Shareholder pay vote proposals labelled 'undemocratic' in Australia

A study of recent voting trends at annual meetings in Australia indicates that the proposed "two strikes" rule for executive pay will have unintended consequences, a remuneration expert has claimed.

Speaking at the recent Chartered Secretaries of Australia annual conference, John Egan said the measure would effectively give 15 per cent of shareholders the ability to remove a company board, the Australian reports.

This observation is based on research by his consultancy firm, Egan Associates, which revealed that less than 60 per cent of investors voted at recent AGMs.

"If 25 per cent of that 60 per cent could remove a board over a limited period of time ... it means that 15 per cent of shareholders determine the destiny of a board," Mr Egan told the conference.

He described the 25 per cent threshold as "a mistake" and claimed the two strikes method does not seem to be "a very democratic process".

Based on a recommendation from the Productivity Commission, the proposal states that all directors must face re-election if more than 25 per cent of shareholders vote against a remuneration report for two successive years.

Australia's former minister for financial services Chris Bowen has said it will give investors more power and increase accountability among board members.