A transcript of Friday's video editorial on shareholder protest votes

While John Howard’s industrial relations changes have been hogging headlines, not to mention all that expensive advertising space, Australian investors are achieving real wage setting reform that will save them millions.

And the ACTU doesn’t mind at all.

The wages in question aren’t on the shop floor, but in the executive suite, as the non-binding vote on executive remuneration begins to bring some sanity back into what had become an absolute racket.

Ever since listed companies were required to publish details of their top salaries, there has been appalling and unwarranted CEO inflation.

The way the nonsense works is basically like this:

Any given board of directors wants to think they’re smart enough to hire the best CEO in their industry '” after all, that’s just about most important job the board has: picking the right CEO.

So if you’ve employed the best CEO, you’re obviously going to have to pay him or her more than the average CEO.

At this stage a bunch of remuneration consultants will get involved, charge some hefty fees, tell the board what the average CEO is being paid and give a considered opinion that they should pay a lot more.

And, of course, the same thing is happening in every board room in the country, meaning CEO salaries just keep skyrocketing, because no board ever wants to consider they might have a below-average CEO; that would mean the board has failed.

It seemed unstoppable, but the current annual general meeting season is showing the first sign of the brakes being applied via shareholders’ non-binding vote on remuneration.

The Australian Financial Review last week reported that a quarter (17 of 68) of the ASX200 companies that have held AGMs so far have recorded significant remuneration protest votes; that is, more than 10% of votes cast being against the board’s largesse. Include abstentions as an indication of dissatisfaction and the figure rises to 26 '” more than a third of the companies.

You’d have to think the boards just might get the message.

The less-bright company directors had opposed this reform, arguing they would be put in an impossible position if they lost the remuneration vote, even though it is non-binding and has no legal force. The smarter ones though realised the shareholders’ protest vote was just the tool they needed to start to rein in the excess.

Time and again I’ve seen otherwise diligent boards go completely gaga when it comes to CEO pay. While the rest of the business might be run with a close eye on getting the most bang for the buck and ruthless cost cutting, the most pedestrian CEO has been able to rely ever greater mountains of cash, options, shares and sundry perks.

Even making a total hash of the job hasn’t stopped the lolly coming on several occasions.

The honour of recording the highest “no” vote so far goes to drug company Novogen, with an astounding 70% at its AGM on October 28. (Over the weekend Novogen management tried to explain this vote, suggesting many of the no votes were sent in error by US institutional investors.)

On top of that, Novogen chairman Philip Johnston botched the meeting process and the company made it worse by spinning the numbers to try to downplay the extent of the protest. That all resulted in an official apology finally being wrung out of Johnston last Thursday, but shareholders should remember this performance when he next comes up for election.

Second place in the no vote race goes to Investa Property Group with 34%, followed by Valad Properrty Group with 30% and then Amcor and Coates Hire with 20%.

Crane Group deserves a dishonourable mention for a 45% no vote on Wednesday over an excessively generous handout of shares to CEO Greg Sedgwick '” but that was not a non-binding vote '” it was the real thing the board was nearly rolled on. Sedgwick had already picked up a 25% pay rise last year, to $1.7 million '¦ again, you’d think the board might take the hint.

Anyone with an interest in holding boards accountable for their stewardship should be applauding this new burst of activism. The way the numbers work, it is of course the big funds that make the difference, but individual shareholders have the opportunity to feel a little empowerment as well. As the saying goes, vote early and often. Well, just vote.

And on matters of real importance, at the time of writing, Australia's Wallabies rugby union team were preparing to play France. They have lost five tests in a row, so if Eddie Jones wants to hang on to his job as coach, that had better not become six. (Ed note: Alas, the Wallabies went down 26-16, making it six.)