The Corporations Amendment (Improving Accountability on
Director and Executive Remuneration) Act 2011 (Cth)
(Amendment) came into force on 1 July 2011,
amending the existing Corporations Act 2001 (Cth)
(Act). This included several reforms to the manner
in which proxy votes are to be dealt with.
The newly introduced section 250BD provides that a person who is
appointed as a proxy must not exercise any undirected proxies on a
resolution connected with the remuneration of key management
personnel (KMP) if they themselves are, or are
closely related to, a member of the KMP. This exclusion will not
apply, however, if the person is the chairman and their appointment
as proxy expressly authorises them to vote on matters of KMP
remuneration.
Unfortunately for all company directors, this section seems to
conflict with amendments to section 250R, which deals with voting
on the remuneration report. Subsections (4) and (5) state that a
vote on a resolution regarding the remuneration report must not be
made by a member of the KMP (or a closely related party) in any
capacity. KMP is defined as including the chairman. The only
exception to this is if the KMP member casts a vote as a proxy
where the person appointing them specifies in writing how the proxy
is to vote (ie KMP members may cast directed proxies).
Importantly, subsection (10) states that s250R(4) and (5) have
effect despite anything else in the Act (which includes section
250BD).
The amended s250R therefore seems to undermine the effect of
s250BD regarding the approval of the remuneration report. Section
250BD would give the chairman the power to vote undirected proxies
as they see fit (assuming they have been given the necessary
authority), but s250R categorically prohibits them from doing so.
Consequently, it would seem that the chairman's powers under s250BD
are restricted to any votes on remuneration of KMP that are not
related to the approval of the remuneration report.
The Amendment also brought in changes to prevent
'cherry-picking' of proxy votes by non-chair proxy holders.
Previously, all directed proxy votes held by the chairman had to be
voted. However, non-chair proxy holders could choose whether to
exercise their directed proxy votes. The Amendment introduced new
provisions automatically vesting any directed proxies to the
chairman if the original non-chair proxy holder decides not to vote
on a particular resolution.
Authored by Matt Foley, Cornwall Stodart