Shareholders are becoming more vocal in their distaste for high executive pay at the companies they own. For example, ARB Corporation recorded a 41% against vote on its remuneration report in October, while Reece saw a 34% vote against.
These figures aren't a one-off. Instead, they are becoming a trend and they matter as Australia moves strongly into the AGM season. The two-strikes rule is becoming more important as shareholders rally to prevent bosses from overpaying themselves out of profits that should be paid to owners.
How voting has taken place so far
The pattern of voting so far has been quite surprising, with dissent among shareholders over executive pay running high. The first strike in the two-strikes rule occurs when 25% or more of the votes cast oppose a company's remuneration report.
For example, ARB, which makes accessories for four-wheel drive vehicles, said it was taking feedback seriously about how much executives were being paid and was considering changing its remuneration policies. Plumbing parts supplies group Reece said its result was a first strike after its shareholders voted at its AGM.
However, these two companies are by no means the worst performers when it comes to shareholder backlash against high executive pay. ARN Media suffered a serious blow earlier in the year when 90.1% of votes went against its pay report.
Why chief executive pay is in the firing line
Chief executive pay in the firing line is nothing new overseas, but it is surprising to see it in full force in Australia. Recent figures from the Australian Council of Superannuation Investors suggest why the backlash may be occurring. According to its figures, the median chief executive at ASX 100 companies got paid $4.8 million in the 2025 financial year, up almost 16%. That figure was the highest in the 12 years of data, suggesting that executives are taking advantage of their locked-in market positions.
According to the figures, “realised pay” is what chief executives actually receive during the year. This figure indicates that the average CEO got 55 times the pay of regular wage earners.
Interestingly, though, the figure for executive pay can jump around quite a bit from year to year. In 2016, the average ASX 100 chief executive got paid 74 times the average worker. Furthermore, fixed executive pay is still below the 2012 record of $1.95 million. Currently, median fixed pay is around $1.83 million, but bonuses and other share options are increasing total remuneration well beyond fixed pay.
According to many commentators, large executive pay packages like this are unethical, unproductive and undemocratic. Shareholders, in many cases, do not represent the staff who do most of the challenging work. Even so, they are looking for ways to limit the ability of executives to enrich themselves through the hard work of others.
How the rules work
The two-strikes rule dates back to 2011. If the company receives two strikes against its pay reports from two AGMs in a row, shareholders vote on a spill resolution. If the spill resolution is supported by more than 50% of them, the company needs to hold a meeting within 90 days to re-elect all of the directors apart from the managing director.
The rules also stipulate that directors themselves and their family members can't vote on the pay report. That means companies that are only held by a few people must submit to the decisions of the few shareholders left to vote. They ultimately have the power to control executive pay and ensure that managers of companies don't receive outsized compensation relative to the work they put in.
At Globe International, for example, shareholders successfully leveraged the two-strikes rule to force the re-election of its directors.
Interestingly, though, the two-strikes rule doesn't force directors out. Instead, executives can simply stand for re-election and recover their old positions if voting goes their way. Sometimes they need to make concessions, but not always.
How are boards reacting?
But the picture, according to proxy advisers, for how boards are reacting is mixed. Interestingly, the number of strikes against executives across companies is falling, but strike numbers remain above the range seen from 2018 to 2022. Repeat strikes are also making up a growing share of the total, meaning that shareholders are exercising increasing power over leadership they feel is acting unethically when it comes to pay and bonuses.
Guerdon Associates, a team of remuneration and governance specialists, confirms that this type of pressure is occurring:
We're seeing an increasing number of shareholders with stakes in businesses across Australia and New Zealand launching strikes against boards. They are telling managers that owners do not accept their pay rises. In many cases, they are asking company directors to prove the value they're delivering.
In many cases, it's simply a matter of seeing how the executive pay bonus is calculated and whether it has been done fairly. This means having clearer policies in place to determine bonus amounts and ensuring that they're being measured correctly by in-house teams. It also means adding owners to the board who can independently scrutinise how pay figures are arrived at and check them against real company filings.
The rules are changing
The two-strikes rule has been around since 2011, but rules are changing quickly. According to the Australian Prudential Regulation Authority's practice guide on remuneration for various industries, companies should not compensate senior managers if they fail to properly manage risk. Separately, a draft of the ASX Corporate Governance Principles went out for consultation in July and would only apply to financial years beginning on or after 1 July 2027. Even so, these updates are much needed and ensure that executives aren't taking excessive risk to pump up their own bonuses. It may also assist with clearer disclosure.
As noted in the introduction, it's currently AGM season in Australia. Whether the two-strikes rule is still functioning as originally intended will become clearer as we move through November and December. What is apparent, though, is that owners have less tolerance for extreme pay compared to previously. They are more willing to rein in executives or even re-elect or replace them if necessary.
