Shareholder Proposals Quieten Down in Australia AGM Season

October 11th, 2024

As the Australian AGM season commences, this blog article by Stewardship Senior Analyst Thomas Bolger provides an in-depth analysis of recent trends in shareholder engagement.

Annual General Meetings are an opportunity for shareholders to gather, ask boards questions and provide input on future strategic direction, as well as vote on executive pay, director elections and other important matters. In recent years, one notable development in the Australian market has been an increased focus on environmental and social issues, with Australian shareholders focusing particularly on climate change. 

As the chart below shows, while there had been a clear upward trend in the number of shareholder proposals being filed at ASX200 companies, with 2020 presenting the peak, since then, the number has been steadily falling - with only eight proposals in 2024 at the time of analysis. The decline in shareholder proposals in Australia appears to align with what has been observed in other markets, such as declining shareholder support on environmental & social shareholder proposals in the United States.

Australia Shareholder Proposal Experience

Australian shareholders are faced with a unique situation regarding shareholder proposals which impacts the use of filing resolutions as an engagement mechanism.

Section 249N of the Commercial Act governs the mechanism for shareholders to file resolutions at a general meeting. Shareholders may file a resolution if they hold at least 5% of the voting rights, or if the resolution is filed by 100 or more shareholders entitled to vote at the meeting. 

Whilst there is perhaps a low bar for the filing of shareholder resolutions, shareholders do not have the ability to file advisory non-binding resolutions in the market. Shareholder resolutions are considered a ‘decision’ of the company and are therefore binding and subject to a supermajority requirement of 75% votes in favour. 

A company’s constitution governs decision-making rights for shareholders. Therefore, it is common for shareholders to file a binding resolution seeking an amendment to the constitution to grant shareholders the right to propose advisory resolutions or to express an opinion.

Filing this request gives shareholders the platform to propose advisory resolutions on other matters, such as climate change, at the same meeting. As the constitutional amendment resolutions are classified as special resolutions, shareholders struggle to find the required majority, and no such proposal has been successful. If the constitution amendment fails, then any advisory resolution also filed at the meeting cannot pass as they are conditional on the amendment.  The current system makes it difficult for shareholders to hold public companies to account on issues they would like to express an opinion on. 

Climate Remains a Focus Area

There are multiple factors behind why shareholders are filing less climate-related shareholder proposals:

• The difficulty in gaining successful outcomes on shareholder proposals due to the Australian filing rules.
• The adoption of say on climate votes by energy companies in Australia provides shareholders with a direct say on climate strategy at the largest greenhouse gas emitters.
• The use of member statements as an alternative method of shareholder advocacy.

Whilst the number of shareholder proposals has been declining, the number of say on climate votes in Australia has increased and the level of opposition on say on climate votes has also been high. Since say on climate votes first started appearing on meeting ballots, Australia is the only market to see a company face a defeat. Woodside Energy’s climate plan was voted down by shareholders in 2024. The level of dissent received by Woodside broke the previous dissent record on say on climate, which was also set by Woodside indicating concerns with board responsiveness to shareholder concerns.

In Australia, the vast majority of shareholder proposals have been filed by just two organisations: Market Forces and the Australasian Centre for Corporate Responsibility (ACCR). A contributing factor to the declining number of shareholder proposals in Australia is in part due to a shift in focus with the firms becoming more active in Asia (such as the filing of climate proposals at Japan-listed companies) and advocating for votes against director elections and/or the remuneration report as a way to raise concerns over climate strategy without filing a resolution.

Pursuant to section 249P of the Corporations Act, a group of shareholders holding at least 5% of the voting rights or numbering at least 100 shareholders may request a company to give all its shareholders a statement as provided by the group of shareholders. This tactic has been used by the ACCR during 2024 to include a statement against the re-election of directors in the notice of meetings of Santos Ltd and Woodside Energy Ltd whilst Market Forces filed member statements against the approval of the remuneration report at Santos Ltd, Whitehaven Coal Ltd and Woodside Energy Ltd.

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