Under the Act, directors and "closely related parties" cannot vote to adopt a remuneration report or direct proxies on remuneration resolutions. Closely related parties of the key management personnel include:
- A spouse or child of the member.
- A child of the member's spouse.
- A dependant of the member or of the member's spouse.
- Anyone else who is one of the member's family and may be expected to influence the member, or be influenced by the member, in the member's dealings with the entity.
- A company the member controls.
- A person prescribed by the regulations for the purposes of this paragraph.
Releasing its guidelines on managing voting exclusions on remuneration-related resolutions, Judith Fox, director of policy at Chartered Secretaries Australia, says the amendments catch a whole range of people who weren't covered before.
"It's going to be quite challenging," Fox says.
"Directors can't vote their own shares and it's clear a wife and kids can't either. But what if you've got siblings you don't talk to anymore? Or you might have a second marriage or step-child and not have a clue what's in their portfolio."
Fox says directors need to show they are acting in good faith, and adds that although it's a personal liability issue, the reality is directors will be looking at companies to give them guidance.
CSA recommends the following for companies:
- Identify to whom a voting restriction applies.
- Decide how the proxy form will be set out.
- Provide relevant information to members of key management personnel (KMP).
- Provide members of the KMP with a pro forma letter with instructions for nominee companies or trusts on not voting their shares.
- Provide the details of the KMP, closely related parties and associates to the share registry and review KMP records regularly.
- Review the processes put in place by the share registry.
The amendments follow a Productivity Commission view that it is a conflict of interest for directors to be able to vote in favour of their remuneration.
It also comes as a number of high-profile listed companies recorded "no" to remuneration reports this annual general meeting season. If there a "no" vote of more than 25% for a second year running, a spill of the board can be called.
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