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Australia’s two-strikes rule is now a settled feature of the country’s governance regime, but not an uncontroversial one. Fifteen years after its introduction, some critics have called for its abolition in the belief that it amplifies general performance grumbles and forces companies into rigid pay structures, while rarely leading to a spill actually taking place. The measure, introduced in 2011, set out to curb excessive pay and force greater accountability with a board spill vote required if a remuneration report faces more than 25% opposition at two consecutive meetings. Diligent Market Intelligence (DMI) tracked 20 such board spill resolutions that were put to a vote at ASX 300 companies in 2025. Yet while investors were prepared to deliver repeated “strikes” on pay, their appetite for unseating entire boards remained extremely low, with support for spills staying in the low single digits. One exception emerged in a more recent May 6, 2026, vote, however, when BrainChip Holdings saw a spill vote backed by almost 21% of votes cast – one of the highest levels of dissent seen to date. Historically, Cromwell Property Group was one of the few companies to see its board feel the full weight of the rule, with the 2020 spill vote intertwined with a wider board control battle led by major shareholder ARA Asset Management. Downward pressure, uniform design With such heightened stakes around pay votes, the rule is perceived to have exercised downward pressure on CEO pay overall. "Australia stands out from other economies, which have seen a more steady increase in CEO pay that is more aligned with the value of assets that they manage and build upon," said Michael Robinson, principal at Guerdon Associates. It has also been viewed to have led to more standardized pay structures when compared to other markets with some observers flagging the potential for misaligned incentives in some cases. "That ubiquitous base, short-term incentive, long-term incentive structure might not suit all companies, even if you take quantum out of the equation," said Suzanne Wohlthat, a fellow principal at Guerdon Associates. "It creates very vanilla pay structures that could be more varied to better align to company strategy." A March report by PwC Australia, detailed a slew of concerns, describing the rule as having "a significant handbrake on productivity." "While GDP and productivity outcomes are influenced by many factors, remuneration rigidity compounds these pressures by diverting senior executives, directors, and HR professionals from business priorities, forcing them to spend excessive time and resources on predicting the market’s reaction and balancing this sentiment with their remuneration frameworks," it concluded. Critics also warn that the regime risks driving talent to the private sector or overseas. "The rigidity and inefficiencies of the two-strikes rule have a further, more insidious effect: if listed Australian organizations are left in a suboptimal state due to their remuneration frameworks, it follows that senior talent seeking reward for strong performance will move," PwC warned. Letting the tail wag the dog Reform advocates have also argued that the 25% threshold amplifies the power of a dissatisfied minority. "You're ignoring the 75% that approved it. It's the tail wagging the dog, responding to the minority that didn't like it," said Guerdon’s Robinson. Many market participants also question whether the lever clarifies or obscures investors’ underlying concerns on remuneration. "Due to its lower 'no' vote tolerance threshold, the remuneration report vote is frequently used not for remuneration matters but to express concerns or discontent on performance, or on how the board is dealing with the strategy or the direction that the company is moving in," said Wohlthat. "So, while the intent is to provide guidance on remuneration, it's not always clear to directors what, if any, concerns there are with the remuneration when there's a strike." Even so, remuneration remains a live investor grievance. At a May meeting, ARN Media faced one of the highest strikes on pay with 90% opposition. DMI data also show that seven remuneration reports advanced by ASX 300 companies failed to secure over 50% support in 2025, up from just four in 2024. "Investors are certainly going harder on remuneration reports, especially against a backdrop of chronic company underperformance or major governance failures," said Aldi Djajaputra, a managing director at Sodali's Sydney base. Research carried out by the firm found that strikes were incurred with greater intensity in 2025, averaging 46% of votes against – the highest in the last five years. "For the most part, the reason for those strikes and certainly the high ‘against’ ones were for remuneration reasons. The number of directors who get high votes against their reelection is also typically related to remuneration issues." Rethinking accountability While the rule itself is not expected to undergo any major change in the near future, other methods of enhancing board accountability outside of pay are being explored. One idea under discussion is a shift from three-year director reelections to an annual system, in line with U.K. and U.S. practice. "Protest votes are climbing up but directors have three years before they face another vote. A one-year cycle would give that extra layer of accountability and has been pushed for by some," noted Djajaputra. At a May meeting of the Advisory Group on Corporate Governance (AGCG), the topic was considered with the group concluding that there is not a compelling case for change at this time. For all its perceived shortcomings, the rule is still valued by investors for the level of influence it affords them. “A great advantage of the two strikes rule is that it does really require boards to engage, which you wouldn’t get in some other markets, and investors value that power and influence,” said Robinson. This, Djajaputra notes, is particularly the case for long-term investors. "Investors like superannuation funds or index funds as they typically invest in an index, they may not have a choice but to invest in ASX 300 companies so they want to be able to have multiple levers to influence areas such as governance practices, strategy, risk management, ESG etc."
