Antiquated systems undermining institutional votes

Old fashioned manual, paper-based voting systems are undermining the validity of shareholder votes on corporate governance issues such as executive remuneration, according to new research released by AMP Capital Investors.

The research, released this week, suggests that votes on corporate governance issues are being lost as a result of the manual system, with up to 4 per cent of ballots being misplaced, with the real figure likely to be much higher.

The research found that a significant proportion of institutional shareholder votes on corporate governance issues were still appearing to be lost and that many of the votes might have helped determine the outcome of shareholder resolutions, including those on executive and board remuneration.

Commenting on the research, AMP Capital Investors director of sustainable funds Michael Anderson said the report highlighted the impact that lost shareholder votes could have on corporate governance.

"There are a number of ways in which the current, largely manual, voting system can fail its stakeholders," he said. "However, the widely-discussed solution of updating to real-time electronic vote registration should substantially reduce the number of shareholder votes that are lost and in turn boost the overall levels of corporate governance."

The latest AMP Capital Investors research suggests that good pay practices and remuneration incentives were paying dividends by rewarding company management who produce better shareholder performance.

However, it noted that remuneration remained the most contentious corporate governance issue, with incentive issues not supported at 43 per cent of meetings, while 39 per cent of votes on remuneration reports were not supported.