AGM Snapshot Meetings. Corporate Markets

Transcription

1 AGM Snapshot 2018 Meetings Corporate Markets

2 Contents In this edition 2018 AGM Season Statistics Meeting Season Statistics 10 AGM Season Wrap Client Engagement Survey 16 Hybrid Meetings Held in Australia in Welcome to the fifth edition of Link s AGM Snapshot. Link has reviewed the global trends and insights that have shaped the results of the 2018 AGM season which included over 700 meetings in Australia and 1,053 meetings in the UK. Hybrid Meeting Checklist 19 The International AGM Landscape 20 Corporate Governance The European Experience 24 Bringing Shareholder Engagement into the 21st Century 26 National Venue List 29 Lysa McKenna Chief Executive Officer, Link Market Services Australia In this report, we examine the global investor discourse on board performance, executive remuneration and investor demands for more transparency in corporate governance. Link is trusted to run meetings on behalf of our clients worldwide. Our insights are based on our expertise and experience from the activities we undertake on behalf of our clients such as proxy solicitation, investor communications, advice on AGM logistics and planning and the results of each and every AGM we conduct. Connecting people and technology is core to our business at Link. Utilising new virtual meeting technology to support shareholder engagement continues to be an area of debate in each of the jurisdictions, with some companies still unsure about the merits of opening up the AGM to an even wider audience that virtual engagement supports. That said, some of Link s largest member organisations and listed clients have embraced the platform with positive and pleasing results. We hope you enjoy the insights from our Meeting Services team at Link Group. 2 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 3

3 2018 AGM Season Statistics All statistics are based on Link clients 7.28% 4.91% 5.52% 4.53% 6.10% 11.00% 13.60% 15.60% 18.40% 21.50% 24.35% 25.38% 28.60% 30.79% 34.00% Online Voting Volumes Percentage of proxies received since 2004 Form Volumes (Online & Paper) & Number of AGMs Held The average return for proxy forms in 2018 was 3.57%, slightly down from 3.94% in Despite the increase in AGMs from 399 in 2017 to 415 in 2018, there was only a very small increase in proxy volumes The small increase in online voting of 3.2%, taking the figure to 34% in 2018 is consistent with online voting trends since The greatest volume of online votes comes from the S&P/ASX 201+ base of voters with almost 50% of votes lodged online. Total Proxy forms received Form Volumes Number of AGMs Number of AGMs held Total Online Votes Percentage of online votes received by S&P/ASX category in S&P/ASX % S&P/ASX % S&P/ASX % Voting The total number of holders lodging a vote remains low across all indices Direct Voting 19 clients offered direct voting in On average 5.95% of issued capital voted using direct voting, up from 4.37% in All Clients 3.57% 3.94% 4.01% 3.89% S&P/ASX % 3.91% 3.78% 3.73% S&P/ASX S&P/ASX % 4.80% 4.91% 4.45% S&P/ASX Electronic Communication S&P/ASX % 3.77% 4.61% 4.21% S&P/ASX Percentage of holders posted % Percentage of holders ed % 2017 Percentage of holders posted % Percentage of holders ed % Percentage of holders who received AGM documents via and post For the first time, the percentage of holders who received AGM documents electronically was greater than those who received their documents via post, with 52.05% receiving an communication. Percentage of votes received online vs. the number of holders ed AGM documents 2.72% 63.64% 66.60% 43.47% 65.51% 66.21% 53.14% 69.70% 71.73% 66.24% 72.08% 77.05% 63.48% Issued Capital Voted Percentage of Voting Issued Capital Issued capital voted remained steady in the S&P/ASX 100 & 200 indices but dropped by 9.67% in the S&P/ASX This follows a drop of 13.1% in this index in Percentage of holders voting via paper compared to the number mailed 5.73% S&P/ASX 100 S&P/ASX 200 S&P/ASX Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 5

4 2018 AGM Season Statistics All statistics are based on Link clients Conduct of Polls Total Polling All Link clients in the S&P/ASX 100 conducted a poll at their AGM with 97.50% taking all resolutions to poll. Polling was also high in the S&P/ASX 200 with 82.35% conducting a poll at their AGM. Polling trends in 2018 AGM Shareholder Attendance Percentage of shareholders attending AGMs AGM attendance remains low with only 0.17% of holders attending meetings across the country % 82.35% 39.76% 94.29% 78.38% 33.33% 94.59% 77.78% 31.72% 96.67% 87.80% 67.86% 97.50% 96.43% 88.81% 2.50% 3.57% 11.19% 0.17% % % % 2015 Meeting Attendance Meeting Duration All Resolutions Some Resolutions S&P/ASX 100 S&P/ASX 200 S&P/ASX 201+ Shareholders represented the largest portion of attendees at AGMs in % 58.53% 56.84% 7.16% 5.14% 6.71% 24.93% 36.53% 36.45% The majority of meetings lasted between 1 and 2 hours. This year we observed a greater number of questions being asked from the floor, particularly around remuneration, director accountability and environmental issues. S&P/ASX 100 S&P/ASX 200 S&P/ASX 201+ Up to 30 minutes 2.56% 0.00% 17.69% 30 minutes 1 hour 15.38% 26.47% 42.69% hours 25.64% 29.41% 26.93% hours 30.78% 17.65% 7.31% hours 12.82% 14.71% 3.08% hours 10.26% 8.82% 1.92% 3+ hours 2.56% 2.94% 0.38% Shareholders Proxy holders Visitors S&P/ASX 100 S&P/ASX 200 S&P/ASX Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 7

5 2018 AGM Season Statistics All statistics are based on Link clients Shareholder Questions Prior to the Meeting The number of clients offering questions increased in the S&P/ASX 200 but dropped in the other indices. These questions provide clients with insight into the topics raised at the AGM and allow them to prepare. Remuneration Resolution S&P/ASX Over 90% 71.81% 77.15% 64.10% 44.12% 14.84% 74.28% 32.43% 21.71% 70.27% 47.22% 15.17% 80.00% 43.90% 13.04% 2018 Percentage of clients offering questions in the S&P/ASX % % had a For vote of over 90% 80% 89.99% 15.38% 8.57% 75% 79.99% 2.56% 5.71% 60% 74.99% 2.56% 2.86% 40% 59.99% 2.56% 0.00% Less than 39.99% 5.13% 0.00% Show of Hands 0.00% 5.71% S&P/ASX S&P/ASX 100 S&P/ASX 200 S&P/ASX 201+ Types of questions received from shareholders prior to the meeting Question topics 2018 Customer Service 10.87% Remuneration Report 10.46% % had a For vote of over 90% Over 90% 84.85% 85.29% 80% 89.99% 6.06% 2.94% 75% 79.99% 3.03% 5.89% 60% 74.99% 6.06% 0.00% 40% 59.99% 0.00% 2.94% Less than 39.99% 0.00% 0.00% Show of Hands 0.00% 2.94% Future Direction/Strategy 8.98% In 2018 the types of questions asked by shareholders were varied. The remuneration report was a focus and questions around the banking royal commission were asked of our clients in the banking industry. General Suggestion 7.04% Share Price 6.14% Performance or financial reports 5.70% Dividends/Shareholder Benefit 4.57% Banking Royal Commission 3.92% Sustainability/Environment 2.63% S&P/ASX % had a For vote of over 90% Over 90% 46.82% 50.52% 80% 89.99% 7.01% 8.93% 75% 79.99% 3.50% 3.78% 60% 74.99% 5.10% 3.78% 40% 59.99% 2.55% 3.09% Board Management 1.80% Less than 39.99% 1.91% 1.38% Resolution being put to the AGM 0.71% Show of Hands 33.11% 28.52% Other 37.18% 8 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 9

6 2018 Meeting Season Statistics All statistics are based on Link clients Strikes in 2018 There was an increase in strikes in the S&P/ASX 100 with three companies receiving a vote of more than 25% against on their remuneration report. Again, there were a greater number of strikes in the S&P/ASX 201+ rising from 22 in 2017 to 27 in st Strike 2nd Strike S&P/ASX S&P/ASX Over 700 Meetings & Ballots in was a busy year for the Link Group Meeting Team, managing 707 AGMs, EGMs, Ballots and Member Meetings. These included ballots for the Australian Institute of Company Directors, Canterbury Bulldogs, GrainGrowers and the Real Estate Institute of Queensland. WoolPoll 2018 went to a preference count and Creditor Meetings were run for companies including Halifax and RCR Tomlinson Group. Months in which meetings and ballots were held Alongside AGMs, Link ran Scheme Meetings, Extraordinary Meetings, Ballots, Creditor Meetings and more. In 2018 we managed 707 of these, a big jump of 75 from November continues to be the busiest month with the majority of AGMs held at this time January February March April May June July August S&P/ASX September October st Strike 2nd Strike November S&P/ASX December S&P/ASX Totals S&P/ASX Locations st Strike 2nd Strike Locations where Link staff attended meetings in S&P/ASX S&P/ASX S&P/ASX NT 1 84 QLD 55 WA SA VIC 241 NSW ACT 1 NZ 2 OTHER 9 TAS 2 10 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 11

7 AGM Season Wrap The 2018 AGM season was anything but boring with some fiery meetings, eyebrow-raising results and an increase in against votes across the board, as predicted by industry observers. Link Market Services Australia AGM Season 2018 saw a record number of meetings with the team managing 707 meetings and ballots in Australia alone. These included AGMs, member meetings, ballots and EGMs with a significant number of the EGMs related to Scheme of Arrangements. We travelled across the country, visited Dubbo alongside Prince Harry and Meghan, Duchess of Sussex, were stranded at airports during the dust storm, met the Indian cricket team and even experienced an earthquake in Palmerston North, New Zealand! The statistics within this edition highlight the move towards electronic communications and digital voting around the globe via our virtual meeting offering. We saw more clients embracing the technology with a focus on shareholder engagement. We oversaw a number of highly contentious meetings; we worked in conjunction with Orient Capital, to ensure our clients had visibility over the votes in the lead up to, and at the meeting, and a seamless meeting throughout. Questions were focused on remuneration, the number of directorships held and directors capacity to complete their board responsibilities. Environmental questions were also prominent and protest groups were vocal outside some venues is shaping up to be similar, and early engagement remains the key to running successful meetings and increasing investor participation. Company Matters AGM Season Company Matters is fortunate to work with over 400 clients, from S&P/ASX 20 entities to small caps and not-for-profits. Accordingly, we have visibility over a diverse range of entities, across a variety of sectors and industries. In 2018, we attended over 65 members meetings, prepared over 70 notices of members meetings and participated in over 1,200 board and board committee meetings. Our key observations from the 2018 AGM season are: More companies at the higher end of S&P/ASX indices received a strike on their remuneration report than in 2017; we also saw companies further down the S&P/ASX indices receive strikes, as well as being subjected to increased scrutiny on their remuneration structures. Continuing the trend from 2017, partly driven by the Financial Services Royal Commission, there was an increased focus on director elections; specifically director re-elections if the entity was underperforming or where there were broader governance or risk concerns. An increase in the number of investors requesting that directors seeking re-election address the meeting and outline the reasons why investors should vote in favour of their elections. Many companies preempted this by having each director up for election address the meeting ahead of the vote. Again, continuing the recent trend, an ongoing focus on environmental, social and governance (ESG) matters, with the results indicating that an increasing number of investors see ESG as critical to their investments. A lesson for the 2019 AGM season is that further engagement with shareholders is warranted ahead of the AGM, given the high number of against votes received by some companies this season. Remuneration remains front and centre It will not come as a surprise that remuneration matters continued to dominate a number of AGMs; we saw an increase in strikes from 2017, and an increase in the number of companies that came close to receiving a strike. Some of our clients who have historically received almost unanimous support for their remuneration reports, had No votes creeping close to a strike. In particular, investors raised concerns about the move by some companies to combine long and short term incentive schemes into one scheme. Underlying this was the Financial Services Royal Commission. Not surprisingly, banks and financial services companies were at the receiving end of a number of strikes, with a significantly high percentage of No votes. One company received the unfortunate record for the highest No vote (with a strike of 88.43% and 45% of shareholders voting on the resolution). Additionally, some of our smaller clients, previously not the subject of proxy advisers and detailed scrutiny on their remuneration frameworks entered the spotlight this year. A lesson for the 2019 AGM season is that further engagement with shareholders is warranted ahead of the AGM, given the high number of 'against' votes received by some companies this season. Increased focus on director elections We observed an increased focus on individual director re-elections once more, particularly in organisations with poor financial results or governance issues. There were a number of protest votes against director reelections, specifically where there was a long-standing director who was part of the board during the poor performance period and presumably had the ability to influence and approve certain outcomes. Historically, many companies view director elections and re-elections as non-events which were often passed with almost unanimous support and little-to-no questions from investors. While some companies as a matter of practice, request that directors who are subject to election address the meeting and provide a brief biography and the reasons for election, this is not necessarily common practice. We did however notice that this is a growing trend, continuing from 2017, with investors at a number of meetings requesting that directors who were subject to election address the meeting and outline the benefits and attributes they would bring to the board composition. There was also an increase in questions being asked by investors in regards to director re-elections. Environmental, social and governance matters Again continuing the 2017 trend, there was a focus on ESG issues, especially at the top end of the S&P/ASX indices. Interestingly, although the proposed constitutional amendments put forward by activists were defeated, resolutions relating to climate risk matters at the Origin and Whitehaven Coal AGMs received support of 46% and 40% respectively. The ESG focus this year was not limited to environmental matters, with some companies also facing shareholder resolutions on human rights issues. 12 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 13

8 Orient Capital AGM Season In 2018 Orient Capital ran considerably more meetingrelated campaigns, with an increase of 39% in comparison to These campaigns provide clients with valuable insight into their investors voting intentions. This year s campaigns saw a marked increase in against votes on remuneration with an increase of 29% on average from superannuation (super) funds and 14% from investment managers. We saw a very clear trend of investors more inclined to use their voting power to send a message to the board. Investors clearly aren t afraid to speak out on what they consider to be low hurdles in obtaining Long or Short Term Incentives (LTI/STIs), excessive pay, or poor governance. Voting trends Our research shows increased participation of super funds at AGMs in 2018, and not only are super funds becoming increasingly more active, generally speaking they appear to be taking their vote direction in house. Meanwhile, as seen through our proxy campaign work, the participation levels of investment managers remain static. Overall, 2018 saw an increase in against votes on the grant of performance right resolutions, which is consistent with what we have seen over the last 2 to 3 years. Orient Capital Case Study 1 An ASX100 Company undertook a proxy campaign ahead of their AGM and due to the disclosure-led campaign, obtained advance insight that votes against the remuneration were above 25% and the company was going to receive a strike unless there was intervention. Orient Capital worked with the ASX100 Company to identify an institutional investor that held enough issued capital to swing the vote, and engaged the portfolio manager and governance team to ensure that they submitted their votes in favour prior to proxy close. The strike was subsequently avoided. Some of the benefits of a proxy campaign (as highlighted in the above case studies) include: Advance insight and increased visibility into voting intentions Minimised risk of receiving unforeseen Against votes (no surprises) Providing the board with peace of mind Increased participation Insight into any shareholder unrest ahead of the meeting Efficient way to engage large numbers of shareholders (retail campaigns). If there are no custodians/nominees on the register and issued capital is more evenly distributed across a lot of shareholders, then a retail campaign can be of benefit in reaching a large number of shareholders to understand their thoughts or intentions when voting at meetings. Meeting-related retail shareholder campaigns saw an increase of 83% in 2018 in comparison to 2017, however this was from a comparatively low base (11 vs 6). Proxy Advisors Mid 2018 saw the U.S. Securities and Exchange Commission raise concerns about the influence proxy advisors wielded, and as such have led the way in round table discussions regarding the proxy process, albeit with a US focus. Australia s disclosure legislation means that Link can undertake campaigns which enable these votes to be traced in the days leading up to the meeting, providing valuable insight regarding those investors of concern. Proxy advisors play an integral role in the voting process and form an important part of an investor s decision making process, however they may not hold as much sway as the market has been led to believe. There have also been changes in how proxy advisors consider their recommendations, with Institutional Shareholder Services (ISS) announcing a new voting policy effective 1 February 2020, for US-based companies with no female directors serving on their board. Glass Lewis has also stated that as of 1 January 2019, they will generally recommend votes against the nominating committee chair for those companies that have no female director representation. ISS also tabled their benchmark policy update to focus on auditor fees and audit committees in the Asia Pacific region in The 2018 AGM season, as most commentators suggested, saw an increase in against votes across the board, and we expect 2019 to continue in the same vein unless companies can demonstrate that they have improved their governance across key areas of concern. Orient Capital Case Study 2 An ASX200 Company had been advised by the portfolio manager of an institutional investor that they were voting for a resolution, but Orient Capital had identified that that investor had used their own funds to vote against, a decision made by the governance team, not the portfolio manager. Knowledge of the lack of communication between the front office and back office ahead of proxy close provided the ASX200 Company with the opportunity to address this, so that the institutional investor resubmitted their votes in the Company s favour, and the ASX200 Company avoided receiving unwarranted against votes. Our research shows that investors and super funds when voting at meetings of Australian incorporated companies may not typically follow their proxy advisors recommendations. In fact, investment managers have only voted in line with their proxy advisors 25.1% of the time, with super funds following their advisors 42.7% of the time. This reinforces our belief that if an investor (whether an investment manager or beneficial owner), retains voting discretion they will vote how they feel is most appropriate, irrespective of the proxy advisors recommendations. 14 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 15

9 2018 Client Engagement Survey As part of Link s ongoing commitment to strengthening relationships with our clients, we sent a survey in December 2018 seeking feedback on how we could improve client engagement and our service offering. Results from the AGM component highlighted the interest in our virtual meeting technology. Our AGM Services How do you rate the management of your AGM by your Link relationship team? Excellent 62% Very Good 32% Average 6% AGM Technology Would you consider holding a Hybrid AGM? (i.e. a physical and online meeting) Yes will use the technology in the near future 23% 94% of clients rate Link s AGM service as very good to excellent 16 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 17

10 Hybrid Meetings Held in Australia in 2018 Hybrid Meeting Checklist In 2018 we saw a rise in the number of Australian clients wanting to increase investor engagement and encourage investor participation at their AGM by using Link Group s hybrid meeting technology. OZ Minerals, Mirvac and REA Group joined NRMA, Link Administration Holdings, Xero and Cogstate as early adopters of this technology. Hybrid meetings open up channels of communication for our clients, and enable an increase in participation rates at their meetings. By using this technology Oz Minerals and Mirvac experienced a 99% and 188% increase respectively, in AGM attendance in one year. The key to running a successful hybrid meeting is to engage Link early. Demonstrations to your team and Board can provide a better understanding of the technology and how it works alongside other aspects of your meeting. Early engagement ensures we include the relevant information in your Notice of Meeting to promote the platform to your holders; Link has a number of examples they can provide. The Link Meeting team will guide you at every step of the process, including accompanying your question moderator on the day and preparing for any run throughs if required. Hybrid Meetings Held in Australia in 2018 The physical component of the AGM is replicated for online attendees, as much as is possible. The fully integrated platform enables online participants to view the live webcast of the meeting and presentation slides on the screen. Participants can also download relevant meeting documentation, and if they are verified investors (or proxy holders) they can ask questions and submit their online voting card. Once registered, the electronic voting card allows voters to submit a full or partial vote for each resolution. Once their vote is complete they can submit this at any time during the meeting, up until the time the poll is closed by the Chair. For those voting online, a red bar with a timer displays at the top of the screen to show them how much time they have to submit their vote. Investors and proxy holders can also ask questions and have the option to select the resolution their question applies to, or ask a question regarding general business. The questions are monitored by a moderator from the company and all relevant questions sent to the Chair for a response. On the opposite page we have included a Hybrid Meeting Checklist covering the key aspects leading up to your meeting. Attendance Meeting Attendees Physical Online National Roads & Motorists Association Xero Limited Link Administration Holdings OZ Minerals Limited Mirvac Group Engage Link to run the online component of your meeting including the webcast. Arrange webcast requirements with Link. Prepare the information to include in your Notice of Meeting: Links to the online platform Login requirements When your online platform will open for the meeting. Work with Link to design your Proxy/Voting form this should include details for voting online and proxy holder contact details. Work with Link to design your Online Platform Guide. Capture AGM Questions from shareholders prior to the meeting (if you don t already) with a question form sent out with the Proxy/Voting form and/or by utilising Link s online question functionality. This provides an opportunity to consider recurring questions, issues or themes, and ensures responses are carefully considered and if necessary, discussed with the Chairman. Provide Link with your brand/style guide and colour logos to set up the online platform screenshots from this can be used for your Online Platform Guide. Review and customise (if required) the T&Cs on the online platform (seeking your own legal advice as necessary). Consider whether any other documents/ guidelines should be prepared, for example Direct Voting Regulations and/or Meeting Principles/ Procedures, and whether these documents should be available on your website prior to the Meeting. Send a broadcast the day before the meeting to remind people to login, view and vote online. Select your moderators moderators will field online questions and forward them to the Chairperson. Moderators should rehearse ahead of the meeting and should allow a reasonable opportunity for members to ask questions or make comments N.B. Moderators will be trained by Link staff prior to your AGM and a Link staff member will accompany them throughout your Meeting. Provide a Q&A document for upload to the online platform, taking into consideration the questions from holders received before the meeting. (Optional) Provide final presentation slides and Chairperson s script to Link. Book a run through with the Chairperson so they understand the online question process. This should preferably be performed at the venue after the technical aspect has been set up. There are some processes the Chairperson should familiarise themselves with before the meeting, which are different to a physical only meeting. If using the Link Vote app at your Meeting, Link will provide relevant instruction cards and signage. REA Group Cogstate Limited Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 19

11 International AGM landscape Spotlight on: The United Kingdom AGM participation on the rise Average shareholder AGM participation amongst FTSE 100 companies increased approximately 2% from % in 2017 to % in 2018 Three companies increased their participation by double digits: Admiral Group, Centrica and BP, with BP experiencing the biggest leap of 32.54% (from 43.63% in 2017 to 76.16% in 2018). This sharp rise appears to be the result of the company s decision to break with a 100-year precedent by holding the 2018 AGM in Manchester, rather than London. The UK led all four markets (UK, France, Switzerland and Germany) in approval rates across all categories (quorom, remuneration, capital authorisations, and director election support) and on all items combined. Modern corporate governance was invented there, and its value has permeated the DNA of most Plcs. Investors keep the pressure on Investors have repeatedly highlighted their concerns with excessive CEO pay, so it is frustrating that the message does not appear to be getting through to some FTSE 100 boardrooms. This year we have seen more FTSE 100 companies get significant votes against their remuneration reports than in previous years. Andrew Ninian, Director of Stewardship and Corporate Governance, The Investment Association, August 2018 Shareholder revolts against remuneration items rose in the last year of AGMs. This year has seen 17 items receive less than 80% support, the highest in the last three years. This constituted 12 remuneration report items, 3 items on remuneration policy, and 2 equity plans for executives proposals. Low approval rates are becoming increasingly significant; as of the new UK Corporate Governance code effective from the 2019 AGM season, companies will be expected to address these low rates. Votes on remuneration remain the most likely to see shareholders challenge companies plans. Over the last years, 8 of the 10 lowest-approved items (all under 58%) were related to remuneration report proposals. Despite a quieter AGM season last year, the 2018 season has shown that executive pay remains an area of shareholder focus. We have seen a much more challenging voting season, in particular for FTSE 30 companies, despite it not being a policy year for the majority. This reflects a tougher stance taken from proxy agencies in respect of the largest companies, as well as continued pressure on repeat offenders. Stephen Cahill, Vice-Chairman, Deloitte August 2018 Director elections support stable Average approval of director proposals has remained around 98% over the last three years. We continue to see average support for director elections trailing that of director discharge. The difference indicates shareholders are more inclined to support the stepping down of a director or CEO in light of inevitable negative media and publicity surrounding particular activities/ decisions/policies/reckless behaviour rather than exercise a vote in favour of electing or re-electing a board member. Over the last three years, Institutional Shareholder Services (ISS) has been less critical in its recommendations, recommending a vote against 7, 4, and 2 director proposals in 2016, 2017, and 2018 respectively. There is a correlation between ISS favourable recommendations on director proposals and a consistent average approval rate of 98% from shareholders year on year. AstraZeneca, Old Mutual, Informa and WPP stand out, having received less than 80% approval on remuneration items for two consecutive years. Some of this information was originally published in D.F. King Ltd s General Meeting Season Review October Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 21

12 Spotlight on: New Zealand New Zealand showed positive trends in shareholder engagement with data indicating a 26% increase in proxy returns. Online voting also continued to grow, with 71% of shareholders voting online. Online voting was up from 46% in 2016, and 58% in 2017, as shareholders are familiarised with online voting; a trend that is expected to continue. Continuing the digital theme, 70% of all shareholder communication was dispatched electronically. Overall 41.3% of issued capital was voted, which remained largely consistent with the previous year. Voter attendance is still largely dependent on the business of the meeting, with only 3.1% of all shareholders deciding to participate. An effective communication strategy that includes voting reminders, increases voter participation. An effective communication strategy ensuring increased shareholder voting was demonstrated at the Heartland Bank Scheme of Arrangement Meeting in September, which saw 30% of all shareholders vote prior to the meeting. Another growing trend is the number of hybrid meetings held in New Zealand continuing to increase. 7 of the NZX Top 10 issuers now run hybrid meetings to ensure wider shareholder engagement. This trend is likely to increase, albeit slowly. Heartland Bank Limited SMS Case Study Heartland Bank Limited (Heartland) undertook a Scheme of Arrangement meeting to approve a corporate restructure of the company. To implement the court required 50% of all shares to be voted at the meeting. Heartland is a widely held company, being formed through the merger of three co-operative building societies (like a credit union), with only one shareholder holding beneficially more than 5% of the shares on issue. To reach the threshold Heartland required approximately 3,000 out of its 12,000 shareholders to vote. To reach the target, a 600% increase in shareholders voting from the previous year (411 shareholders) was required. Link implemented a communication strategy that included: reminders SMS Postcards. Two voting reminders were sent to: 8,041 shareholders by 5,222 by SMS 12,000 by postcard. There was a noticeable spike in voting after each reminder and Heartland was able to secure 3,800 shareholders to vote at the completion of the meeting. Attendance 2018 Meeting Attendees Physical Online Z Energy Limited Spark New Zealand Trademe Group Limited Tourism Holdings Limited Contact Energy Limited Fisher & Paykel Healthcare Limited Port of Tauranga Limited The A2 Milk Company Limited Pacific Edge Limited Auckland International Airport Air New Zealand Number of hybrid meetings in NZ by year Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 23

13 Corporate Governance The European Experience D.F. King Ltd D.F. King Ltd is part of the Link Group and was founded in D.F. King Ltd is an expert in stakeholder engagement, providing comprehensive global advisory and execution services for equity and debt transactions, as well as support in insolvency matters. The 2018 UK and European proxy season demonstrated that corporate governance continues to evolve toward greater accountability by boards, not only toward their shareholders but also toward the wider stakeholders affected by them. If corporate governance is healthier today, the demands on listed companies continue to grow, especially in a more prescriptive environment. How Corporate Governance Regimes Evolved in Europe Following the financial crisis, it became imperative for investors to ensure that corporate boards could manage systemic risk and that they were accountable not only to all of their investors but to their broader stakeholders as well. The decision in several European countries to enable shareholders to take a more active role in a company s decision making became the hallmark of the corporate governance movement. When the public did not see the anticipated decrease in executive compensation, many governments came under pressure to give more teeth to corporate governance regimes. They began to move away from a self-governing model to a prescriptive one. The implementation of the Shareholders Rights Directive (SRD II) is a sea-change for companies, shareholders, custodians, and proxy advisors alike. While national governments still maintain substantial flexibility in how they transpose SRD II into national legislation, we are starting to see the impact of some of the changes. For example, France s Sapin II law created binding votes for both remuneration reports and remuneration policies, motivating French businesses to improve their processes. We are also seeing several markets roll-out further changes to their domestic corporate governance codes. But if the aim of further regulation is to better align investor and issuer perspectives on corporate governance, how well have previous national attempts on legal intervention faired? United Kingdom Corporate governance remains strong Average shareholder support has remained stable since 2015 at approximately 97.5%, with approval rates in each proposal category remaining relatively flat. In our analysis, only one management proposal failed to secure 50% support in This was in relation to Royal Mail s remuneration report, which secured 29.83% votes in favour vs 70.17% against as shareholders rejected higher pay for the company s new CEO. Under the new UK Corporate Governance Code, which will be effective from the 2019 AGM season, should votes against any item exceed 20%, company boards will be expected to explain the action they intend to take to address the relevant shareholder concerns. In cases where support is lower than 80%, companies will also be expected to provide an update in the following six months on shareholder views. Companies also will need to disclose the actions set out in the annual report and AGM notice, outlining how this action has impacted the board s decision-making and any actions or resolutions the board proposes moving forward. Switzerland Corporate governance support at 4-year high Average investor support at Swiss AGMs returned to levels witnessed prior to 2017, increasing by 1.13% and reaching a four year high of 95.93%. The data also reveals a 4.27% increase in support for remuneration proposals. France Corporate governance approval rising France s Corporate Governance codes and practices have been rigorous and sophisticated for many years. This general health is reflected in the average approval rate for all items combined which continued its upward trend to an average of 94.27%. This is compared to 93.72% in 2017 and 93.61% in Similarly to 2017, the approval rates of remunerationand capital-related resolutions increased, while directorrelated resolutions continued to decrease, falling to 92.8% from its level in 2016 due to a certain number of elections of directors with combined role of Chairman and CEO. Germany Corporate governance coming under pressure Shareholder support for management proposals at AGMs of German DAX and MDAX companies remained high overall at an average of 94.08% support. The only proposal that failed to garner a requisite simple majority was the re-election of Norma Group s Chairman Stefan Wolf (which saw an approval rate of 49.59%). However, the average approval rate of items related to a company s remuneration, capital, or supervisory board, as well as the average approval rate for all items combined, decreased slightly from prior years. The continued decrease in the approval of remuneration items warrants particular attention. To answer this question, D.F. King Ltd selected four Europeancountries with different regulatory regimes on corporate governance overall and executive remuneration in particular. These were the United Kingdom and Switzerland, two countries with early but very different legal implementations of binding compensation; France, which enacted their remuneration policy vote legislation only in 2017, with full implementation in 2018; and Germany, the only one of the four without a binding vote on remuneration. Some of this information was originally published in D.F. King Ltd s General Meeting Season Review October Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 25

14 Bringing Shareholder Engagement into the 21st Century Link Asset Services, UK Is our industry meeting shareholder expectations? As we approach the third decade of the 21st century, it is increasingly possible to operate almost entirely online. Banking, ordering food, even submitting tax returns can be done and is often preferred via a smartphone app or website. But amid this push into ever-greater automation and better use of technology, one part of our professional lives is stubbornly stuck in the past. For the vast majority of public companies around the world, the process of engaging with shareholders has barely changed since the internet was invented. Despite receiving digital reminders about renewing road tax and submitting gas meter readings, shareholders can often expect to find bulky annual reports and proxy voting cards stuffed in their letterboxes still. While we can FaceTime and Skype our family and friends anytime and almost anywhere, in order to make our voices heard at an annual general meeting, which can take place anywhere in the world, most shareholders need to turn up in person. Unlike most financial aspects of our lives, which have undergone a technological evolution, shareholder engagement has been slow to embrace these digital advancements. But apart from this clear mismatch of technology with behaviour, why should it matter? Shareholder engagement has become a common catchphrase for the investment industry since the financial crisis. Investors want to know that their capital is holding company directors to account and if there is something wrong, they can (or at least try to) change it. However, Link Market Services data show that, on average, only 6% of a company s registered shareholders actually vote at AGMs by proxy representing 54.5% of capital. The FTSE 100 constituents fare better with proxy appointments of circa 63% compared to the overall average. Attendance at the meeting is often represented by as little as 0.1% of capital with varying levels on physical membership present. 1 For retail shareholders, who are often based miles from a meeting, the travel cost and time considerations are usually prohibitive. For institutional investors, who commonly hold hundreds of different stocks, the logistical feat of physically attending all shareholder meetings would be bordering on the impossible. Interestingly, 96% of paper proxy cards are never completed and returned for counting. We can only speculate as to whether the weighty documentation packages are ever read. That said, around 55% of an issuer s capital is regularly voted, with the majority lodged via electronic means. Our evidence shows companies that provide for electronic communications receive 9.5% more proxy submissions than those that just offer paper. Apart from the issue of wasting precious resources, which should chime with an investment industry increasingly attuned to its environmental responsibility, it is a chronic waste of effort and cost. In 2019, we expect to see a major shift in this area with over a fifth of Link Market Services clients removing paper proxy cards as a default proxy voting method. Most companies know they are not engaging fully with their shareholders they can count the voting cards that come back but so far, as a large amorphous group, they have been hesitant to grasp the digital opportunities. In their defence, there have been barriers to overcome. Making even the slightest change to an Articles of Association is a task not always welcomed by issuers. Just to make a small amendment to allow digital voting options can often open the whole process up to an inordinate amount of scrutiny and review. Things on both sides are changing however, and now that the touch paper has been lit, the digital revolution can rapidly take hold. Claims that a technological shift would impede older shareholders from communicating with a company appear largely unfounded. According to a June 2018 survey from Deloitte, 77% of 55 to 75 year-olds said they had access to a smartphone, up from 29% in 2012, with a further 64% claiming to have a tablet. With these instruments readily at hand, there are plenty of options and opportunities for companies to bring their shareholders into the fold and the more forwardthinking of them are already out there exploring. For example, the document repository app developed by Link Market Services Signal documents is proving to be popular. It allows Link Market Services clients to hold electronic versions of their reports and accounts in one place, both for viewing and electronic annotation. Whilst virtual and hybrid meetings have been limited in the UK, take up of such facilities in the USA, Australia and New Zealand has been growing. Though there has been some criticism of moves to introduce completely virtual AGMs, hybrid AGMs have emerged as a viable and positive solution that combines the merits of physical and online attendance. In Australia, Link Group was the first S&P/ASX 200 company to hold a hybrid AGM. It had shareholder participation from across the USA, Australia and New Zealand. After the initial development outlay, this model could be adopted and used by plenty of other companies to cut down on the out-of-date processes that waste back office time and money. This would enable retail shareholder attendance, without the significant travel time and cost, to bring them closer to the company. For institutional fund managers, deluged in AGM season, this virtual connectivity lets them gauge a wider shareholder sentiment, while still allowing for their usual, behind the scenes engagement channels during the rest of the year. As the investment world evolves with the advent of defined contribution pension funds, greater personal responsibility for investing for retirement, and the social imperative to do better with our resources, financial or otherwise, grows with younger generations the need for change is here. Luckily, the technology is already here too and is advancing every day. Like the rest of business if not the world the shift is only going one way and with just a bit of forward thinking, shareholder engagement can readily embrace tomorrow, today. 1 Data from AGMs held in Australia across all indices shows that, on average, only 3.57% of a company s holders vote, representing 47.11% of issued capital. Meeting attendance is a low 0.17%. 26 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 27

15 National Venue List 28 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 29

16 National Venue List Venue Capacity (max) Address Phone Web Venue Capacity (max) Address Phone Web Amora Hotel Jamison Street, ANZ Stadium 1,500 Olympic Boulevard, Olympic Park Art Gallery of NSW 320 Art Gallery Road, Australian Institute of Chartered Accountants Australian Institute of Company Directors Erskine Street, Bond Street, City Recital Hall 1,200 Angel Place, Cliftons Conference Centre 190 Level 13, 60 Margaret Street, Christie Conference Centre North Christie Conference Centre Spring Street, Walker Street, North Customs House Alfred Street, Circular Quay, Dexus Place 90 Level 5, 1 Margaret Street, Dexus Place 150 Level 15, 1 Farrer Place Doltone House Darling Island 1, Pirrama Road, Pyrmont Doltone House Hyde Park Elizabeth Street, Doltone House Jones Bay Wharf Pirrama Road, Pyrmont Four Points by Sheraton 1, Sussex Street, Four Seasons 1, George Street, Justice and Police Museum 100 Corner Albert and Philip Streets, ICC 2,500 Darling Harbour, Intercontinental Hotel Macquarie Street, Karstens 180 Level 1, 111 Harrington Street, Luna Park Olympic Drive, Milsons Point Museum of Contemporary Art George Street, The Rocks sydneylivingmuseums.com.au Museum of 120 Corner Philip and Bridge Streets, Park Hyatt Hickson Road, The Rocks Park Royal Darling Harbour Day Street, Pullman Hotel College Street, Radisson Blu O'Connell Street, Rydges World Square Pitt Street, Shangri-La Hotel Cumberland Street, The Rocks Sheraton on the Park Elizabeth Street, Sofitel Wentworth Hotel 1, Philip Street, State Library of NSW 180 Corner Macquarie Street and Shakespeare Place, Swissotel Market Street, Harbour Marriott Hotel at Circular Quay Pitt Street, Masonic Centre Goulburn Street, Town Hall 2, George Street, The Concourse 1, Victoria Avenue, Chatswood The Establishment George Street, The Ivy George Street, The Langham Kent Street, The Mint Macquarie Street, The Star 1, Pyrmont Street, Pyrmont The Taronga Centre 300 Bradleys Head Road, Mosman The Westin 1,400 No.1 Martin Place, Wesley Conference Centre Pitt Street, sydneylivingmuseums.com.au Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 31

17 National Venue List Brisbane Venue Capacity (max) Address Phone Web Venue Capacity (max) Address Phone Web Brisbane Convention and Exhibition Centre 2,740 Cr. of Merivale and Glenelg Streets, South Bank, Brisbane Brisbane Powerhouse Lamington Street, New Farm Christie Corporate Adelaide Street, Brisbane City Cliftons 120 3/288 Edward Street, Brisbane City Customs House Brisbane Queen Street, Brisbane City Dexus Place 100 Level 31, 1 Eagle Street Waterfront Place, Brisbane Karstens 180 Level 24, 215 Adelaide Street, Brisbane Mantra on Queen Queen Street, Brisbane City Mercure Hotel Brisbane /87 North Quay, Brisbane City Novotel Brisbane Creek Street, Brisbane City Queensland Cricketers' Club Vulture Street, East Brisbane Queensland Gallery of Modern Art (GOMA) QPAC Queensland Performing Arts Centre Royal International Convention Centre 220 Stanley Place, South Brisbane 60 and Grey Street, South Brisbane 1, Gregory Terrace, Bowen Hills Rydges South Bank Brisbane Glenelg Street, South Brisbane Tattersalls Club Brisbane Queen Street, Brisbane City Treasury Casino and Hotel William Street, Brisbane City Victoria Park Function Centre Herston Road, Brisbane City brisbane-qld Arts Centre 2, St Kilda Road, Crown Conference Centre 2,500 8 Whiteman Street, Southbank Dexus Place 50 Level 14, 385 Bourke Street, Etihad Stadium 1, Bourke Street, Docklands Grand Hyatt 1, Collins Street, Institute of Chartered Accountants 50 Level 3, 600 Bourke Street, Karstens Queens Street, Convention and Exhibition Centre 1,500 1 Convention Centre Place, South Wharf Park Function Centre 2,000 Batman Avenue, Town Hall 1, Swanston Street, Monash Conference Centre 100 7/30 Collins Street, Park Hyatt Parliament Square, Pullman on the Park Wellington Parade, East RACV Club Bourke Street, Rendezvous Hotel Flinders Lane, Sofitel on Collins 1, Collins Street, The Event Centre 200 Collins Square, 727 Collins Street, The Forum Theatre 1,500 Flinders and Russell Street, The Regent Theatre 2, Collins Street, The Westin Collins Street, com.au melbourne-town-hall Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 33

18 National Venue List Perth Adelaide Venue Capacity (max) Address Phone Web Venue Capacity (max) Address Phone Web Celtic Club (must be a member) Ord Street, West Perth Adelaide Convention Centre 3,000 North Terrace, Adelaide Cliftons Function Centre 120 Ground Floor, Parmelia House, 191 St Georges Terrace, Perth Crown Perth 1,800 Great Eastern Highway, Burswood, Perth Duxton Hotel 300 No.1 St Georges Terrace, Perth Four Points by Sheraton Wellington Street, Perth Fraser's Function Centre 585 Fraser Avenue, Kings Park, West Perth Adelaide Festival Centre 2,000 King William Street, Adelaide Ayers House North Terrace, Adelaide Hilton Adelaide Victoria Square, Adelaide Hotel Richmond Rundle Mall, Adelaide Peppers Waymouth Hotel Waymouth Street, Adelaide www3.hilton.com Hyatt Regency Adelaide Terrace, Perth London House Conference Room (via The George) St Georges Terrace, Perth conferences Pan Pacific Perth Adelaide Terrace, Perth Parmelia Hilton Perth Mill Street, Perth Perth Convention and Exhibition Centre Mounts Bay Road, Perth QV1 Converence Centre 90 QV1 Level 2, 250 St Georges Terrace, Perth qv1.com.au/work-life/conferencecentre South Perth Bowls Club Mends Street, South Perth Subiaco Arts Centre Hamersley Road, Subiaco subiaco-arts-centre Tradewinds Hotel Canning Highway, Fremantle University Club of Western Australia 280 Hackett Drive, Crawley universityclub.uwa.edu.au/ conference-banquets/venues 34 Link Group AGM Snapshot 2018 Meetings Link Group AGM Snapshot 2018 Meetings 35

19 Link Group Level 12, 680 George Street NSW 2000, Australia linkgroup.com Link Administration Holdings Ltd ABN /19 ISS5