Australian Commission Modifies “Two Strikes” Recommendation

by Martin Lawrence, for RiskMetrics Group, January 12, 2010.

Australian companies receiving more than 25 percent opposition on remuneration report proposals over two successive years will trigger an automatic resolution authorizing a vote on the full board, under recommendations made to the Australian government by the Productivity Commission.

The recommendation, contained in the government think tank’s Jan. 4 final report on executive pay, represents an adjustment to the commission’s draft “two strikes” recommendation that drew criticism from Australia’s corporate lobby. The draft recommendation called for an automatic vote on directors in the event of 25 percent opposition to the remuneration report in two successive years.

Under the revised proposal, a board that suffered a 25 percent “against” vote on its remuneration report would be required to include a contingent resolution at its next annual meeting. This resolution, which would only be put to shareholders should the remuneration report suffer another vote of more than 25 percent against, would subject the board responsible for the remuneration report to re-election at an extraordinary meeting, to be held within 90 days, should a majority of shareholders support the “board spill” resolution. In other words, three votes rather than two would be needed to trigger a vote on directors.

The change followed criticism by business advocates that the initial “two strikes” proposal could lead to an automatic board “spill” simply if there were two large votes against the remuneration report in consecutive years…(continue reading)

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