our unimpeded* International Equities holdings.  This relationship has increased CSC’s voting transparency in international markets. 

Over the six  months to December 2014, CGL has voted at 590 (2358) meetings on 5,291 (27,791) resolutions in 48 Countries over 8 regions (excluding Australia).

*Clause 4.3 of CSC’s Service Agreement with CGL notes:  “It is understood that, in markets that require share blocking, account re-registration or any other additional steps or impediments to voting, Glass Lewis shall refrain from submitting proxy votes on Customer’s behalf, unless previously agreed to by the Parties…”


CSC's International voting July to December 2014 
Issue CategoriesNo of resolutionsResolutions not supported
No.%
Director election 2058 1686 15%
Execution remuneration 80 66 25%
Non-executive remuneration 208 203 2.5%
Issue of new shares 54 47 14.9%
Remuneration Report 180 141 27.7%
Financial scheme/ reconstruciton of capital 19 15 26.7%
Constitution/ articles of association change 180 124 45.2%
Appoint/ Reappoint Auditor 243 212 12.8%
Takeover or merger acquisition 118 111 6.3%
SHP 25 9 64%
SHP - Environment 8 0 100%
SHP - Social 5 13 0%
All Other Proposals 2143 1908 11%