The Australian Future Fund,  established in 2006 to assist future Australian governments meet the cost of public sector superannuation liabilities, has released its 2009/10 annual report. The report reveals for the first time how the Fund has cast its voting rights at shareholder meetings in Australia, having taken its voting at domestic meetings in-house in September 2009.

The Fund most frequently voted against LTIP awards to executive directors, voting against some 30% of the time., while the advisory vote on the remuneratation report saw the Fund vote against 25% of the time. In all the Fund voted on 227 of 235 ballots.

Resolution Type No of Resolutions With Management Abstain Against Management LTIP Award to an executive 146 70% - 30% Remuneration Report 183 75% - 35% Amend or approve LTIP 35 80% - 20% Elect director 469 93% - 7% Other resolutions 304 93% 2% 5% Total1,13787%1%13%

Responsibility for the exercise of voting rights in the global public equity portfolio continues to be delegated to the Future Fund’s external asset managers. In 2009/10 the Future Fund’s managers exercised votes in 98% of cases at the resolution level and 98% of cases at the ballot (meeting) level. In the cases where the Future Fund’s votes were not exercised generally the manager judged that it was not in the Fund’s best interests to vote given structural impediments to shareholder voting, such as share blocking and onerous power-of-attorney requirements. In aggregate the Fund’s managers voted against company boards’ recommendations in approximately 6% of resolutions voted.

The voting data was released in a week which saw two further ASX 100 companies lose their remuneration report vote. Some 54.9% of votes cast at the Billabong AGM voted against the remuneration report with a further 5.0% in abstentions. At Transurban 58.8% of the votes were cast against the remuneration report with a further 0.6% abstaining.

Transurban saw an even bigger against vote on the proposed LTIP award to its CEO, Chris Lynch. Only 27.4% of shareholders voting cast their votes in favour of the award, with 67.4% voting outright against and 4.2% abstentions. Manifest noted concerns in relation to the performance conditions proposed, especially given that 50% of the award vested for median performance (verus typically 30% vesting for median at UK companies) and given the size of the award (almost two times salary).

The Transurban CEO will still receive an LTIP award following the defeat, only it will be in cash rather than shares - as the AGM  notice of meeting noted that 'To compensate the CEO for the remuneration he would forgo if security holder approval is not obtained, the CEO is entitled, under his employment agreement, to receive a cash payment instead of Performance Awards. The CEO will only be entitled to receive a cash payment if the vesting conditions are satisfied. The cash amount will be equivalent to the value the grant would have had at vesting if it had been approved by security holders.’

Further Reading

Future Fund Annual Report 2009/10