Shareholder Resolutions

There are two kinds of shareholder resolutions: ordinary and special.

Special resolutions, for example resolutions to amend the company’s constitution, require 75% support from shareholders.

Ordinary resolutions require a simple majority of 50% and can cover a broader range of issues.

Overseas, social and ethical resolutions are typically ordinary resolutions. This type of resolution does not require a change to a company’s constitution and is appropriate for targeting a single issue that shareholders would like to see better considered. International practice has demonstrated that institutional investors are much more comfortable supporting ordinary resolutions than amending company constitutions.

Shareholder Resolutions in Australia

Shareholder resolutions are relatively rare in Australia. During this century there have been over thirty shareholder resolutions with an environmental or social focus put forward at the AGMs of a number of Australia’s top 200 listed companies. Unlike standard practice in the USA, resolutions were not generally put forward multiple years in a row and no resolution was sponsored by a church or religious group.

ACCR has been involved in a test case against the Commonwealth Bank of Australia to establish better rights for Australian shareholders to move ordinary resolutions at company AGMs. Unfortunately, this has been unsuccessful.

The case against CBA was about clarifying that shareholders can express an opinion about the conduct of the company rather than about being able to direct the board. What the experience overseas shows is that shareholder democracy can be an important part of good corporate governance and does not impose an undue burden on companies but rather helps to ensure that they are responsive to the interests and values of their shareholders.

Nowadays, ACCR uses the ‘double barrel’ approach where two shareholder resolutions are filed with the first seeking an amendment to the constitution to allow for advisory resolutions, and the second being an advisory resolution on the relevant ESG issue. All proxies are allowed to vote on both resolutions. Although, formally-speaking, the second resolution isn’t considered unless the first resolution is passed, it is still published in the AGM agenda and considered by all investors and the level of proxy voting support for these advisory resolutions is still a very important indicator to how seriously a company will take these proposals.

Shareholder Resolutions in other countries

Corporate democracy is an important part of responsible corporate governance in most developed countries. In the area of shareholder resolutions, Australia lags behind the rest of the world in terms of recognising shareholder rights as a report issued by the ACCR in 2014 demonstrates. In 2015 ACCR released a follow up report focusing on company reactions to environmental and social issues in other countries.

Most other developed countries allow some form of shareholder resolutions. The US, UK and Canada, in particular, have strong cultures of shareholder engagement, and shareholder resolutions are a longstanding and effective way for concerned shareholders to achieve change in the way a company does business.

Placing resolutions on the AGM agendas of large companies promotes awareness of important ESG issues, and helps to change corporate behaviour. Resolutions on issues from climate change to child sex trafficking have been considered at company general meetings. Even when a majority of shareholders voting in favour of a resolution is not achieved, companies will often change their practices in response to the continued public pressure brought about by shareholder resolutions.

In 2006, the UK amended their laws to make it explicit that shareholders can direct the conduct of the board of directors.

Shareholder advocacy and corporate democracy elsewhere

One of the dominant forces in climate shareholder activism in the US has been the Sisters of St Dominic. They authored and supported a climate change resolution, which has been put to numerous companies, 'to adopt quantitative goals, based on available technologies, for reducing total greenhouse gas emissions from the company's operations'. In 2011, eight companies (ConocoPhillips, Dominion Resources, Portland General, Kimco Realty, Lennar Corp, Ryland Group, Norfolk Southern and Exxon Mobil) had ‘industry customised’ variants of this resolution placed on their AGM. The average level shareholder support was 18.6% in favour.