What is proxy season and why should shareholders care?
The shareholder revolt that rocked Qantas showed what can happen when investors push back. Here's how proxy season gives shareholders a chance to influence Australia's biggest companies.
When Qantas shareholders gathered in Melbourne in early November 2023 for the airline's annual general meeting (AGM), it was clear that it wasn't going to be a run-of-the-mill event.
After months of negative headlines surrounding flight delays, COVID credits and the multi-million dollar payout received by former chief executive Alan Joyce, shareholders were clearly fed up.
In a major backlash, nearly 83% of shareholder votes were cast against the company's remuneration report outlining how much the top executives and directors were paid.
The airline ultimately avoided a second strike in 2024, which could have resulted in a board spill, after major changes to its leadership team and a cut to the exit payout received by Joyce.
While the Qantas case is among the more high-profile examples because of the backlash it received, it's just one of the thousands of resolutions put to shareholders of Australian companies at AGMs each year.
From executive pay and board appointments to climate-related proposals, these votes can have significant consequences for companies and investors alike.
Boards and investors are only part of the story, though. Behind the scenes, proxy advisers and shareholder advocacy groups are also busy shaping the direction of Australia's largest businesses.
Welcome to proxy season.
What is proxy season and when does it happen?
In Australia, AGMs for listed companies tend to cluster in October and November.
This period, as well as the months leading up to it, is often referred to as proxy season.
Under the Corporations Act, public companies are legally required to hold an AGM within five months of the end of the financial year, which for many firms is June 30.
Increasingly, companies give shareholders the opportunity to participate in AGMs by attending in person or joining online.
But for those who can't, or don't want to, attend an AGM and vote on resolutions themselves, there's an alternative: proxy voting.
"A proxy allows a shareholder to appoint another person or organisation to attend and vote at a company meeting on their behalf," Rachel Waterhouse, chief executive of the Australian Shareholders Association (ASA), explains.
"The shareholder remains the owner of the shares and can either direct how the proxy must vote on each resolution or leave the vote open for the proxy to decide."
Proxy votes can be used by regular shareholders, but also by large institutional investors, such as superannuation funds and fund managers, with extensive holdings across companies.
Because of the scale of their holdings and the number of resolutions they have the chance to vote on, institutional shareholders often rely on third parties known as proxy advisers to research resolutions, evaluate issues and provide recommendations on how to vote.
What do shareholders vote on at AGMs?
AGMs provide shareholders with one of the main opportunities to have a say on resolutions put forward by companies, as well as proposals successfully placed on the agenda by shareholders themselves.
Common issues that come up for voting range from director elections to mergers, capital raisings and changes to a company's constitution.
But the topic that typically attracts the most attention, and often the most controversy, is executive remuneration.
This is partly because executive pay, bonuses and share options tend to be a relatable and attractive target for criticism among disgruntled shareholders.
But as Paul Murphy, head of governance advisory APAC at Georgeson, explains, it's also because of Australia's 'two strikes' mechanism.
"If a company gets more than 25% of the vote against the disclosure of how they do their executive remuneration, that's called a strike.
"If that happens at two AGMs in a row, a second strike, then the entire board could be spilled and have to go for re-election.
"It's become a bit of a generic protest vote for investors to push back on things that they don't like about companies."
While a first strike has no immediate consequences, even the prospect of a second strike is often enough to get a board's attention and precipitate change, as was the case following the Qantas AGM in 2023.
"You'll find that most companies are very keen to avoid getting a strike, or getting a second one if they've already had the first, because they attract a lot of media attention, so it's really a reputation management thing for them," Murphy says.
Another prominent voting issue for shareholders is the re-election of existing directors or election of new nominees.
Murphy notes that it's typical for board-nominated directors to receive about 95% approval, so anything significantly below that level can indicate shareholder dissent.
"It's a bit of a signal if a company is putting four directors up and three of them get 95% support and one gets, say, 75%, that there is something going on there.
"We'll typically attribute that kind of outcome to shareholders, especially institutional shareholders, holding an individual director accountable for something they're not happy with.
"That might be the diversity profile of the company, not having enough gender diversity on the board.
"Or it might be because they're the chair of, say, the remuneration committee, and investors are not happy with the remuneration structure."
How shareholder activists influence company decisions
Executive pay and board elections may attract the most attention during proxy season, but they're not the only issues that come before shareholders.
In some cases, investors themselves attempt to shape the agenda with their own resolutions.
"More broadly, shareholder proposals are something that we've seen a little bit of over the years in Australia," says Murphy.
"Often they've been put up by environmental activists or NGOs, most commonly around climate disclosure issues."
Pressure on companies to address issues such as climate change, environmental risk and other social concerns has come from both retail and institutional investors.
But much of the coordination and campaigning has been led by shareholder advocacy and activist groups.
One of the organisations at the forefront of efforts to push issues like these into the spotlight is the Australasian Centre for Corporate Responsibility (ACCR), which does everything from conducting research and analysis to filing shareholder resolutions.
But as ACCR co-chief executive Brynn O'Brien explains, shareholder activism isn't limited to focusing on high-profile AGM votes.
A significant part of the work involves engaging directly with companies throughout the year.
"ACCR has been a shareholder in some major Australian listed companies for over a decade: BHP, Rio Tinto, Woodside and AGL, to name a few.
"We meet fairly regularly with these companies, speaking to thematic experts, executives and board members. We share our views, we hear theirs.
"This is called engagement. Sometimes this influences how they're operating or making decisions, sometimes it doesn't. Many institutional shareholders engage in this way."
One notable example of shareholder influence that O'Brien points to is pressure that ACCR, along with a group of local and international institutional investors, applied to companies regarding their memberships of industry associations.
"Many people will remember the political instability of the 2010s when climate policy was repeatedly derailed and successive prime ministers lost their positions amid intense lobbying by fossil fuel interests.
"Some of the most influential industry groups, including the Minerals Council of Australia, were funded by companies such as BHP and Rio Tinto, even as those same companies were presenting themselves to investors as climate leaders.
"We were able to draw attention to that disconnect.
"Shareholder pressure drove companies to apply much greater scrutiny to the positions taken by those industry groups and, in some cases, to impose consequences when those positions diverged from the companies' own stated commitments."
What do proxy advisers do?
At the heart of proxy season is another set of influential players: proxy advisers.
Global firms like ISS STOXX, the parent company behind Money magazine, and Glass Lewis, as well as Australian firms such as Ownership Matters, all provide these services.
"Fundamentally, proxy advisers serve institutional investors by doing the background research to support voting recommendations at company meetings, not just AGMs, but also things like merger transactions where there's going to be a shareholder vote," Murphy explains.
This doesn't mean institutional investors such as super funds and fund managers are handing over their voting decisions.
Rather, they're outsourcing the research that informs those decisions.
"If you were to ask the really big investors, they would say that they're using the proxy advice as a research input," Murphy says.
"It's not efficient for all of them to duplicate that research.
"There's just a lot of underlying data. So, it makes sense to neutralise that factual research element and have a proxy adviser do it, rather than each investor having to duplicate that effort themselves."
So how do proxy advisers arrive at the recommendations they make?
According to Murphy, each adviser has clear guidelines that set out how issues should be assessed.
"There would be statements of principle about how they define when a director is independent, or around director capacity and overboarding risk, or around the practices companies should follow in their remuneration disclosure.
"These kinds of issues tend to be codified into policies, which then drive the way proxy advisers issue research recommendations."
Proxy advisers have courted controversy in recent years, particularly in the United States, with critics suggesting they wield too much influence over how investors vote.
But Murphy says it's important to remember that proxy advisers don't operate in a vacuum because the frameworks they use are developed alongside their clients.
"The policies they operate under are developed in consultation with their subscribers, the institutional investors.
"So you wouldn't be surprised to see a fair bit of coincidence between proxy adviser recommendations and voting decisions.
"I think that's a bit different from saying that proxy advisers are unaccountable people who sit on the side and determine the way institutions are going to vote."
Why proxy season matters for everyday investors
Proxy season and the AGMs that dominate the calendar in October and November provide investors, even those with relatively small shareholdings, with an opportunity to engage with the companies they own.
"It's not just about voting, but turning up and listening to the people that are leading your company and making sure that you're comfortable, as an investor, with the strategy and the way ahead," Waterhouse says.
"It's not to everyone's interest, but we are very passionate about this because we think retail investors should care and should vote."
What many shareholders may not appreciate is that, in addition to voting, they have a number of rights they can choose to exercise during AGM season.
"Some rights can be used individually, like voting, nominating directors or asking questions. Some are collective rights, like filing shareholder resolutions and members' statements," explains O'Brien.
"These rights and the expression of shareholder voice that goes along with their use contribute to a healthy corporate governance environment and a well-functioning market.
"If companies or governments try to erode these rights, AGM season is often where that becomes most visible."
As the Qantas case demonstrated, when there's enough shareholder engagement and passion directed towards a particular issue, it can force a company to listen and act.
While direct shareholders may be the only people able to vote on resolutions, they're by no means the only ones impacted by decisions made at AGMs and other shareholder meetings.
Australians with money invested through exchange traded funds or superannuation often have a stake in the same companies, meaning the outcomes can also affect their portfolios and returns.
How to vote and participate in AGMs
The reality is that many Australians who own direct shares simply aren't engaged or interested in the companies they're invested in, beyond the returns they provide.
According to Waterhouse, the proportion of people who take part in AGMs or vote on resolutions is very low.
"You can probably understand that. AGMs are quite long and they're often held on weekdays.
"I went to the Woolworths AGM last year and it went for five hours, so anyone working that day wouldn't have been able to attend."
As the 2026 proxy and AGM season draws closer, Waterhouse has some recommendations for everyday shareholders interested in learning more about the companies they own and engaging more actively with them.
As a first step, she suggests reading company communications.
Annual reports, which provide shareholders with a snapshot of how a company has performed and where it's headed, are typically released during the August reporting season.
It's also worth keeping an eye out for AGM notices that contain information about the timing, location and agenda.
When it comes to the AGM itself, attending in person can be beneficial, but companies are increasingly offering online participation options.
Finally, Waterhouse strongly urges shareholders to consider voting on company resolutions, whether at an AGM or at meetings throughout the year.
Shareholders can also appoint a proxy to vote on their behalf.
That could be an individual they provide directions to, or an organisation such as the ASA, which researches companies and publicly discloses how it intends to vote ahead of time.
"We have a group of somewhere between 100 and 120 volunteers who read annual reports, meet with company chairs and then turn up at the AGM and ask questions," Waterhouse says.
"We also put together a voting intentions report that we make public, whether you're an ASA member or not. This way you can see the way we want to vote.
"So, if you choose to give your proxy to us, your vote will reflect how we see a company, and that's led by the members and investors reviewing it."
Whether it's actively participating in an AGM or simply skimming through the latest annual report, Waterhouse believes becoming more engaged will ultimately benefit many investors.
"By finding a little bit of time to engage with the companies you own, you will only become a better investor.
"And if you're not comfortable with where the company is heading, then you can always move away from it."
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