Major investor backs two-strike rule

One of the country's largest investors has backed the two-strike rule for executive pay, saying it has given shareholders greater sway.

The rule puts board positions at risk when 25 per cent or more of shareholders disapprove of executive pay policies for two consecutive years.

Several leading chairmen have been critical of the new law, arguing it gives shareholders too much power over board positions and is open to be influenced by issues other than pay.

But AMP Capital, which manages more than $124 billion in investments, says the two-strike policy has improved the value of discussions between company directors and their owners.

"Before the introduction of the two-strike rule, when we raised concerns with companies about remuneration often our concerns fell on deaf ears," AMP Capital's head of environmental, social and corporate governance research Ian Woods said.

"However this AGM season we've seen a dramatic increase in the number of companies seeking to engage with us.

"This has provided an opportunity to not only get a greater insight into a company's priorities through more transparent remuneration structures, but also to raise other important issues."

In 2012, the second year of the new law, at least nine companies incurred a so-called "second strike", but most of those avoided a board spill as shareholders voted against such action.

But two companies, skate apparel maker Globe International and Penrice Soda will hold spill meetings in the coming weeks.

Western Australian coal explorer Rey Resources avoided a spill meeting when several directors recently resigned.

AMP Capital's review of corporate governance for 2012 also showed an increase in the number of women on company boards.

Among the companies in which AMP Capital invests, 39 per cent had no women on their board in 2012.

That was an improvement from 47 per cent in 2011, and 60 per cent without any female representation in 2010.

The number of companies in AMP Capital's portfolio with two or more women on their board was 24 per cent in 2012, up from 11 per cent in 2010.

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