The AGM is the traditional forum for retail shareholders to meet with directors and management, to ask questions and to raise issues. Nowadays it is common for only a small fraction of shareholders to attend an AGM and for absent shareholders to vote by way of proxy before the meeting. Proxy voting is therefore a key mechanism by which shareholders can be engaged by directors to have a say in the future direction of the company and in the governance of the company.
Recent changes to the ASX Listing Rules seek to simplify the proxy voting process and should therefore assist companies to ensure all votes are counted at shareholder meetings.
To ensure the validity of proxy votes, it is important for ASX listed companies to ensure that the proxy form satisfies the new requirements.
- Shareholders wishing to cast a vote at the AGM but without attending the meeting in person have the right to appoint a proxy to attend and vote on their behalf.
- Proxies can be directed or undirected.
- A directed proxy is where a shareholder instructs the proxy how to exercise all or some of the shareholder’s votes.
- An undirected proxy is where a shareholder gives the proxy a discretion whether and how to cast the shareholder’s votes on a particular resolution.
Chairman’s undirected proxies
Shareholders often appoint the chairman of the meeting as their proxy to vote on their behalf at the AGM. Until recently, the Listing Rules required a Chairman’s Box to be included in the proxy form. Shareholders had to tick or mark this box to permit the chairman to vote undirected proxies in circumstances where the chairman would otherwise be excluded. This requirement was often overlooked by shareholders with the consequence that their votes were not taken into account at the meeting.
The Listing Rules were amended with effect from 1 July 2014 to remove the requirement for a Chairman's Box in the proxy form. This change ensures that shareholder’s votes are not inadvertently excluded from being counted.
Proxy voting on remuneration matters
It is common practice for proxy forms to also use theChairman’s Box to authorise the chairman to exercise undirected proxies on remuneration resolutions. Such resolutions include the adoption of the annual remuneration report, a spill resolution under the two strikes rule and the issue of incentive securities to directors.
Under the Corporations Act, undirected proxies on remuneration resolutions may only be voted by the chairman if the proxy form gives him/her express authority to do so. In our view a clear statement on the proxy form that declares that the chairman can vote undirected proxies on a resolution that is connected with remuneration of the key management personnel is sufficient for these purposes. As such it is not necessary to include in the proxy form, a box that must be ticked to authorise the chairman to vote.
To address the Listing Rule changes listed companies should ensure that the proxy form:
- allows shareholders to direct a proxy to vote for,against or abstain from voting on each item of business;
- removes the Chairman’s Box but still contains clear and express wording to the effect that, unless the shareholder indicates otherwise by ticking either the ‘for’, ‘against’ or ‘abstain’ box on an item of business, the shareholder will be directing the chairman to vote in accordance with the chairman’s voting intention; and
- includes a statement as to how the chairman intends to vote any undirected proxies (‘for’, ‘against’ or ‘abstain’ on each item of business).
Other AGM matters
The AGM is a convenient time to deal with general business of the company as well as receiving the annual financial reports. Items of business that are often attended to at this time include:
- refreshing the Company’s 15% placement capacity (Listing Rule 7.1) by retrospectively approving the past issue of securities under this rule;
- obtaining a shareholder mandate for an additional 10% placement capacity (Listing Rule 7.1A) and retrospectively approving the past issue of securities under this rule;
- approving the issue of securities under employee incentive schemes (approval is valid for 3 years);
- directors’ remuneration, including the non-executive directors fee pool and/or issuing securities or performance rights;
- approving executive termination benefits;
- approving or renewing proportional takeover provisions in a constitution (approval is valid for 3 years); and
- approving the payment of dividends.