The "two strikes" rule is a corporate governance rule in Australia that requires shareholders to vote on whether to hold a re-election for company directors if a company's remuneration report receives a "no" vote of 25% or more at two consecutive annual general meetings (AGMs):
First strike If a company's remuneration report receives a "no" vote of 25% or more at an AGM, the company receives a "first strike".
Second strike If the company receives a "no" vote of 25% or more at the following AGM, the company receives a "second strike".
Spill vote Shareholders vote at the second AGM to decide whether the company's directors must stand for re-election within 90 days. A simple majority of eligible votes is required for this resolution to pass.
The "two strikes" rule was amended to the Corporations Act 2001 in 2011. It has been a topic of debate among stakeholders, with some arguing that it gives shareholders too much sway over remuneration structuring.
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