AREAS OF FOCUS THIS AGM SEASON, IN DISCUSSION WITH VAS KOLESNIKOFF AT ISS

26 Oct AREAS OF FOCUS THIS AGM SEASON, IN DISCUSSION WITH VAS KOLESNIKOFF AT ISS

We recently interviewed Vas Kolesnikoff at ISS as part of our On the Couch with Cannings podcast series. Vas is Head of Australia and NZ Research and oversees research, board engagement and voting recommendations for Institutional Shareholder Services (ISS).

The key take-outs from our discussion about the AGM season were:

1. Executive remuneration will be the biggest focus area this AGM season:

• As a result of the impact of COVID-19 on financial performance, many companies have changed their remuneration practices. Quite a few companies are taking out performance targets, while others are including non-financial disclosed targets. The question investors are asking is: if performance targets are taken away, what does that tell us about future expectation?
• The focus is also on justifying the remuneration for company performance that’s been achieved. Investors are also asking, did this company really achieve the performance they had promised?
• Shareholders also want to know which companies have received Jobkeeper and what extent it’s impacted the financial performance and whether executive bonuses are justified in these cases.

2. ESG has been growing in scrutiny over last 5 years:

• Shareholders want companies to make money for them and they want companies to make it the right way. Governance and ESG more broadly, have major consequences for companies in their ability to make money. Investors are increasingly asking questions on these areas and expecting greater reporting on it.

3. Board accountability is in focus:

• Historically shareholders have been prepared to give boards benefit of the doubt, but there have been cases recently where shareholders have expected action and it hasn’t happened. The lack of action has a value implication. We’re looking at board accountability and governance frameworks closely.

4. Diversity and Inclusion:

• Many studies show gender diversity drives better results so we are asking those companies that don’t have diversity at board level, why?
• It’s positive to see that there is an increasing presence of overseas directors with many Australian companies becoming global.

5. Finally, for companies considering engaging firms such as ISS, the advice is:

• Engage early, before the end of August and before the notice of meeting is published.
• Make sure public information, particularly in the Annual Report is clearly laid out and comprehensive.
• Companies that are changing their remuneration policy should engage earlier, to understand market practice and what issues ISS are focused on.