4th February, By Megan Boston, CEO Omni Market Tide
One of the most notable trends in the 2015 AGM season was the number of listed companies receiving first and second strikes on remuneration reports despite the majority of shareholders not voting on these resolutions.
Last year, nine companies received first strikes against their remuneration report, while three companies received second strikes.
However, of six of the nine companies that received their first strike, fewer than 60 per cent of shareholders voted on the resolutions. In one case, just 17 per cent of shareholders that were eligible to vote on the remuneration resolution participated in the vote. Moreover, one of 2014’s top-performing companies in terms of share price appreciation received its first strike with just 25.09 per cent of votes cast against and just 42.9 per cent of eligible shareholders voting.
An engineering services firm is another example of the trend. It received a vote of 30 per cent against its remuneration report, which was driven by less than 12 per cent of shareholders because of the lack of spread on its share register. This meant more than 85 per cent of shareholders were in favour of the remuneration report.
This situation has occurred despite Australian companies spending large amounts of money on shareholder engagement and registry services. The Corporations and Markets Advisory Committee (CAMAC) discussion paper on the AGM and shareholder engagement found that Australian listed companies spent $200 million on share registry services, $120 million on AGMs and $350 million on shareholder engagement. Yet only five per cent of the top 200 companies are drawing more than 500 shareholders to their AGM.
It all points to low levels of shareholder engagement – if more shareholders were making an informed vote then these companies might have avoided a strike. But the responsibility lies with the company to better engage with their shareholders and make it easier for them to vote.
The question is – what could these companies have done to change the outcome? How could they – and other companies – improve shareholder engagement and ensure that the outcomes of votes are representative of the majority base? And how can they do so in a more efficient and, more importantly, cost effective way?
As a company’s shareholder base grows, the cost and time associated with driving shareholder engagement only becomes costlier and more time intensive. And as corporate governance continues to evolve, companies should be interacting with shareholders on a far more regular basis.
Investors want to know more about the companies they are putting their hard-earned money into and chief executives expect their investor relations teams to actively and frequently engage with and supply information to shareholders.
The AGM system also needs to be improved to ensure all shareholders have their say more than once a year and that the outcome is representative of the majority. It’s often said that AGMs are symbolic of how we used to do things – paper based, backward in focus, physical in their organisation and process. This leads to low shareholder voting levels and low levels of shareholder engagement.
One solution is to make the process easier by making the voting process mobile through a shareholder voting app. My company, Omni Market Tide, is Australia’s only mobile shareholder voting app and, after launching in July 2015, has already registered two ASX20 companies for the investor relations app and a partnership with registry service provider, Boardroom.
This mobile technology is allowing Australian shareholders to vote through smart devices, rather than rely on the paper and post method, but it’s a relatively new technology.
We hope that by increasing stakeholder engagement throughout the year and giving investors access to company data and communique through mobile technologies, companies can build trust and respect. This is ultimately the best way to avoid being caught off-guard at AGMs whilst enabling shareholders to make informed decisions.
Our international counterparts are doing it well. In the US, 105 companies now hold virtual shareholder meetings, up from 88 in 2014. This method is believed to have boosted shareholder engagement, driving voting participation almost threefold. Additionally, the ability to vote through a mobile platform has seen a 70 per cent increase in voting.
The companies we are currently talking to and working with see the benefit in being a first mover in this area. They understand that mobile technology for shareholder engagement can help eliminate the inefficiencies of trying to manage disparate retail shareholder groups, particularly when needing to mobilise support for things such as a Share Purchase Plan. It also gives them greater insight into the shareholder to better understand their needs, showing their commitment to greater transparency and strong governance.
Australian listed companies can no longer afford to spend money on inefficient methods of shareholder engagement which leads to low voting participation and in some cases, unexpected outcomes at AGMs. Whilst relatively new, companies need to embrace new technologies to increase shareholder engagement and ultimately, get the outcomes that both they and the shareholders deserve.