Directors are facing unprecedented scrutiny following many
high-profile cases that were uncovered by the Hayne Royal
Commission, AUSTRAC, the media or were self-reported.
Many executives have either resigned, been terminated or
have had their pay cut as a result.
Investors and proxy advisors also expect that non-executive
directors are held to account for perceived failures. Investors
are dissenting at the AGMs of issuers where these failures
occurred, but personal accountability is also being assigned
to individuals and they are being targeted by investors at
other organisations where they hold board positions.
Following the Hayne Royal Commission, directors are
expected to have a greater grasp on company culture
including the setting, monitoring and articulation of it. As
non-executives, directors may have limited ability to influence
culture, but this expectation highlights the ever-expanding
role of directors.
Public controversies aside, investors and proxy advisors
continue to assess the structure of boards, including
independence and diversity, and vote against individuals
based on the composition of the entire board. The workloads
of individual directors are also assessed to ensure they are
...personal accountability is also being assigned to individuals and they are being targeted by investors at other organisations where they hold board positions.
As part of the campaign for greater accountability, annual
director elections are being sought by ACSI and State Street
Global Advisors, among others. Already the norm in the US
and UK, this would see directors face the ballot box at each
AGM instead of the usual three-year term.
Proponents for annual elections say this promotes greater
accountability including ensuring chairs of nomination and
remuneration committees can be held to account for a lack
of diversity or misaligned pay outcomes. Detractors say
directors could be punished for short term ‘failures’ which
may prove successful over the medium to long-term.
Average support for issuer-endorsed directors in 2019
was 95.3%, slightly down on the 95.5% support in 2018.
Excluding withdrawn elections, there were 42 director
elections that attracted more than 20.0% of votes against
in 2019, including one endorsed director who failed to be
re-elected. This is broadly in line with 2018 when 45 directors
received more than 20.0% against.
- Assess the independence of your board. Are
the interests of all shareholders protected?
- How diverse is your board? Think ethnicity,
gender, age, skills, geography
- Consider the tenure of directors. Is director
succession going to plan? Have you disclosed
your succession plan to the market?
- The ASX Corporate Governance Council
recommends issuers disclose a board skills
matrix, which is an opportunity for you to
demonstrate the skills of your board and
articulate succession planning
This article was originally published in Computershare and Georgeson's report - 2020 AGM Intelligence: the driving forces behind AGM outcomes. To download the full report, click here.