Directors of movie maker and amusement park operator Village Roadshow have used a legal loophole to vote their shareholding in favour of the company's remuneration report and avoid a first strike.
It is a criminal offence, punishable by up to five years in jail or a $34,000 fine, for company management or people who are "closely related" to management to vote on remuneration reports.
However, Village Roadshow has confirmed a company controlled by executive chairman Robert Kirby, his brother, deputy chairman John Kirby, and managing director Graham Burke voted its 41 per cent stake in favour of the remuneration report at the company's annual meeting on Friday.
Village Roadshow chief legal counsel Simon Phillipson said the company which holds the directors' shares, Village Roadshow Corporation (VRC), was not "closely related" to management personnel or board members. This was because VRC "is controlled by a number of people, and not by an individual", he said. "None of them have individual control. VRC is able to and did vote on the resolutions last week."
An ASIC spokesman declined to comment.
Of proxy votes recorded at the Village Roadshow meeting on Friday, 95.7 million, or 84.8 per cent, were cast in favour of adopting the remuneration report.
If VRC had abstained from voting its 65.9 million shares, the percentage in favour of the remuneration report would have fallen to 63 per cent, earning the board a first strike.
A strike is recorded if more than 25 per cent of shares are voted against the remuneration report. If two consecutive strikes are recorded, the company must put up a motion considering whether there should be a meeting to spill the board.
The prohibition on directors and top executives voting their own shares in the remuneration report resolution at an annual general meeting was designed to stamp out a conflict of interest caused by executives voting on their own pay packets. However, how the rules are applied in practice depends on the legal definition of a closely related party.
Guidance to directors from the Governance Institute of Australia says directors and "closely related parties" are prohibited from casting a vote "in any capacity" on a resolution on executive pay. The document, which includes a foreword from the Australian Securities and Investments Commission, says closely related parties includes a company that the director controls.
A stock exchange filing from earlier this year said the Kirby brothers and Mr Burke had an "indirect relevant interest" in VRC because they jointly controlled the power to vote or dispose of its holding in Village Roadshow.