Director elections and CEO pay disclosure key to improving accountability

Annual director elections, non-binding shareholder resolutions, binding votes on remuneration policies, and chief executive pay ratios disclosure would all help improve superannuation funds’ corporate accountability, the Australian Council of Superannuation Investors (ACSI) has said.

The proposals came as the Council agitated for improved corporate governance frameworks for super funds, saying that the Banking Royal Commission had shown the need for companies to be more accountable for conduct that harmed investors and the community.

The annual director elections recommendation would require companies to put directors forward for re-election each, both improving accountability and allowing more targeted and timely feedback of their performance. The United Kingdom and United States already had such a rule.

Non-binding shareholder resolutions were intended to improve communication between investors and companies on issues such as environmental, social and governance risks.

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Votes on remuneration would make companies to submit their pay policies to a binding vote every three years, aiming to prevent inappropriate payments such as excessive bonuses and better align executives’ interests with long-term outcomes. Again, this was already required in the UK.

Finally, the CEO pay ratio disclosure policy would require companies to disclose their CEO’s pay ration against that of their median Australian worker, as well as explain how this was consistent with their values, strategy and culture. Once more, the UK and US already impose this requirement.

“Millions of working and retired Australians hold shares in listed companies through their superannuation savings. They have the right to know that their investments are delivering sustainable long-term returns, and that companies are not doing anything to damage shareholder value,” ACSI chief executive, Louise Davidson, said.

“It is essential that the policy makers and regulators build on the momentum generated by the Royal Commission to strengthen corporate accountability,” she finished, calling ACSI’s recommendations “a considered, proportionate and targeted response” to the issue.