Intelligence Report (AU) - February 2013

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Our latest Intelligence Report covering company meetings held in Australia during 2012

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Intelligence Report (AU) - February 2013

  1. 1. Intelligence Report > Insights from company meetings held in 2012 - Australia February 2013 COMMERCIAL IN CONFIDENCE 1certainty ingenuity advantage
  2. 2. IntroductionWelcome to Computershare’s fourth annual report of company meetings held in Australia during 2012. This unique publicationprovides you with insights into the trends, issues and innovations that dominated your most significant annual securityholder event.In 2012 we observed in Computershare client companies a two-speed voting pattern, where voting participation was up for thelarger companies but down ‘across the board’. For most issuers, 90% of proxy votes were rushed through the door in the final daysbefore cut-off. In a concerning but unsurprising trend given what we’ve seen in recent years, very small numbers of securityholdersattended meetings in person.Investors continued to swap paper for convenience in 2012 with a record number of securityholders lodging their proxy vote online.Institutional investors also made their online presence felt, lodging nearly a quarter of the total issued capital voted via IntermediaryOnline, Computershare’s dedicated web service for custodians and nominees.In 2012 we saw the first group of companies face their ‘second strike’ and contemplate the practical implications in regards tocommunicating with their securityholders and planning for a potential spill meeting. And in June 2012 Parliament passed anamendment to the two strikes legislation in order to make certain that the Chair can vote undirected proxies on the remunerationreport resolution with an express authority.Also in this report our Chief Legal Counsel and Company Secretary, Dominic Horsley, discusses the Corporation and MarketsAdvisory Committee (CAMAC) review on the ‘The AGM and shareholder engagement’; summarising Computershare’s response,discussing the key themes contained in submissions from across the industry, and envisaging what might be next in this review.I hope you find the insights in this report to be useful, and please do contact me if you have any questions or comments.Kind regardsGreg DooleyManaging DirectorComputershare Investor Services & Funds Servicesgreg.dooley@computershare.com.au 1
  3. 3. Insights from company meetings held in 2012 Highlights from 2012 Attendance and voting Very small numbers of securityholders Voting ‘across the board’ appears to …but voting participation continues are turning up to meetings be resuming its downward trend… to increase in the ASX200 UP 5.4% 0.17% 42.8% 62.0% from 2011 of securityholders of issued capital of issued capital attended meetings was voted across was voted across in 2012 DOWN all meetings in DOWN all meetings in 10.5% 7.6% from 2012 from the ASX200 2011 2011 Most proxies are submitted in the Overvoting continues to cause last few days before proxy close headaches for issuers Over 90% In 2012 we of votes were lodged identified 187 cases in the last 2 of overvoting business days before affecting the proxy close 117 issuers date Report methodology: The data contained throughout this Intelligence Report is based solely on Computershare’s client meetings, unless otherwise denoted. As a leading provider of share registry and meeting management services, we are uniquely capable of analysing and reporting on data collected from hundreds of meetings each year. 2
  4. 4. Insights from company meetings held in 2012 Highlights from 2012 Use of technology Securityholders are swapping Investors show their support for mobile device Institutional investors show strong paper for convenience voting – a new and convenient way to vote support for online voting 23.3% UP 12.6% One company 23.3% of UP 60.7% from reported that 57.8% the total issued from of securityholders 2011 capital voted in 2012 2011 voted online in of its total online was lodged via our meetings that offered votes were lodged via dedicated online service online voting mobile devices for institutional in 2012 investors Voting on the remuneration report More companies received a ‘strike’ 25 companies received a second strike How they decided – in 2012 than in the previous year in 2012, requiring them to take a vote show of hands versus a poll on the spill resolution 124 companies 72% of received either a first Nearly a quarter companies decided or second strike of the companies who the remuneration compared with 114 received a first strike report resolution via companies receiving in 2011 received a a show of hands. a first strike second strike 28% conducted in 2011 in 2012 a poll. Report methodology: The data contained throughout this Intelligence Report is based solely on Computershare’s client meetings, unless otherwise denoted. As a leading provider of share registry and meeting management services, we are uniquely capable of analysing and reporting on data collected from hundreds of meetings each year. 3
  5. 5. Insights from company meetings held in 2012 Attendance and voting Attendance and voting Very small numbers of securityholders are turning up to meetings Over the last four years less than a quarter of one per cent of securityholders’ have been turning up to meetings each year. A continuous downward trend in attendance has been observed over the same period, with attendance dropping by approximately 10% per year. Proportion of securityholders attending meetings 2009 0.25% 2010 0.21% 2011 0.19% 2012 0.17% Figure 01: Very few securityholders show up to meetings and attendance levels are continuing to drop. 4
  6. 6. Insights from company meetings held in 2012 Attendance and voting A significantly smaller proportion of securityholders are attending meetings for companies in the ASX200 (0.13% in 2012) than is observed for all companies. The difference is even more apparent in ASX50 companies where only 0.09% of securityholders walked through the venue door in 2012. It appears that attendance may still not have yet hit its low. Proportion of securityholders attending by ASX index 0.11% 2012 0.11% ASX 50 0.11% 2011 0.09% 2010 0.14% 0.13% ASX 100 2009 0.12% 0.12% 0.15% 0.14% ASX 200 0.13% 0.13% 0.00 0.03 0.06 0.09 0.12 0.15 2009 2010 2011 2012 Figure 02: Larger companies see a significantly smaller proportion of shareholders walk through the venue door. 5
  7. 7. Insights from company meetings held in 2012 Attendance and voting Voting participation continues to increase in the ASX200 Our analysis of Computershare client meetings shows that there is a two-speed voting pattern; while voting in companies ‘across the board’ resumed its downward trend in 2012, voting participation is in fact much healthier in larger companies. Computershare clients in the ASX200 have seen a marked increase in the proportion of issued capital voted in the last four years; from 48.2% in 2009 to 62.0% in 2012, indicating that institutional holders are increasingly taking up their vote in larger companies. Proportion of issued capital voted by ASX index (all meeting types) 51.2% 2012 56.2% ASX 50 57.0% 63.2% 2011 50.9% 58.6% 2010 ASX 100 59.8% 63.3% 2009 48.2% 57.5% ASX 200 58.8% 62.0% 42.1% 41.4% ASX Other 42.3% 36.5% 0% 20% 40% 60% 80% 100% 2009 2010 2011 2012 Figure 03: Over the last four years, companies in the ASX200 have seen a marked increase in the issued capital voted across all meeting types. 6
  8. 8. Insights from company meetings held in 2012 Attendance and voting Voting ‘across the board’ appears to be resuming its downward trend In a 2012 securityholder survey, Computershare In 2012 the total number of securityholders voting across all Computershare client meetings slipped to 5.9%. The overall issued found that nearly half the capital voted was 42.8%, the lowest level seen in the last four years. In 2011 we observed a marginal increase in voting which respondents who said that pointed to a potential advance in securityholder engagement. However, an ‘across the board’ increase in engagement appears to be they wouldn’t vote in 2012 debatable given the downward voting trend that resumed in 2012. cited their small holding not making a difference as the reason. Proportion of securityholders voting and issued capital voted (all meeting types) 50% “I am generally happy with the direction of the company 40% 46.1% 46.3% and if I become unhappy I 44.1% 42.8% will sell out.” SURVEY RESPONDENT 30% 20% 7.5% 6.6% 6.9% 5.9% 10% 0% 2009 2010 2011 2012 Issued capital voted Securityholders voting Figure 04: Voting for all meeting types appears to have resumed its downward trend in 2012. 7
  9. 9. Insights from company meetings held in 2012 Attendance and voting Over the last four years, Scheme Meetings and AGMs have typically attracted the largest proportion of votes by issued capital. In 2012 the issued capital voted by meeting type was higher for Scheme Meetings (59%) than any other meeting type, followed by AGMs, with 47.4% of issued capital voted. Proportion of issued capital voted by type of meeting 42.8% 2012 Annual 48.3% General Meeting 50.6% 2011 47.4% 2010 31.2% General 37.0% Meeting 2009 33.3% 31.4% 39.4% Scheme 61.5% Meeting 54.4% 59.0% 0% 10% 20% 30% 40% 50% 60% 70% 2009 2010 2011 2012 Figure 05: Scheme meetings followed by AGMs have attracted the largest proportion of votes by issued capital. 8
  10. 10. Insights from company meetings held in 2012 Attendance and voting Few companies have adopted direct voting Nine Computershare clients (predominently in the ASX50) offered direct voting in 2012, down from ten in 2011. While adopted by only a handful of companies, the proportion of securityholders who vote in meetings where direct voting is used tends to be marginally higher than in companies who do not use this voting model. We also analysed companies before and after they adopted direct voting and observed no meaningful difference in voting participation. Proportion of securityholders who voted in meetings using direct voting vs. overall voting at all meetings in ASX50 8% 7.5% 6.8% 7% 6.4% 6% 6.5% 5.4% 6.2% 5.9% 5% 5.3% 4% 2009 2010 2011 2012 Overall voting in ASX50 Direct voting Figure 06: The proportion of securityholders who vote in meetings where direct voting is used tends to be marginally higher than in companies who do not use this voting model. 9
  11. 11. Insights from company meetings held in 2012 Attendance and voting Most votes are submitted in the last few days before proxy close Based on a sample of companies from the ASX50, in the lead up to AGMs in 2012 most retail securityholders voted in the first few business days after proxies were dispatched, yet just over 90% of issued capital voted via proxy was lodged in the last two business days. These findings are consistent with our analysis in previous years which clearly demonstrates that retail securityholders move quickly and vote shortly after receiving meeting materials, while votes from institutional investors embark on the long journey down the chain, firstly to the vote service provider and then to the nominated custodian before finally arriving at the registry just prior to proxy close-off. Proportion of securityholders who voted and issued capital received prior to the proxy close date 80% 70% 60% 50% 40% 30% 20% 10% 0% 18 days 13 - 17 days 8 - 12 days 4 - 7 days 3 days 2 days 1 days Proxy close date BUSINESS DAYS FROM PROXY CLOSE DATE % of issued capital received % of securityholders voted Figure 07: In 2012 most retail securityholders voted in the first few days after proxies were dispatched, yet the majority of votes were lodged in the last two days before the proxy close date. 10
  12. 12. Insights from company meetings held in 2012 Attendance and voting Voting reminders play an important role for companies who are looking to increase their overall voting participation. Companies who issue a ‘reminder to vote’ to their securityholders in the days before the proxy close date see a noticeable increase in voting participation within a short time after the email communication is sent. A day after one company issued a reminder communication in 2012, they experienced a fivefold increase in the number of holders who voted online and an uplift of twelve times the issued capital received compared to the previous day. Companies who issued a voting reminder in 2012- proportion of securityholders who voted and issued capital received prior to proxy close date 80% 70% 60% 50% 40% 30% 20% 10% 0% 18 days 13 - 17 days 8 - 12 days 4 - 7 days 3 days 2 days 1 days Proxy close date BUSINESS DAYS FROM PROXY CLOSE DATE % of issued capital received % of securityholders voted Figure 08: Companies who issue a voting reminder in the days before the proxy close date see a noticeable increase in voting participation. 11
  13. 13. Insights from company meetings held in 2012 Attendance and voting Over-voting continues to cause headaches for issuers What’s the difference between a ‘designated’ and There has been plenty of discussion recently across the industry and in the media regarding the issue of proxy ‘over-votes’. Over- ‘pooled’ account? voting occurs when more shares are instructed to be voted than the actual number of shares owned by a registered securityholder. It can occur when there is an imbalance between the perceived voting entitlements of individual investors whose shares are pooled A pooled account is the with other investors within a nominee holding and the actual (lesser) voting entitlements held by the nominee on the share register. combination of client assets held through an omnibus The impact on issuers is significant; from meetings held in 2012, we identified 187 cases of over-voting affecting 117 issuers. Over- account in the name of the voting represented more than 20% of the issued capital voted for four companies and in the most extreme case, one issuer saw custodian or its nominee, over-voting make up 56.8% its issued capital voted or 31.7% of its total issued capital. rather than in individual accounts for each underlying 98.9% of the over-vote cases in 2012 were lodged via paper proxy forms. To encourage a reduction in paper proxies and combat over-voting, Computershare launched Intermediary Online in 2008; the only online service offered by a registry that is specifically client. For example, designed to meet the needs of institutional investors. Intermediary Online supports real-time proxy processing which means that HSBC Custody Nominees when a lodged vote causes a securityholding to move into an over-vote position, an on-screen alert is immediately broadcast to the (Australia) Limited or user. In addition, if an over-vote occurs sometime after lodgement of an electronic vote, the custodian or nominee receives an alert National Nominees Australia about the over-vote via email. Limited. Chasing over-votes is a time consuming and time critical exercise. It requires significant rework for all parties, mostly in the last A designated account is the two days prior to the proxy cut-off date. Computershare endeavours to contact any proxy agent who lodges an over-vote position. segregation of underlying In only three of the 187 over-vote cases in 2012 were we not able to contact the lodging agent and resolve the issue. However, the investors into individual impact on these three cases was that votes had to be accounts on the share disregarded in their entirety. We then reviewed the results for all resolutions put to meetings where there was an register. For example, over-vote, and found that the inclusion of the over-vote QIC Limited <c/- National position would not have changed the outcome in all three Nominees Limited> or INVIA instances. Custodians Pty Limited <Sample Superfund>. In our recent submission to CAMAC’s review of ‘The AGM and shareholder engagement’, we discuss how the current Designated or segregated practice of custodians and nominees holding institutional accounts can be established investors in pooled account structures rather than in within CHESS and directly on designated accounts named on the company register is the share register, facilitating contributing to a number of market inefficiencies, including the issue of over-voting. The pooling of investors into one direct communications and account on the register means that over-voting cannot voting between companies be adjusted by a simple pro-rating down of votes ‘for’ or and shareholders. ‘against’. Figure 09: Computershare’s Intermediary Online supports real-time proxy processing which is helping to combat the incidence of over-voting. 12
  14. 14. Insights from company meetings held in 2012 Use of technology Use of technology In a 2012 securityholder survey, Computershare found that 73% of personal investors said that they Securityholders swap paper for convenience would prefer to ‘go paperless’ While the move to online voting appeared to pause for breath in 2011, an increasing proportion of securityholders lodged their proxy and vote online. online in 2012. This safe, simple and convenient voting channel is now used by nearly a quarter of all securityholders who participate in meetings that offer online voting. In 2012 we saw a number of companies shift to online voting in order to enhance the service provided to their overseas securityholders. For some issuers overseas holders account for a significant portion of the register, and online voting means that this group no longer needs to wait for their mailpack to arrive or risk their paper proxy form not reaching Computershare on time. We expect that the launch of Digital Post Australia, a new communication channel, will encourage even more securityholders to move away from paper proxy forms in 2013. Digital postal mail is an enhanced digital replica of Proportion of securityholders who voted online in meetings that offered online voting the communications that 30% consumers receive in their physical mail boxes. Powered 23.3% by Digital Post Australia, 20.7% 20.7% a Digital Postbox allows consumers to receive their 20% important mail, such as 15.5% bills, statements, insurance documents, government and 10.5% registry communications in one central and secure online location. 10% Want to know more about this exciting new communication channel? Speak with your relationship 0% manager or contact us here 2008 2009 2010 2011 2012 Figure 10: In meetings where online voting was offered in 2012, over 23% of securityholders who voted chose to do so using this convenient channel. 13
  15. 15. Insights from company meetings held in 2012 Use of technology An Australian first – introducing another convenient way to vote At the end of June 2012 there were 16.2 million mobile handset subscribers in Australia who were able to access the internet via their devices.1 Having observed this strong growth in mobile handset ownership, Computershare developed mobile device voting for our own AGM in 2011 before launching this new module of InvestorVote in 2012 with a pilot group of 13 clients. Across the pilot program, an average of 6.7% of securityholders chose to lodge their proxy vote via their mobile device instead of using the desktop version of InvestorVote. Mobile device voting accounted for 7.1% of total proxy votes lodged via all online channels in 2012. In a show of securityholder support for this new channel, one company reported that 10.1% of its investors who voted online in 2012, lodged their proxy vote using a mobile device. This represented 57.8% of this company’s total votes lodged online. Proportion of holders who used the mobile device module of InvestorVote vs. the desktop version of this web service (2012 pilot group companies) Co1 96.6% 3.4% Mobile Co2 92.9% 7.1% Co3 96.3% 3.7% Desktop Co4 91.0% 9.0% Co5 96.0% 4.0% 90.8% 9.2% COMPANIES Co6 Co7 94.7% 5.3% Co8 89.9% 10.1% Co9 95.8% 4.2% Co10 91.5% 8.5% Co11 87.1% 12.9% Co12 95.8% 4.2% Co13 93.5% 6.5% 80% 85% 90% 95% 100% Desktop Mobile Figure 11: In a 2012 pilot 6.7% of securityholders lodged their proxy vote via their mobile device. 14 1 Australian Bureau of Statistics, June 2012
  16. 16. Insights from company meetings held in 2012 Use of technology A promotional flyer for the new module of InvestorVote accompanied the AGM mailpacks sent out to the securityholders of two In the lead up to their companies. This offline campaign proved to be effective, resulting in a higher proportion of securityholders lodging their proxy via AGM in May 2012, AMP’s mobile compared with the overall average of the pilot. securityholders became some of the first in Australia After the success of 2012, mobile device voting will be available for all Computershare clients to offer to their securityholders in to lodge their proxy votes 2013. With strong consumer uptake of mobile device technology in Australia, we expect to see a growing proportion of votes lodged using a mobile device. via this channel in the future. Scan here to go directly to the AMP mobile voting website Our new mobile voting website is designed specifically for smartphones, so you can now vote on the go. Simply scan the QR code above with your smartphone or log on to www.investorvote.com.au from your phone. You will need the control number, holder number and postcode for your shareholding. These can be found in the top right corner of your enclosed proxy form. To scan the code above you need to have already downloaded a free QR code reader application to your smartphone. “This is about keeping AMP’s AGM contemporary and relevant as shareholders change the way they view and use information, and Figure 12: A convenient way to vote; securityholders simply need to scan a QR code to access Computershare’s mobile device proxy voting service. communicate with us. The To learn more about this service click here. site is easy to read and designed to suit mobile devices rather than desktop computers.” MARNIE REID – AMP HEAD OF SHAREHOLDER SERVICES 15
  17. 17. Insights from company meetings held in 2012 Use of technology Institutional investors show strong support for straight-through processing Although institutional investors who voted online in 2012 accounted for only 0.4% of securityholders, this small group certainly made their presence felt by lodging proxies online for nearly a quarter of the total issued capital voted. Since our launch of Intermediary Online in 2008, Computershare is the only registry to offer an online service specifically for institutional investors. This unique technology enables custodians and nominees who hold securities on behalf of institutions to swiftly lodge proxies electronically, ensuring straight-through processing for issuers’ largest investors. Users receive an immediate vote confirmation upon lodgement and are able to run real-time proxy status reports. Accounting for only 8.9% of issued capital voted in 2010, volumes have nearly tripled in the last three years resulting in Intermediary Online processing 23.3% of the total issued capital voted in 2012. Securityholders who voted by channel Issued capital voted byVote Investor channel Traditional Intermediary Online Intermediary Online Intermedia 15.7% 84.2% 0.1% 15.4% 75.7% 8.9% 2010 2010 Traditional Traditional Investor Vote Investor Vo 17.0% 82.7% 0.3% 2011 9.0% 76.5% 14.5% 2011 20.8% 78.8% 0.4% 2012 11.3% 65.4% 23.3% 2012 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% InvestorVote* Traditional Intermediary Online InvestorVote* Traditional Intermediary Online * Includes mobile device voting Figure 13: 23.3% of all issued capital voted in 2012 was submitted via Intermediary Online, a Computershare web service designed to meet the unique needs of institutional investors. 16
  18. 18. Insights from company meetings held in 2012 Use of technology Using voting handsets at meetings maximises attendee experience “We’ve now used the handset voting system at the ANZ AGM Faced with needing to hold two consecutive meetings on the same day in 2012, Woolworths since 2006. It’s easy to use for opted to use voting handsets instead of traditional voting cards, this allowed securityholders the shareholder, and enables the to register for both the AGM and General Meeting at the same time. votes cast electronically at the meeting to be tallied and displayed IML, a Computershare company, and Computershare Investor Services worked closely with instantly at the meeting – this the company prior to the meetings, establishing the rules and protocols for voting and is a significant improvement determining when results for each resolution would be available to view. compared with using voting cards and has most certainly enhanced At registration, hundreds of securityholders were swiftly provided with a personalised the AGM ‘experience’ for those in smartcard programmed with their specific voting privileges which was then inserted into an accompanying IML Connector handset. When voting opened, attendees cast their votes using attendance.” the handsets, which immediately recorded and processed the data and then added it to the JOHN PRIESTLEY – total results. ANZ COMPANY SECRETARY Using the handsets simplified the complex logistics associated with running two meetings, thereby providing comfort to Woolworths that voting was being managed efficiently. This technology also ensured a better experience for their securityholders who did not need to re-register between meetings. Extending the AGM to an online forum Retail shareholders are adept with While current legislation does not specifically authorise companies to offer their securityholders the opportunity to participate in an online AGM, the Corporation and Markets Advisory Committee (CAMAC) will no doubt address this as part of their technology and open to being recommendations to the government in response to their review of the ‘The AGM and shareholder engagement’. engaged via digital channels. We have observed the virtual AGM taken to the extreme in the United States, where some states permit online-only meetings 66% of respondents in a recent and as a result a degree of securityholder scepticism has emerged. For example, securityholders have expressed fears that their Computershare survey said that questions have been prioritised, rephrased and ignored or responses have been delayed to be answered outside the meeting, and they would participate in an online are therefore not on public record. Concerns have also been expressed regarding the transparency of securityholder questions and AGM if it was offered. management’s answers, as well as whether or not securityholder questions asked online are visible to everyone at the meeting. In our submission to CAMAC, Computershare put forward our support for hybrid meetings – that is, a combination of the physical and online AGM. We do caution however that it should ultimately be the company’s choice as to whether they adopt this practice. Computershare is ready to offer its clients an online AGM service pending confirmation that securityholders are able to participate in a meeting via this channel. We will continue to participate in industry dialogue on this matter. 17
  19. 19. Insights from company meetings held in 2012 Voting on the remuneration report Voting on the remuneration report The Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill was passed in July 2011. This legislation introduced the ‘two strikes’ rule which was designed to provide investors with a greater say on executive remuneration. In 2012 the level of investor discontent about executive pay was higher in companies outside the ASX200 than in larger companies. An analysis of the proportion of votes lodged against the remuneration report shows that the average percentage was 5.5% in the ASX50 versus 7.4% for all companies outside the ASX200. Average proportion of votes cast against the remuneration report in 2012 ASX50 5.5% ASX100 6.9% ASX200 7.1% ASX Other 7.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% Figure 14: Across the entire ASX, the proportion of votes cast against the remuneration report in 2012 was lower in larger companies than it was for those outside the ASX200. Data source: 2012 AGM results (all companies), Financial Review Business Intelligence, January 2013.   18
  20. 20. Insights from company meetings held in 2012 Voting on the remuneration report Fewer companies received a first strike in 2012 than in the previous year In 2012, 124 companies received either a first or second strike compared with 114 companies receiving a first strike in 2011. However, it should be noted that in 2011 only AGMs held from July onwards were subject to the new rule. Looking across the entire ASX, 15 fewer companies received a first strike in 2012 (99) when compared to 2011 (114). Two thirds of the companies who suffered a first strike in 2012 received 25-49.9% of votes against their remuneration report resolution, with nine per cent receiving more than 75% of votes against this resolution. The highest percentage of votes against the remuneration report resolution for an individual company was 95%. First strike - how securityholders voted on the Remuneration Report 75 25-49.9% 66 % VOTES AGAINST REMUNERATION REPORT 2012 23 2011 50-74.9% 24 16 75-100% 9 0 20 40 60 80 100 NUMBER OF COMPANIES 2011 2012 Figure 15: 99 companies across the entire ASX received a first strike in 2012, 15 fewer than the previous year. Data source: 2012 AGM results (all companies), Financial Review Business Intelligence, January 2013. 19
  21. 21. Insights from company meetings held in 2012 Voting on the remuneration report 25 companies received a second strike in 2012 114 companies (just over 6% of the entire ASX) received a first strike in 2011. Ten companies who received a first strike in 2011 did not hold an AGM in 2012 for a variety of reasons including: >> ASX suspension / delisting >> Corporate structure changes as a result of a takeover or Scheme of Arrangement >> Liquidation >> ASIC extension granted to hold the AGM at a later date Interestingly, we observed that 65 of the 104 companies facing a second strike who did hold an AGM in 2012, held the meeting in the last eight days of November. Nearly a quarter of the companies who received a first strike in 2011 received a second strike in 2012, requiring those companies to subsequently take a vote on the spill resolution. Companies facing a second strike in 2012 - how securityholders voted 0-9.9% 55 % VOTES AGAINST REMUNERATION REPORT 24 2012 10-24.9% 25-49.9% 18 50-74.9% 3 75-100% 4 0 20 40 60 NUMBER OF COMPANIES Figure 16: 25 companies across the entire ASX received a second strike in 2012 20
  22. 22. Insights from company meetings held in 2012 Voting on the remuneration report Spill meetings are still being held in 2013 Companies who plan to hold their AGM and a spill meeting (if Of the 25 companies across the ASX who received a second strike in 2012, six companies received more than 50% of votes in required) on the same day should favour of the spill resolution which required them to hold a spill meeting within 90 days of the AGM. At the time of writing, four consider replacing traditional companies are still yet to hold their spill meeting. voting cards with digital voting handset technology at the meeting Penrice Soda Holdings Limited (PSH) was the first company required by the ‘two strikes’ rule to hold a spill meeting. After having to enable securityholders to received more than 25% ‘no’ votes on the remuneration report resolution and more than 50% ‘yes’ votes on the spill resolution register for both meetings at once. at their AGM held on 30 October 2012, requirements stipulate that the spill meeting must be held within 90 days of the AGM. This meeting was held on 25 January 2013. Click here to find out how this technology assisted a company At the spill meeting two incumbent directors, who under the two strikes legislation ceased to hold office at the conclusion of the meeting, offered themselves for re-election and were both successfully re-appointed. The company had also received three manage its complex meetings in additional nominations for Board positions, but all three failed to get the required securityholder support. 2012. The second company to conduct a spill meeting was Globe International Limited (GLB). GLB received a second strike at their 2012 AGM held on 14 November 2012. The remuneration report resolution received more than 85% of votes against, and the spill resolution received more than 85% of votes in favour which triggered the requirement to hold a spill meeting. The spill meeting was held on 6 February 2013. The three directors who stood for re-election were all re-appointed, each director receiving almost 90% of votes in support of their re-election. There were no additional nominations for the Board positions. Careful consideration required for arranging a spill meeting We also observed that three companies arranged for a spill meeting to be held on the same day as their AGM, in the event that they received a second strike and the spill resolution was passed. This pre-arranged meeting was intended to avoid the substantial costs associated with staging a second meeting within 90 days, although these companies did incur an upfront cost associated with the printing and mailing of a second Notice of Meeting and proxy form for a meeting that might not take place. None of these three companies did in fact have to hold their spill meeting, although two of the three companies did receive a second strike. How they decided – show of hands or poll? Across all Computershare clients who held their AGM in 2012, we observed that 72% of clients decided the remuneration report resolution via a show of hands while 28% of clients conducted a poll. Based on our review of all of the 104 companies facing a second strike at their 2012 AGM, we observed that the proportion of companies who decided the remuneration report resolution via a show of hands was 52% with a corresponding 48% conducting a poll. For the 25 companies who received a second strike and then had to put a spill resolution to the meeting, the proportion of companies going to poll on the spill resolution was 68% with 32% voting on the spill resolution by a show of hands. 21
  23. 23. Insights from company meetings held in 2012 Voting on the remuneration report The practical application of the two strikes legislation puzzles many An analysis of Computershare clients who were facing their second strike in 2012 reveals that for more than three quarters of these companies, a higher proportion of proxy votes in favour of the spill resolution than against the remuneration report was recorded. Although for many companies the difference was marginal, in several the difference was substantial. In one extreme example, a company had its remuneration report resolution pass by more than 95% on proxies, yet it had more than two thirds of proxies also vote in favour of the spill resolution. Our analysis indicates that the mechanics of the two strikes / spill resolution process is not yet fully understood by securityholders, and we suspect that this outcome will occur less frequently in the future as investors of all sizes become more familiar with the process. We believe the single most likely reason for these results is that securityholders who are generally supportive of the company will vote in favour of all resolutions, without understanding that a vote in favour of the spill resolution is supportive of calling the spill meeting. This is despite concerted efforts by companies to provide detailed explanations of the process in their notices of meeting and proxy forms. This may mean that many securityholders either do not read meeting materials thoroughly or do read them but do not fully understand their content; a likely scenario given the significant legal technicalities that the documentation is required to comply with. Computershare did observe the trend of proxies in favour of the spill resolution being greater than proxies against the remuneration report emerging in some of the early meetings of our clients who were facing a second strike. As a result we also communicated with the institutional investor community to explain how the two strike and spill resolution process works. 22
  24. 24. Insights from company meetings held in 2012 Voting on the remuneration report Use of express authority clarified for use on proxy forms On 18 June 2012 Parliament passed an amendment to the two strikes legislation in order to make certain that the Chair can vote undirected proxies on the remuneration report resolution with an express authority. Prior to the long awaited clarification that this amendment delivered most companies were adopting the ‘deemed direction’ approach on proxy forms (in accordance with ASIC guidelines released in August 2011) and of these the majority were requiring securityholders to use a tick box to give that direction. Proxy form approach % of companies who used this approach for AGMs % of companies who used this approach for AGMs held held 1 Jan 2012 to 17 Jun 2012 18 Jun 2012 to 31 Dec 2012 Deemed direction with a tick box 52.8% 0.4% Deemed direction with no tick box 30.2% 0.7% Undirected proxy votes not available to Chair 9.4% 0.7% Express authority with a tick box 3.8% 10.1% Express authority with no tick box 3.8% 88.0% Figure 17: Once legislation was amended in June 2012, the deemed direction approach was rarely used on proxy forms. The data in figure 18 above clearly demonstrates that once the legislation was amended, the deemed direction approach was rarely used. We understand that of the small proportion of companies who did use this approach after 18 June 2012, most had prepared their proxy forms prior to the amendment being passed. After the legislative amendment, we updated our standard proxy forms to accommodate the granting of an express authority on the remuneration report (and other remuneration related resolutions) without a tick box. An alternative form that incorporated a tick box was also made available to clients on request. There seems to be consensus across the industry that an express authority can be granted without a tick box; as corroborated by the 88% of Computershare clients who adopted that approach for their proxy forms after 18 June 2012. Valuable votes continue to be lost Analysis of a sample of companies who did use a tick box to authorise the Chair to cast their open votes on the remuneration report, reveals that approximately two thirds of securityholders appointing the Chair as their proxy on an undirected basis did not tick the box which meant that their votes could not be counted on the remuneration report resolution. 23
  25. 25. Insights from company meetings held in 2012 What does the future hold for the AGM and shareholder engagement? What does the future hold for the AGM and shareholder engagement? In December 2011, the then Parliamentary Secretary to the Treasurer, the Hon. David Bradbury MP, requested that the Corporations and Markets Advisory Committee (CAMAC) inform the government on: >> The future of the annual general meeting (AGM) in Australia, including how documents and meeting forms should change to meet the needs of shareholders in the future. >> The risks and opportunities presented by advances in technology, in the context of maintaining the ongoing relevance and efficacy of the AGM. >> The challenges posed to the structure of the AGM by globalisation, including potential increases in international share ownership Dominic Horsley, and dual-listing. Computershare’s Chief Legal Counsel and In September 2012 CAMAC released their discussion paper, ‘The AGM and shareholder engagement’, and called for industry Company Secretary, submissions in response to the questions contained in the paper. 36 public submissions were received by CAMAC – these can be discusses the Corporation viewed here. and Markets Advisory Committee (CAMAC) review Our review of these submissions affirmed to us that there is still strong support for the AGM and there is substantial backing for on the ‘The AGM and engaging with securityholders through a greater range of online communication channels. shareholder engagement’. He summarises Computershare’s submission focused on improvements that we believe would benefit our clients; either as a result of addressing current market inefficiencies, improving securityholder engagement or by lowering the costs to our clients of holding an AGM Computershare’s response, discusses the key themes contained in submissions from across the industry, and hazards a guess as to what might be next for this review 24
  26. 26. Insights from company meetings held in 2012 What does the future hold for the AGM and shareholder engagement? Here are some of the key points from our submission: >> Computershare has been campaigning for some time now on what we believe is an obvious solution that will remedy market inefficiencies caused by ‘pooled’ accounts, such as over-voting, transparency issues and timing concerns. Institutions and nominees should be encouraged to use designated accounts and consideration should be given to making designated accounts the default for institutional securityholders. Rather than market participants such as custodians pushing for changes to the legislative environment to overcome the lack of transparency caused by the administrative approach they adopt, they should be asked to explain why they cannot use designated accounts to solve the identified issues. >> In a recent Computershare survey, nearly 80% of securityholders said that they would prefer to receive their AGM communications electronically (email, SMS or digital mail box). However, our data shows that the actual average number of securityholders who receive their Notice of Meeting via email is 18.5%. We therefore recommend regulatory change that allows companies to require securityholders to opt in to receive physical proxy material and Notices of Meeting. Issuers will benefit under this change from a decrease in communication costs. >> We do not recommend moving the record date as it will introduce concerns about people voting who are no longer securityholders by the time the meeting takes place. We believe that the Australian proxy voting processes are better than in any other developed jurisdiction. In the United States the record date cannot be less than 10 days before the meeting and it is often 45 days before the meeting. In our experience this results in ‘stale’ voting, where investors have sold out of the stock by the meeting date. In some European jurisdictions, if you want to vote at all, you have to ‘block’ your shares (deny yourself the right to sell them) for an even longer period before the meeting. Although our own submission focussed on some suggested practical improvements to the AGM, other submissions proposed more radical changes to the format of the AGM with some support for separating out the decision making function of the AGM and having voting take place outside of the meeting itself. We wait with interest to see how CAMAC will respond to the many and varied opinions that have been provided in the submissions. However, we do expect that the AGM will be retained, albeit allowing for potential changes to its format, and we certainly expect there to be strong support for making technology integral to the AGM in the future. 25
  27. 27. Insights from company meetings held in 2012 Highlights from around the globe Highlights from around the globe While we have provided a snapshot of meetings trends from around the globe in this report, we are also developing analysis based on our global proxy research. This detailed analysis will be released later this year – pre-register here to receive this report. United Kingdom Voting, as a percentage of issued share capital for FTSE 350 AGMs, has risen by 2.6% since 2010, as the introduction of the UK Stewardship Code and increased media coverage have encouraged higher shareholder participation. There was also a 5% increase in FTSE100 companies experiencing a high degree of opposition to remuneration resolutions. On this issue, the UK is considering additional legislation in the future to give shareholders more say over companies’ remuneration policies. Northern Europe Shareholder activism took a slightly different form from that in other regions. When challenging boards over issues such as remuneration, shareholders chose to take more responsibility in their role as company owners, and focussed on discussing the design of longer term executive remuneration systems. In Sweden, there is provision for shareholders to suggest alternative Littleton remuneration proposals relating to the pay of the board elected at the AGM. Bahrain United States and Canada The greatest change in the US AGM space was the ongoing impact of the introduction of ‘Say on Pay’ rule, that gives shareholders a non-binding vote on levels of executive compensation. This vote is mandatory for all public institutions within the US, however many Canadian companies voluntarily chose to hold a ‘Say on Pay’ vote to support good governance. In Canada, new Notice-and-Access regulations come into effect in February 2013 whereby issuers can choose to mail a Notice of Meeting and include ‘Access’ information that, in lieu of the customary full proxy package, details where the proxy materials are located on the internet. Issuers will benefit from reduced printing and postage costs by using the Notice-and-Access method for mailing proxy materials. These regulations have been in place in the United States for some time. Ireland Irish shareholders increased their participation in meetings during 2012, not only voting in greater numbers but also being noticeably more willing to verbally challenge the board at AGMs. This rise in opposition from shareholders has led to an increase in the number of companies using proxy solicitation services. Maroochydore 26
  28. 28. Insights from company meetings held in 2012 Highlights from around the globe Central and Southern Europe Low level shareholder activism was seen across the region, with most companies experiencing little or no opposition. German and Dutch shareholders currently have a binding vote on the remuneration policy, whereas France is currently debating the implementation of a ‘Say on Pay’ style shareholder vote. In Italy, the introduction of a ‘Designated Representative’ policy enabled shareholders to vote via a web portal. Russia The number of retail shareholders attending AGMs has decreased slightly over the last three years, while overall voting participation has remained steady. If new legislation initiatives announced in 2012 are enacted, it will be possible for shareholders from across the region to participate in AGMs online. China and Hong Kong Companies in Hong Kong and mainland China saw an increase of more than 44% in shareholder attendance from 2011, with this figure more pronounced for larger companies, while voting figures have declined over the same period. Littleton India Bahrain Foreign Institutional Investors continued to have a growing influence at AGMs, and collaborated with proxy advisors to actively challenge the companies in which they held securities. Legislation now allows companies to dispatch AGM notices and annual reports by email, and it is compulsory for the top 500 listed companies to record a securityholder’s email address (where provided) for the electronic distribution of proxy information. South Africa Following the enactment of the New Companies Act in May 2011, companies now need to obtain shareholder approval for remuneration policies, company financial assistance, conversion to no par value shares and adoption of a new MOI. This has led to an increase in the number of general meetings facilitated within the season and has seen higher numbers of shareholders voting. Although shareholder activism is not yet a major concern, it is growing and more campaigns are expected in the future.  Maroochydore 27
  29. 29. Insights from company meetings held in 2012 Early planning will ensure you’re p repared for 2013 voted you know who e’ in 2012? Do Did you rece ive a ‘first strik port and why? muneration re against your re p shareholders behind your to cision makers out how you ca n tap into Who are the de this year? Find ey vote mputershare and how will th Georgeson, a Co older by speaking with n and securityh this intelligence proxy solicitatio orld leader in company, the w communicat ion services. mentators and s, industry com m onitor the pres M? How will yo u Do you regularly d after your AG ication fore, during an your commun social media be ese channels as part of anage th monitor and m strate gy this year? tal erence for digi ting a clear pref nsider Shareholders are demonstra meet th ese needs? Co ns – wha t can you do to voting which communicatio d mobile device olders online an d shareholders . offerin g your securityh overseas base arly helpful for is also particul y MPs) and Closel t Personnel (K t of Ke y Managemen the Returning Ensure your lis and provided to ) is up to date Rela ted Parties (CRP delegate. Officer or their or turning Officer include the Re yo ur proxy form, actice standards are When designing ensure best pr your reviews to th eir delegate in adopted. ose y, proxies will cl M on a Monda ies ng to hold your AG to contac t relevant part If you’re planni akes it difficult close-off nd which m Ensure your pr oxy off on a weeke s of overvoting. rectified. and resolv e any instance over vote positions to be cien t time for any date allows suffi 28

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