Fifteen years after its introduction, Australia’s Two Strikes Rule on executive pay is supporting stronger accountability and better alignment according to new research from the Australian Council of Superannuation Investors (ACSI).
The research finds that with an average of just 21 ASX300 companies – approximately 7% of the cohort – receiving a first strike each year since 2011, a ‘strike’ is relatively rare. Second strikes went from an average of 1.8 a year in 2012-2018, rising to 5.3 in 2019-2026.
Despite the attention attracted by high-profile remuneration votes, shareholders have supported a board spill resolution just once in the Rule’s 15-year history.
“The Two Strikes Rule is doing exactly what it was designed to do: it gives shareholders a meaningful voice on executive pay, encourages boards to respond to legitimate concerns and strengthens accountability,” said Louise Davidson, ACSI CEO.
“Strikes can attract significant attention, particularly when they involve high-profile companies or controversial pay decisions. But the evidence shows they are the exception, not the norm. Investors care about executive remuneration because incentives can shape behaviour. They expect to see executive remuneration that rewards performance, reflects the experience of shareholders and supports the long-term success of the company.”
In 2009, the Productivity Commission launched an inquiry into executive remuneration in Australia, triggered, as its final report said, by “concern that executive pay had got out of hand. This perception was fuelled by practices in financial institutions abroad that were seen as a key contributor to the global financial crisis.”
The Two Strikes Rule came into force in 2011. Under it, a remuneration report with an ‘against’ vote of 25% or higher receives a ‘strike’, providing a clear mechanism through which investors can raise concerns about executive remuneration. If the report receives a ‘second strike’ the next year, boards can face a spill motion if investors choose to enforce it.
ACSI’s research shows that the Rule’s strengths include encouraging boards to respond to investor concerns, improving disclosure and supporting boards to consider whether remuneration structures are aligned with long-term company performance. It has also acted as a moderating force: Australia has not experienced the significant increases in remuneration packages seen in some other markets.
The highest number of first strikes came in 2023, 2024 and 2025, years marked by post-COVID remuneration outcomes in LTIs, and turbulent periods for companies and the market, which may have resulted in votes against remuneration outcomes.
Despite the multitude of companies subject to the Rule over 15 years, only 17 companies have received consecutive strikes. These 17 companies are responsible for 64 of the ASX300 strikes against remuneration reports.
Investor scrutiny remains concentrated on the small proportion of companies that exhibit poorly structured or misaligned pay outcomes. The lack of company response to, or engagement with, investor concerns often contributed to these consecutive strikes.
By contrast, as the numbers of first versus second strikes show, most companies which receive a first strike engage constructively with investors to address their concerns and do not receive a second strike the following year.
“The changes ushered in by the Two Strikes Rule have strengthened Australia’s corporate governance framework and further promoted accountability, transparency and market confidence,” Ms Davidson said.
