November 30, 2011
12 Australian Companies Receive First ‘Strike’ Vote
– Daniel Smith, ISS’s Australian Research
Twelve Australian ASX 300 companies have received a first “strike” under the new “two strikes” law in Australia that allows shareholders to oust directors if a company’s remuneration report receives 25 percent or more “against” votes for two consecutive years.
The controversial rule, which is part of an amendment to the Australian Corporation Act that went into effect July 1, requires companies to put a “spill” motion on the ballot of the annual general meeting at which a second strike could occur. If the spill motion passes with a simple majority, the company must hold a general meeting within 90 days at which all directors, except managing directors, stand for reelection. The legislation, which applies to any Australian-domiciled company, prohibits key management personnel or their closely related parties from voting on the remuneration report and on the spill resolution.
The 12 companies with first strike votes so far are: Bluescope, Crown, Dexus, Pacific Brands, Watpac, UGL, GUD, Austock, Tassal Group, Sirtex Medical, Perpetual, and Globe.
The two strikes rule has increased the focus on executive pay in the Australian market, but has otherwise received mixed reviews, with some stakeholders concerned that shareholders could use the rule as a way of ousting directors instead of focusing on remuneration. They fear it could dilute the existing feedback mechanism without actually curbing any of the pay excesses. An advisory vote on remuneration packages has been required in Australia since 2005.