Australia’s biggest superannuation fund has issued a warning that the number of votes against remuneration reports is too high and boards need to take a tougher line on executive pay.
AustralianSuper chief executive Ian Silk says some companies still regard shareholders as a ‘nuisance’. He also warns that such companies should leave the share market unless they accept that active shareholders have rights and responsibilities to be ‘active’ owners.
Shareholders have flexed their muscles during the recent annual shareholder meeting season, delivering reprimands to a number of major companies over board pay, including Commonwealth Bank ‒ the first bank to receive a first strike ‒ Boral, AGL, CSL, Goodman Group, CBA, Magellan Financial Group and Lend Lease.
AustralianSuper, which manages A$105 bn ($78.43 bn) for 2 mn members, said it had voted against 5 percent of pay reports. ‘Five percent strikes me as rather too high, a little higher than we would like,’ Silk told the Australasian Investor Relations Association in Sydney.
He added that while the focus on remuneration reports was ‘unfortunate’, they were a ‘very good bellwether’ on how boards were discharging their responsibilities to shareholders.
‘It is one thing to criticize ‘greedy executives’ but ‘greedy executives’ don’t write their own pay checks,’ Silk points out. ‘It is boards that should be acting on behalf of the company and shareholders. A lot of boards, a lot of chairs, a lot of remuneration committees and lot of remuneration committee chairs need to ensure they have the balance right rather than acquiesce to the demands ‒ as they often do ‒ of management.
‘These companies regard shareholders as an aggravation, a nuisance they should not have to endure. But we are the owners and we do have the right and the fiduciary responsibility to be active when the occasion demands.
‘If that is considered an inconvenience to management or the board the message is pretty simple: nobody forces a company to list so if you don’t want the accountabilities and responsibilities that come with the benefits of being a listed company, don’t list.’
