Is 2025 the year boards will learn from past errors and adhere to transparent corporate governance?

Shareholders want company leaders held accountable for inappropriate profes­sional performance and failures in their personal conduct.

A new year has just arrived, and the Australian corporate and investment landscape will continue to evolve.

How it will turn out, and what the biggest issues might be, are clearly open-ended questions. But if lessons from 2024 have been learned, there is a good chance that the next 12 months will result in a significant increase in transparency, accountability and good corporate governance.

Reflecting on 2024

Throughout 2024, there had been an ongoing focus on shareholder engagement, corporate governance, environmental, social, and governance (ESG) considerations, and remuneration and ­accountability.

Some of these areas have seen significant progress, while others are still posing problems for the corporate world.

Despite some hard-won changes, the investor community expects further improvement in these areas, and ASA will be emphasising them in our discussions with listed companies.

So where should boards and executives be directing their efforts to achieve better results and to enhance their relationships with their shareholders?

Hybrid AGMs

Many companies like in-person annual general meetings (AGM); they are easier to organise and easier to control.

However, they make it difficult for shareholders unable to be in the room to participate in these important forums, removing a fundamentally important opportunity to question the people who are managing your shareholding.

So while there has been a push for more inclusivity and accessibility over the last year, this has not often risen to the standard that the community might expect.

Instead of hybrid AGMs, offering both in-person and online participation, some companies are resorting to in-person meetings with perhaps a webcast or video stream.

Such a format disenfranchises shareholders, preventing them from asking questions or voting, and raising questions about whether a company is committed to genuine engagement.

When large listed companies fail to provide hybrid options, retail investors are likely to express their dissatisfaction.

True hybrid AGMs are essential to ensuring all shareholders, regardless of location, can exercise their rights effectively.

In 2025, ASA will continue to push for equitable engagement through the use of hybrid AGMs that allow real-time participation, including live questions and ­voting.

Ethics in leadership

Trust is essential. Shareholders will not support a company that breaches their trust.

Senior leaders have to act ethically and be accountable for their actions if they want to maintain a positive corporate reputation and encourage retail investment in their companies.

In 2024, certain CEO scandals raised concerns about ethical and governance standards, and shareholders have begun to call for boards to hold leaders accountable for inappropriate profes­sional performance and personal conduct.

As we move into 2025, boards must ensure that their CEOs demonstrate focus, integrity and freedom from conflicts, maintaining shareholder confidence and organisational stability.

Board effectiveness

Corporate governance remained a fundamental concern in 2024, with retail shareholders focusing on board composition, independence and diversity.

ASA has highlighted the need for boards to align skills with company strategy and has further ­advocated for publicly disclosed board skills matrices to help ­investors evaluate directors’ expertise.

It has also argued for board members not to be on more than five boards and not to have more than two chair roles, as these responsibilities demand significant time.

Shareholders need to have confidence that directors can manage their commitments effectively and independently, and will be scrutinising board composition more closely to ensure that directors have the skills and time needed to fulfil their roles.

Integrated ESG

Government and social pressures are increasingly requiring companies to align their operations with sustainable practices.

Regardless of the diverse views investors may hold on ESG, there is a growing expectation that companies will actively track, manage and disclose their greenhouse gas emissions, modern slavery risks, and broader social impacts in a meaningful way.

In other words, ESG is no longer a “nice-to-have”, it is a business imperative – it is not just about ensuring ethical practices, but creating long-term value and mitigating risk.

Retail investors have been vocal in demanding such accountability, and have been highly critical of “greenwashing” – the practice of overstating environmental achievements.

Companies that fail to demonstrate genuine commitments to sustainability risk losing investor confidence and falling foul of regulatory requirements.

Alignment of pay

The current push for remuneration structures that reward long-term performance will intensify in 2025, with shareholders increasingly voting down pay packages that fail to align with long-term value creation. It is a risk, under Australia’s two-strike rule, that boards are increasingly seeking to mitigate.

ASA has advocated for clear performance hurdles that measure outcomes over at least four years, ensuring that executives are rewarded for creating lasting value.

Excessive or misaligned remuneration proposals are likely to be voted down, as shareholders seek greater accountability from their boards and executives.

Poor performance is not in the interest of the shareholder, and should not be rewarded.

Get involved

Retail shareholders play a central role, influencing strategic directions and calling for greater transparency and accountability.

If you own shares – regardless of the size of the stake – vote at AGMs, or give your proxy to ASA, so that your voice can be heard. This year will be an opportunity to raise awareness and to hold those managing our assets to account.

ASA will be there every step of the way.

Rachel Waterhouse is CEO of the Australian Shareholders’ Association.