The annual reporting season produced three notable outcomes yesterday, as well as one surprise.
Shareholders in Pacific Brands and Watpac opposed rejected the remuneration reports for the company at annual meetings in Melbourne and Brisbane, but Transurban won shareholder approval for its reports, despite three votes of well over 25% against it at the past three AGMs.
And the final vote from News Corp’s AGM last Friday in the US, showed significant votes against the re-election of some directors, and against the remuneration report.
The Pacific Brands meeting saw the most dramatic vote: shareholders actually rejected the remuneration packages of three senior executive directors in a stinging rebuke to the board.
More than 50% of shareholder votes were cast against the passing of the Pacific Brands’ remuneration report for the 2010-11 financial year.
That is a ‘first strike’ under the new ‘two strikes’ policy where votes of 25% or more against the remuneration report, cast at an AGM, can generate a spill of board positions.
The Pac Brands vote came after homewares maker GUD Holdings last Thursday became the first company to be hit with a protest vote under the ”two-strikes rule” on executive pay, giving the company a year to calm concerned shareholders.
Nearly 42% of GUD shareholders voted against the remuneration report, which last year gave chief executive Ian Campbell a 33% pay increase to $2.23 million even as profits fell 14%.
Transurban which had seen protest votes of more than 25% against its remuneration reports in each of the past three years, failed to get a strike at yesterday’s AGM after it moved to allay shareholder concerns in the lead up to the meeting.
Only 9% of proxy votes were cast against Transurban’s pay card for its senior executives for the year to June at the AGM in Melbourne compared with more than 50% a year ago.
And in Brisbane property developer and builder, Watpac received a "no" vote from investors who own more than a third of its shares.
Pac Brands chairman James McKenzie acknowledged the ‘no’ vote ahead of the formal poll in his address to shareholders,
"From discussions with shareholders and their representatives and proxy votes already lodged it is apparent the vote on the remuneration report will record more than 25% of votes against its acceptance, and thus constitute a “strike” under the new Corporations Law rules," he said.
He promised to the meeting that "We will not be standing before you this time next year discussing similar issues".
In reaction to the news, the company’s shares plunged more than 12%, hitting a new low for the year of 55.5c.
The shares ended at 60c, down 3c or 5%.
But that also followed a gloomy outlook from the chairman, plus CEO Sue Morphet, who told the meeting the company’s first half performance would be down on previous expectations because of lower sales in some areas.
The poll saw 316.7 million votes cast against the adoption of the remuneration report, or 52.9%, and 279.6 million in favour, or 46.7%.
The remainder of votes abstained.
According to the remuneration report, CEO Sue Morphet and the company’s other senior managers received short-term cash incentives despite performance targets not being met.
Ms Morphet was paid a $910,000 cash bonus, chief financial and operating officer David Bortolussi received $505,845, and other managers received between $127,000 and $450,000.
Short-term incentives were paid despite the company missing its target of earnings before interest, tax, amortisation and significant items (EBITA) exceeding 90% of its budgeted group EBITA.
Pacific Brands posted a $132 million loss in 2010-11, and an EBITA loss of $58.8 million.
Ms Morphet’s total remuneration in 2010-11 was $2.3 million, according to the annual report.
Chairman James MacKenzie argued at the AGM that the 90% EBITA hurdle was only narrowly missed in the 2010-11 financial year.
He said the board decided to "open the gate" because of the impact of Kmart’s decision to stop stocking Pacific Brands products, plus increased costs, such as cotton prices.
Another factor was the progress of the company’s restructure announced in 2009, which involved the closure of some Australian manufacturing plants and selling of some brands.
"What we should have also emphasised was that the delivery of the transformation program – one year ahead of schedule and despite many thinking it couldn’t be done – was a critical consideration in the board’s decision to open the gate for the payment of STIs (short-term incentives)," Mr MacKenzie said.
"The scale and scope of the transformation should not be underestimated."
The incentives paid were about 60% of the maximum available to the executives, he claimed.
"It is clear that some stakeholders see the gate as something that, once set, should not be subject to any discretion," Mr MacKenzie said.
"And we hear that concern."
On operations, Mr McKenzie was downbeat, saying:
"The year ahead will be a very challenging one for all in our sector.
"We must face the headwinds of subdued retail conditions as well as those from cotton price increases and de-listings at Kmart which
