heading towards 'two strikes'

At the Nov 12 AGM item 3 on the agenda was: 'To consider and act on an advisory vote regarding the approval and compensation paid to certain executive officers.' ie, Executive Compensation.

Result: For, 69%. Against, 30%


Presently, the Corporations Act 2001 (Cth) requires a listed company to put its remuneration report to a non-binding shareholder vote at the AGM. The Corporations Act, however, does not set out any consequences where a board proceeds with its remuneration policies despite a negative shareholder vote.
The Act provides for a new 'two-strikes and re-election' process as follows:

'First strike' – where a company's remuneration report receives a 'no' vote of 25 per cent or more of the votes cast on a resolution that the remuneration report be adopted.

Where 'comments' were made on the remuneration report that were considered at the AGM where there was a negative vote of 25 per cent or more, the company's subsequent remuneration report must contain an explanation of the Board's proposed action in response, or, if the Board does not propose any action, the Board's reason for inaction.

'Second strike' where a company's subsequent remuneration report receives 'no' vote of 25 per cent or more of the votes cast on a resolution that the remuneration report be adopted.

A 'spill resolution' is to be put to shareholders at the same AGM as the 'second strike'. A spill resolution will be passed if 50 per cent or more of eligible votes cast are in favour.

A 'spill meeting' is required to be held within 90 days of the passed spill resolution. The directors required to stand for re-election at the spill meeting (other than the managing director) are those individuals that were directors at the time the directors resolved to put the directors' report to the most recent AGM. Failure by the directors to hold a spill meeting within 90 days will be an offence.

The term of office of a director who is re-appointed at a spill meeting will run as if the re-appointment had not occurred.