Shareholder resolution framework is flawed

Australian laws make it difficult for shareholders to hold public companies to account on environmental, social, and governance (ESG) issues, according to the Australian Council of Superannuation Investors (ACSI).

ACSI said the current corporate governance framework restricted the ability for shareholders to bring resolutions at company meetings. It said under the existing framework, shareholders who wished to raise an issue must propose a constitutional amendment or vote against the re-election of directors.

ACSI chief executive, Louise Davidson, said: “In other jurisdictions where non-binding shareholder resolutions are permitted, we have seen shareholders use them to improve company disclosure on risks associated with sustainability, climate change, and labour and human rights”.

“There is a clear consensus among investors that the current framework is too restrictive and needs to be reformed. We need to develop a better way for shareholder concerns to be heard,” Davidson said.

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ACSI’s ‘Shareholder Resolutions in Australia: Is there a better way?’ report recommended an introduction of a non-binding shareholder resolution in Australia, while maintaining the current threshold of five per cent of capital or 100 shareholders for bringing proposals.

It said this could provide a mechanism for escalating ESG issues where company engagement was not working.

“We have seen a rush of shareholder resolutions this AGM [Annual General Meeting] season which are actually seeking to create a non-binding vote in individual companies. We think this issue would be better dealt with on a market-wide basis,” Davidson said.

“We want to see all companies better managing climate-related, labour and human rights or disclosure risks and our proposal for reform will help deliver this.”