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Full AGM Season Review: Key Trends And Lessons For FY2023

19 August 2022

Full AGM Season Review: Key Trends And Lessons For FY2023

These are among the findings of our 2021 AGM Season review – Australia, which provides a snapshot of voting outcomes, trends, sentiments, and key reasons for shareholder voting patterns, with a focus on S&P/ASX300 companies. It highlights how topics such as climate change and human rights returned to centre stage last year, following the shock of dealing with COVID-19 in 2020.

Average levels of support for directors and their elections broadly realigned with pre-COVID levels, but investors continued to hold boards accountable for broader environmental and social risks alongside traditional corporate governance concerns such as board composition, board independence and remuneration.

The Say on Climate trend which has taken the world by storm reached Australia in 2021, and BHP became the first company to place such a resolution on their ballot here, with more to come this year.


Remuneration continued to be a highly contentious issue in 2021, especially during pre-season engagements. ASX300 companies recorded a total of 26 remuneration strikes in 2021, equalling 2019's record high and one more than in the prior year. Looking at the level of dissent for those companies that received strikes, nine recorded greater than 50% of the final vote result against their remuneration report.

Investors were particularly focused on the alignment between pay and performance and the rigour of targets set by the board. Any attempts by boards to recoup previous pay cuts to executives were critically examined.

Interestingly, we saw more and more investors coming out in favour of ESG being factored into remuneration, particularly where these metrics are used as a gateway to financial outcomes. Many companies were and still are hesitant to adopt ESG metrics into their incentive plans, and incorporating ESG metrics into variable remuneration, particularly environmental measures such as carbon emissions, continues to be less prevalent in Australia than in other markets.

Proxy advisors are generally sceptical of Australian companies introducing non-financial measures into variable remuneration plans, as they are often perceived as 'soft' or a reward for 'business as usual' activities, particularly where disclosures are limited. Investors and proxy advisors were especially critical of non-financial measures introduced into long-term incentives (e.g., strategic measures, environmental measures) with a corresponding reduction in the weighting of financial/market-based measures.

Given the increasing adoption of non-financial measures in variable remuneration, we expect to see improvements in disclosure going forward

Director elections

ASX300 companies held 728 director elections in 2021, of which 22 attracted more than 20% votes against re-election at AGMs (compared to 39 in 2020). Average support for directors at 2021 AGMs was 95% (compared to 91% in 2020).

The increasing focus on environmental and social risks impacted the assessment of directors and their election/re-election, also driven by several scandals at high-profile Australian companies during 2021 which further strengthened global asset managers' interest in the corporate cultures fostered by boards, and their management of non-financial risks.

Investors kept a close eye on remuneration outcomes and structural changes in the context of the COVID-19 economic climate, and were keen to vote against remuneration committee members for perceived egregious remuneration awards or retention awards.

Key considerations and voting trends in 2021 included an increased appetite from investors to hold directors accountable for performance and risk management; proxy advisors' continued focus on pay outcomes for executives; and investor focus on board skills, composition and overboarding to ensure the board structure is 'fit for purpose'.

Australian Director Analysis
  • 728 number of director elections in the ASX 300
  • 95% average support for directors at 2021 AGMs
  • 20% votes against re-election at AGMs
Sustainability and E&S activism

As evident from the trends related to remuneration and election of directors, sustainability considerations took centre stage in 2021. Investors have for some years been using their influence to drive progress in combating climate change, to increase business resilience and to encourage corporates across the globe to explore new methods of value creation, and ESG funds now account for 10% of worldwide fund assets.

In addition to shareholder resolutions related to environmental and social matters and various investor initiatives such as Climate Action 100+ and the Investor Group on Climate Change, 2021 brought a new trend to the global markets – Say on Climate.

A wave of Say on Climate proposals flooded the ballots of 2021 AGMs across Europe and North America. Shareholder resolutions on Say on Climate did not receive much support from shareholders and proxy advisors, but those tabled as management proposals received overwhelming support (over 95% on average).

The first company in Australia (and the only one in 2021) with a Say on Climate resolution was BHP Group. The voluntary, management-sponsored proposal received 84.9% support.

Many investors have welcomed the opportunity to express their views on companies’ climate disclosures via Say on Climate vote, and they have supported the majority of these resolutions, but some have expressed concerns that this practice could lead to the approval of climate strategies which are not sufficiently rigorous.

ASX-listed companies that will have a Say On Climate proposal in 2022:

  • Accel Energy
  • AGL Australia
  • Origin Energy
  • Oil Search
  • Rio Tinto
  • Santos
  • South32
  • Woodside Petroleum

The rise of the Say on Climate trend seems to have had little effect on E&S activism. During the 2021 AGM season, shareholder activists lodged a total of 29 resolutions across 12 different companies, which is a slight decline from previous year when 33 resolutions were lodged. Similar to last season, the activism was predominantly led by the Australasian Centre for Corporate Responsibility (which targeted nine companies in 2021) and Market Forces (four).

While executive remuneration attracted much attention in 2020, ESG and sustainability emerged as the key themes of the 2021 AGM season and remain central considerations in 2022
Looking ahead to AGM season 2022

While executive remuneration attracted much attention in 2020, ESG and sustainability emerged as the key themes of the 2021 AGM season and remain central considerations in 2022.

The ways in which company directors exercise their fiduciary duties with regard to not just the financial but also the material non-financial risks and opportunities before their companies is under intense and growing scrutiny, as evidenced by events of 2022 to date such as the forced withdrawal of AGL’s demerger plans.

This reflects broader trends which are impacting not just the business sector and capital markets but society more broadly, including the outcome of Australia’s federal elections held in May. As a result, shareholders are increasingly pressuring companies to demonstrate more concrete action not just on climate but on improving business resilience, sustainability and transparency.

In this environment, Morrow Sodali’s role in providing boards with context and insights as they prepare for their annual meetings remains as vital as ever, with the goal of minimising dissent and delivering the disclosure that investors and shareholders today demand.

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