Welcome to Manifest-I

Welcome to Manifest-I the blog of Manifest Information Services Ltd. Here we take a wide ranging view of topical governance and stewardship issues. Please feel free to add your comments and join the debate. Sign up to receive free weekly updates.

Manifest is a signatory of the Best Practice Principles for Shareholder Voting Research

Delivering Diverse Viewpoints

In the pursuit of secure investment returns, diverse viewpoints based on high-quality data and varied information are critical for portfolio construction. We believe that share ownership is no different. Manifest intelligently navigates the complexities of global governance and voting delivering actionable and defensible stewardship insights.

Manifest: showing, not telling

Get in touch to find out more about Manifest's governance research, data and advisory services

Australian pay reforms set global standard

Australian  Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen has delighted Australian shareholders with plans to introduce extensive executive remuneration reforms designed to force boards to be more accountable and give shareholders more power.

Chris Bowen MP

Chris Bowen MP

In a ringing endorsement of the Productivity Commission’s review of executive pay which was published in January this year, the Rudd administration has announced that it will introduce legislation to implement many of the PC’s 17 recommendations, including the “two strikes” proposal, which will strengthen the non-binding vote on remuneration and set out consequences where companies do not adequately respond to shareholder concerns on remuneration issues.

As currently proposed, the two strikes and re-election resolution would work as follows:

  • 25 per cent ‘no’ vote on remuneration report triggers reporting obligation on how concerns addressed; and
  • Subsequent ‘no’ vote of 25 per cent activates a resolution for elected directors to submit for re-election within 90 days.

It is not clear whether it would be the entire board to be submitted for re-election, just the remuneration committee or the chairman, however there will be a further opportunity for input as there during the consultation process ahead of the final drafting of amendments to the Corporations Act 2001.

An unexpected but welcome addition to the proposals is a “claw-back” provision which would require a director or executive to repay to the company any bonuses calculated on the basis of financial information that subsequently turned out to be materially misstated.  Bowen asserted that the introduction of a claw-back provision “warrants further analysis, as it would help strengthen the ability of shareholders to recover overpaid bonuses that have occurred as a result of materially misstated financial statements.”

Issuers have expressed their concerns in the Australian media calling the proposals “heavy handed”. Speaking to ABC News, John Colvin from the Institute of Company Directors said: “We’re a bit perplexed and quite frankly bemused at why we would have such a heavy-handed, red-taped, legislative approach to this area,”

“Whilst there are examples of, and we acknowledge those, of pay outcomes which haven’t been in line with either company expectations… on the whole Australian remuneration of corporate governance has been very good.”

The Australian Shareholders Association (ASA) said that the response was “much stronger than they had anticipated.”

“We think that it’s a very well-measured, very well-considered report,” said an ASA representative “from the ASA’s point of view it certainly went a little bit further than we had asked, but we’re very positive about the recommendations and we’re very hopeful that they’ll have the effect of making boards much more accountable on this issue which is very important to shareholders.”

Summary of Australian Government Response

Rec Summary of Recommendation Government Response


Any declaration of ‘no vacancy’ at an AGM to be agreed to by shareholders. Boards to retain flexibility to make required appointments during the year with shareholder approval at next AGM.



The ASX Corporate Governance Council’s principles should provide, on an ‘if not why not’ basis, that remuneration committees should comprise at least three members, all non-executive directors, with a majority and the chair independent, and companies should have a charter setting out procedures for non-committee members attending meetings.

Support in‑principle.


The ASX listing rules should prohibit executives in ASX300 companies from sitting on remuneration committees.

Support in‑principle.


Prohibit key management personnel that hold shares from voting on their own remuneration arrangements.

Support with additional strengthening.


Prohibit key management personnel from hedging unvested equity remuneration or vested equity subject to holding locks.

Support with additional strengthening.


Prohibit key management personnel from voting undirected proxies on remuneration resolutions.



Require proxy holders to cast all their directed proxies on remuneration reports.

Support with additional strengthening.


Remuneration reports should include a plain English summary of remuneration policies and report actual remuneration received and total company shareholdings of individuals in the report. Establish an expert panel to advise on Corporations Act architecture to support changes.

Support, with:

– CAMAC to act as expert panel; and

– additional referrals.


Confine remuneration disclosures to key management personnel.

Support with further streamlining.


The ASX Corporate Governance Council’s principles should provide, on an ‘if not, why not’ basis that companies should disclose executive remuneration advisers, who appointed them, who they reported to and the nature of any other work undertaken for the company.


To be implemented through legislation.


Where an ASX300 company engages remuneration consultants, the consultant’s services should be commissioned by, and their advice provided directly to, the remuneration committee or board, with accompanying disclosure in the remuneration report.


To be implemented through legislation.


Institutional investors should voluntarily disclose how they have voted on remuneration reports (and other remuneration-related issues). ASIC should monitor progress in relation to superannuation funds regulated under the Superannuation Industry (Supervision) Act 1993.

Support in-principle.


Remove the cessation of employment trigger for taxation of equity or rights that qualify for tax deferral and are subject to risk of forfeiture.

Not support.


ASIC should issue a public confirmation to companies that electronic voting is legally permissible without the need for constitutional amendments.

Support in‑principle.


Two strikes and re-election resolution process: 25 per cent ‘no’ vote on remuneration report triggers reporting obligation on how concerns addressed, and subsequent ‘no’ vote of 25 per cent activates a resolution for elected directors to submit for re-election within 90 days.



The Australian Government to implement intent of recommendations 2, 3, 10 and 11 by legislation if the ASX and Corporate Governance Council do not make requisite changes.



Review within five years to consider: the effectiveness and efficiency of the reforms, including to termination payments and employee share schemes, and the regulatory architecture.


Claw back

A director or executive must repay to the company any bonuses which were based upon financial information that subsequently turned out to be materially misstated.

Additional Government proposal.


Joint Statement in Full >>

What do you think?