An increasing number of investors are using the annual general meetings of ASX-listed companies to have their say about climate change and other issues, according to new research.
Macquarie Securities reveals that there has been an increase in the number of
of shareholder resolutions put forward at AGMs over the last two years.
In the 2019 AGM season 12 out of the 15 resolutions put forward by shareholder groups related to climate change.
The resolutions related to issues such as transition planning disclosure, lobbying inconsistent with goals of the Paris Agreement and the public health risks of coal operations.
It is required that an amendment to a company’s constitution by the way of a special resolution with at least 75 per cent support in order for a shareholder resolution to pass.
If the special resolution passes, an ordinary resolution will be put forward which requires 50 per cent support to pass.
Macquarie also reviewed voting on remuneration reports. It found that of the 181 companies it analysed 14 companies received a strike, or 7.7 per cent. This is down from 9.3 per cent in the previous year.
Despite the decrease, this strike rate is higher than the historical average of 7.2 per cent, when the legislation was introduced in 2011.
The companies that received strikes in the 2019 AGM season are: Aurelia Metals, amaysim Australia, Carsales.com, Cromwell Property Group, Evolution Mining, GTN, Harvey Norman, Karoon Gas, Lovisa Holdings, Ramsay Health Care, Seek, Sonic Healthcare, Westpac Banking Corporation and Worley Parsons.
Interestingly, the incidence of strikes in the ASX 100 was higher than e-100, at 10.8 per cent compared with the e-100 at 6.3 per cent. The ASX 100 strike rate was the highest since the legislation was introduced.
Macquarie’s quant team reveals a correlation between underperformance and strikers. It found that stocks underperformed by around 6 per cent in 120 days prior to the strike and a further 6.7 per cent of underperformance 120 days after the event.
Macquarie says: “This relationship outcome illustrates that there is often increased scrutiny on poorly performing companies and their executive incentive structures.”
Under the rules covering voting on remuneration reports, if 25 per cent or more of the shareholder votes cast at a listed company’s annual general meeting oppose the adoption of the remuneration report, the company has a first strike recorded against it.
A vote against the remuneration report the next year is counted as a second strike. Following a second strike a spill resolution must be put to shareholders at the same meeting. A spill of the board occurs if 50 per cent or more of eligible voters are in favour.
A spill meeting must be held within 90 days of a passed spill motion. If the spill motion is not passed the slate is wiped clean.