30 Sep 2011

Voting on the remuneration report: Government changes rules

Company chairmen will be able to vote undirected proxies on the remuneration report... eventually.

Recent amendments to the Corporations Act said that chairs both could and couldn't vote undirected proxies on the remuneration report. A new Bill aims to remove the contradiction and make it clear that the chair can vote undirected proxies on the remuneration report if the proxy "expressly authorises the chair to exercise the proxy".

Unfortunately, the new Bill will not be of any use for the current AGM season. The Bill is still before Parliament and has been referred to a committee. The committee does not expect to report back to Parliament until mid November.

Accordingly, while the Bill is welcome news, companies are still left with the options that we canvassed in our recent Alert on this topic:

  • make no change to the company's usual proxy form and ensure that the chair does not vote any undirected proxies on the remuneration report resolution;
  • change the company’s proxy form with a view to ensuring that there are more directed proxies, which can be counted in the vote on the remuneration report;
  • suggest to shareholders that they should consider nominating a proxy other than a member of the company’s key management personnel for the purposes of the remuneration report resolution; or
  • apply to ASIC for relief (which will be considered on a case-by-case basis).

If a company has proposed an amended proxy form (the second approach above) to have a directed proxy notwithstanding the failure of the proxy appointor to mark the for, against or abstain boxes of the remuneration report resolution, the new law when passed should not affect those proxies if appropriately drafted as those proxies are not undirected proxies.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.