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Australia’s long-standing “two strikes” system to curb executive pay was under the spotlight last week when shareholders lodged a protest vote against the remuneration of those who work at what has become known as “the Millionaires’ Factory”.
Macquarie, the Sydney-based bank and asset manager, has for decades doled out huge sums to its top executives as a reward for delivering strong returns. The sharing of the bank’s profit pool for workers is regarded as fundamental to its success in generating value for Australian shareholders and pension funds that provide its capital.
But even Macquarie has found that it is not immune to the growing tide of shareholder wrath down under.
The country’s unique “strike” system — once seen as a pioneering method that other markets would copy — is intended to add sense of peril to annual meeting season. A strike occurs when more than 25 per cent of shareholders vote against a company’s remuneration proposal at an AGM. Although it is a nonbinding vote, a second strike in the following year triggers a potential vote to dissolve the board — known as a “spill” — meaning that all directors, with the exception of the chief executive, need to stand for re-election. Introduced in 2011 and designed to give shareholders a mechanism to protest about excessive pay awards, the strike option has also handed shareholders a blunt weapon to tackle issues beyond remuneration.
For Macquarie, a growing list of compliance allegations — including legal action from Australia’s market regulator accusing the bank of misreporting historic short trade data, a settlement with US regulators following charges of inflated asset valuations and a fine by the UK financial watchdog over fictitious trades — acted as a catalyst for a strike. Shareholders complained there had been only “paltry” cuts to pay in response. Macquarie’s board stepped up efforts to soothe those concerns and its chief executive Shemara Wikramanayake, who earned A$24mn last year, took the unusual step of calling some shareholders directly to discuss their concerns to gauge whether the issue with the profit pool was fundamental or fleeting.
Strikes have become a more regular feature of AGM season in Australia. Georgeson, the shareholder engagement consultancy, said just over 10 per cent of companies in the S&P/ASX 300 index have already suffered a strike this year. Yet, in practice, the threat to boards is limited even when strikes have become recurring. Georgeson research showed there was a rise in second strikes in 2024 and yet no spill votes have been cast against boards even for companies enduring their fourth consecutive rebuke.
Georgeson points out that mainstream institutional investors, such as superannuation funds and index investors, are averse to forcing a board spill, no matter how strong their objections to a company’s remuneration structure, executive conduct or performance may be. And while critics of the two strike rule often cite concerns that the rule could be harnessed by activists to take over the boards of companies, those fears haven’t been borne out.
The lack of boardroom dissolutions could suggest that the two strikes rule is an idle threat that most companies can ignore. Yet it could also indicate that the threat of reputational damage spurs a board to pull its socks up and avoid a second strike. Qantas, the airline, was hit with a near-83 per cent strike in 2023 as investors joined its customers and unionized staff in revolt. The company shook up its board and its executive team, clawed back bonuses and published a damning report into its culture in the year that followed. Its remuneration policy passed by an 86 per cent majority in 2024 and the company’s shares hit record highs this year.
Elizabeth Sheedy, an academic at Macquarie University (which shares a historic name with the bank but is otherwise unconnected), said the two strike rule has transformed Australia’s capital markets into an “engagement paradise”, fostering more access for investors and making companies more focused on long-term value creation and responsive on environmental, social and governance matters.
“It generates a lot of embarrassment and companies have to take evasive action,” she said of boards facing the prospect of a second strike.
In 2026, the prospect of boardroom blood being spilled at Macquarie looks remote based on the record of the two strike rule. But the pressure is building on the board to act to avoid more embarrassment.
nic.fildes@ft.com
