Why remuneration report votes are absurd

The Crown Resorts AGM showed that the ‘two strikes’ remuneration report process is utterly pointless.

Crown Resorts interim chairman Jane Halton. Picture: Ray Strange

The votes at the Crown casino AGM on Thursday showed the utter pointlessness and indeed inherent stupidity of the ‘two strikes’ remuneration report process.

Some 31 per cent of votes were cast against the rem report – the second in a row above the 25 per cent ‘trigger point’, thereby triggering a vote to spill the board.

At which point 96 per cent of the votes promptly said “no, no, no, of course we don’t want to spill the board”. Just 4 per cent voted for the spill.

As the only ‘point’ of the whole rem report vote process is exactly to spill the board – that’s to say, to force every director to stand for re-election – what’s the point of it at all?

Answer: zero, zilch, nada, nothing. It’s utterly pointless. When 31 per cent of shareholders vote against the rem report; and then only 4 per cent follow through with a vote for the spill.

So, why do these mostly institutional holders do it at all?

It is a combination of butt-covering tick-the boxes on what the so-called ‘proxy advisors’ have ‘advised’ them to do, and a sort of primeval moan.

We want to signal that we are upset, but we certainly don’t want anything real or substantive to flow out of our vote.

First off, how come a 25.1 per cent ‘no vote’ triggers a strike?

So 74.9 per cent can vote for the rem report, but they are ‘outvoted’ by the small minority. Whatever happened to 50.1 per cent as the benchmark for decisions?

Further, the vote is not really a vote on remuneration.

Even if 50.1 per cent did vote against the report, indeed, if 100 per cent voted against it, the consequence would be diddly squat.

Shareholders don’t get to vote on executive remuneration – other than some very specific grants involving shares and only with executive directors not executives generally.

There were two votes to give benefits to the new Crown CEO Steve McCann, and they passed easily, at 88 and 79 per cent.

Crown Resorts interim chairman Jane Halton. Picture: Ray Strange

But, if they had been rejected, if shareholders had voted down these benefits to McCann, even that wouldn’t have ‘worked’. The company would almost certainly have been bound under his employment contract to pay a cash sum in lieu.

Shareholders just don’t get to decide remuneration. The vote on the rem report is a sham – and an anti-democratic one, with 25 per cent, at that.

Further, if enough shareholders do want to spill the board, they can do it directly by simply voting against directors. They don’t have to go through a two-year rem report process.

That’s the other mindboggling inanity of all this insto posturing.

They get all hairy-chested voting against the rem report, while voting almost unanimously to re-elect the directors who produced it.

There were votes on two directors. Both got endorsements that would have made even Stalin and Castro envious – 99.95 per cent in one case and 99.84 per cent in the other.

Chairman-to-be Ziggy Switkowski also got 99.83 per cent on the proxies but the resolution to elect him was withdrawn as he had not yet cleared the regulatory approval process.

Interim chairman Jane Halton said he would join the board when that was given; and would then stand for formal election at the next AGM.

If, I would add, there is a ‘next AGM’.

Halton – and her board – really only have two jobs, picking up from her predecessor Helen Coonan.

That is, one, to try to hang onto Crown’s gaming licences in Victoria and WA; and actually get one in NSW.

Two, deal - or help deal – with James Packer and his (in normal times) controlling holding.

Both are best achieved by selling the company; although any buyer wants to know they’ll be getting those licences.

Originally published as Why remuneration report votes are absurd