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|
|Dec to Jun|
|Jun to Dec|
|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
|Resolutions for a board spill supported by CSC||1||0||0|
|% of resolutions where director elections were supported||93%||99%||95%|
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 Categories||No of resolutions||Resolutions not supported|
|Issue of new shares||54||47||14.9%|
|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 - Environment||8||0||100%|
|SHP - Social||5||13||0%|
|All Other Proposals||2143||1908||11%|