By Fiona Balzer, Policy and Advocacy Manager, and Damien Straker, Advocacy Coordinator
27 May 2022

This coming week brings the mini-AGM season to a close, as the companies we monitor complied with the ongoing five-month deadline (after year end) to hold their AGM, despite the ASIC one month extension.

2022 focus issues, ESG policy and updated monitoring guidelines

Last week, we launched ASA’s focus issues for the main AGM season, ASA’s ESG policy, and the updated monitoring guidelines.

The four focus areas for ASA’s company monitoring for the main-AGM season in 2022 include:

• fair treatment of shareholders in capital raisings and communications;
• expectations of directors and boards;
• ESG, in terms of incorporating sustainability and ESG strategy, practice and reporting in an appropriate, effective manner; and
• remuneration with a logical relationship between rewards and financial performance and corporate governance.

These focus issues guide us when we talk with companies and their directors about what matters to retail shareholders.

We updated our voting guidelines, to include guidance for our company monitors on Say on climate resolution, clarifying that when we review resolutions for constitutional change we will vote against those which include a reduction of shareholders rights, such as introduction of virtual-only AGMs. We have grouped and refined of our 22 guidelines on remuneration into three guidelines addressing the remuneration report, CEO remuneration, and voting on the “two strikes” regime board spill.

ASA’s new policy on ESG was developed by a working group of members in collaboration with the staff.

You can find read more on the focus issues here.

Mini-AGM Season

ASA representatives will attend the Duxton Water AGM next week.

Duxton Water

Duxton Water (D2O) is a smaller company (market capitalisation $192m) based in South Australia. Its principal activity is to acquire and manage a portfolio of Australian water entitlements primarily focused in the southern Murray Darling Basin. We are supporting all the resolutions.

2022 Remuneration Report Strike List

Santos 25.32%

The first strike at the Santos meeting has been attributed to the $6m growth projects incentive awarded to the CEO, at the time where Woodside was seeking a new CEO. ASA supported the remuneration report, and notes the payment is once only with a four- year hurdle and annual reports on progress.

Near miss (against vote of 20% or more)

AMP 20.33%

ASA voted against the AMP remuneration report which included sign-on payments and retention payments. We would like to see more financial hurdles to incentivise improved  returns as well as culture and remediation.

Other against votes of note were for the Climate Change reports “Say on Climate”:

Woodside 48.97%
Santos 36.93%

These are ordinary resolutions of an advisory nature so were approved with 50% or more shares voted in favour. Nevertheless, it shows the companies have further to go to meet shareholders expectations.

We see the reporting and voting on Climate Reports will evolve as the International Sustainability Standards Board (ISSB) delivers sustainability-related disclosure standards that will provide investors and other capital adequate information to assess their investments’ long-term outlook.

Not all companies with climate report or action votes received high against votes. In contrast, 84.29% of shares voted were in favour of the Rio Tinto Climate Action Plan.

Other company meetings

Western Areas

There is a meeting to be held 1 June, to consider the scheme whereby a wholly-owned subsidiary of IGO Limited (IGO), IGO Nickel Holdings Pty Ltd, will acquire all of the shares in Western Areas. The independent expert’s report prepared by KPMG Financial Advisory Services (Australia) Pty Ltd concludes that the Scheme is not fair but is reasonable to Western Areas shareholders and therefore is, on balance, in the best interests of Western Areas shareholders, in the absence of a superior proposal. If the Scheme is approved and implemented, each Western Areas Shareholder will receive $3.87 cash for each Western Areas Share held as at the Scheme Record Date.

AGL

The AGL demerger meeting will be held 15 June 2022 and we will have a report available late next week which will highlight the issues outlined in the scheme booklet that may influence how a shareholder will vote.

As most readers will be aware, the shareholders will vote on the separation of AGL Energy into two companies, AGL Australia (the energy distribution business with a market trading function and a base of firming, storage and renewable assets) and Accel Energy (the electricity generating business which will “transition by repurposing its existing generation sites into low emissions energy hubs progressing a pipeline of renewable energy projects.)”

Eligible Shareholders will receive one AGL Australia Share for every AGL Energy Share held at the Record Date. AGL Energy Shareholders will retain their existing AGL Energy Shares and AGL Energy will be renamed Accel Energy. Following the Demerger, Accel Energy Shareholders will hold 85% of the AGL Australia Shares on issue, with the remaining 15% of the AGL Australia Shares to be held by Accel Energy.

In order to vote, shareholders will need to complete two proxy forms, one for the General Meeting and one for the Scheme Meeting. Also, if approved, there is a sale and top-up facility with forms to be completed for shareholders wishing to participate. There are the usual comments on the potential taxation impact for holders, which may impact decision to vote for or against. And if demerger is approved, the cost base information should be recorded for easier administration of records holders keep for tax purposes.

In the Independent Expert’s Report which you will find on page 174 of the booklet, it is stated that in “Grant Samuel’s view, there is a clear case that the status quo is sub-optimal and that change is required.” In simple terms, the report is saying the Independent Expert’s considers continuing as before is not the best way of proceeding. It also notes shareholders will have the same exposures to the assets if the demerger takes place, so the opinion is it is thus “fair”. The expert report also says, “Evaluation of whether or not the Demerger is in the best interests of shareholders is therefore a qualitative assessment of the short, medium and long term benefits relative to the costs, disadvantages and risks.”

Shareholders may have also received communication from Grok Ventures, outlining why the entity will be voting against the demerger.

We would expect shareholders making their voting decision to consider whether they see the potential short-, medium- and long-term benefits outweigh the costs, disadvantages and risks of the demerger outlined in the document. Shareholders might also like to consider AGL needs to find a profitable way forward by transitioning from making money with large coal-fired power stations to a carbon free future, which AGL states is the mission of the two new companies. We encourage (beseech) shareholders read the scheme documents and other source of financial advice and spend some time making their decision as to which way to vote. Given most retail shareholders are not experts in this area, it may come down to whether the holder is more inclined to trust the directors and executives of AGL or the substantial shareholder.

Head to Upcoming AGMs on the ASA website to see all the meetings we will attend, and you can read the voting intention and AGM reports on the How we vote page or the Companies we monitor page or excerpts in EQUITY magazine.

Voting intentions reports on these pages are restricted to member-only and you need to login to view the company pages. You can search by ASX code, company name or date of meeting.

Give Your Proxy To The ASA

Your proxy counts! You can vote your shares or give your proxy to the ASA for the meetings above to be voted as outlined in the voting intentions posted to the website. Give your proxy to Australian Shareholders’ Association via online voting or give a standing proxy.