The remuneration report is no longer just a compliance document. It is a formal opportunity for the Board to explain how executive pay reflects performance, shareholder experience, risk, judgement and future strategy. Where that explanation is unclear, companies can face avoidable AGM scrutiny.

The 2025 AGM season reinforced this point. Investors were asking whether pay outcomes aligned with performance, whether results were genuinely management-driven, whether prior feedback had been addressed, and whether the Board had exercised judgement in a commercially credible way.

For companies preparing their 2026 remuneration reports, the opportunity is to move beyond technical disclosure and answer six practical questions.

1. What is the performance story?

A common weakness in remuneration reports is that company performance and remuneration outcomes are presented as separate stories. The operating review explains what happened during the year. Later, the remuneration section discloses incentive outcomes. The reader is left to connect the two.

For 2026, Boards should test whether the report clearly explains the year in a way that supports the pay outcomes disclosed, including financial results, strategic milestones, safety and risk outcomes, project delivery, shareholder returns and material setbacks.

This is particularly important where incentive outcomes are strong in a mixed year, or lower despite management delivering meaningful progress against longer-term objectives. A useful test is whether a shareholder can read the executive summary and understand why the Board considers the outcomes fair and appropriate.

2. Does executive pay align with shareholder experience?

Pay-for-performance alignment remains central to remuneration report voting. However, shareholders are increasingly assessing this through a broader lens than scorecard mechanics alone.

A company may achieve financial targets and still face concern if shareholders experienced weak returns, dilution or loss of confidence in the strategy. Conversely, the Board may need to explain why management performance remains credible despite share price or earnings pressure.

For 2026, Boards should not rely solely on formulaic outcomes. Where shareholder experience and executive reward appear to diverge, the report should address the issue directly by explaining the Board’s assessment of alignment, including any use of discretion or reasons for not applying discretion.

3. Has the Board explained its use of judgement?

Remuneration governance is rarely judged on formulas alone. The way a Board applies judgement can be just as important as the design of the incentive framework.

Examples may include adjusting STI outcomes, modifying LTI vesting, excluding unusual items, responding to safety or risk events, approving retention arrangements, or exercising discretion where the formulaic outcome does not reflect the Board’s overall assessment.

The use of discretion is not inherently problematic. It can be an important governance tool. The risk arises when discretion is applied without a clear explanation of the framework, rationale and outcome.

A strong 2026 remuneration report should explain what the Board considered, why the decision was made, and how the outcome is consistent with shareholder interests.

4. Are incentive measures still fit for purpose?

The drafting process is also a useful opportunity to ask whether the incentive framework still reflects the company’s current strategy and stage of development.

Many companies evolve faster than their incentive plans. A business may have moved from development to production, from growth to profitability, from transformation to execution, or from capital raising to cash generation. If incentive measures have not kept pace, the report can highlight a disconnect between strategy and reward.

For 2026, companies should consider whether STI and LTI measures remain relevant, sufficiently stretching and balanced across financial, strategic, operational and risk outcomes. Where changes have been made for FY27, the report should explain the reason for the change rather than simply disclose the new measures.

5. Has prior shareholder feedback been addressed?

A prior high vote against the remuneration report, a near miss or a strike should not be treated as a one-off event. It is a signal that investors expect a response.

Where companies have received material dissent, the 2026 remuneration report should explain what feedback was received, how the Board considered it, and what actions were taken. If the Board has decided not to make changes, the report should explain why the existing approach remains appropriate.

The most effective disclosures identify the key themes raised, the Board’s response and any resulting changes to structure, quantum, performance measures, disclosure or governance.

6. Is the report readable?

The best remuneration reports are not necessarily the longest. They are the clearest.

Readable disclosure matters because remuneration reports are read by proxy advisors, investors, media, executives and employees. Each audience may seek different information, but all benefit from clear structure and concise explanation.

For 2026, companies should consider a short Remuneration Committee Chair letter or executive summary covering the year in review, key remuneration outcomes, material changes and any response to shareholder feedback. This should be supported by clear tables showing pay outcomes, STI scorecard results, LTI vesting, performance measure rationale and changes for the year ahead.

A practical final test is whether a non-specialist reader can understand the report without interpreting technical plan rules or reconstructing the Board’s logic from scattered disclosures.

A practical pre-sign-off checklist

Before the remuneration report is finalised, Boards and management teams may benefit from asking:

• Can shareholders clearly understand the year’s performance story?
• Do incentive outcomes align with shareholder experience?
• Has the Board explained any use of discretion or judgement?
• Do STI and LTI measures still support the current strategy?
• Has prior shareholder or proxy advisor feedback been addressed?
• Is the report clear enough for a non-specialist reader?

The opportunity for 2026

For many 30 June year-end companies, the 2026 remuneration report will be drafted amid investor scrutiny, economic uncertainty and sector-specific pressure. That does not require every company to redesign its framework. It does require Boards to be clear about performance, pay and judgement.

A well-drafted remuneration report can reduce avoidable AGM risk, improve shareholder engagement and reinforce confidence in the Board’s remuneration oversight. A poorly explained report can have the opposite effect, even where the underlying remuneration decisions are sound.

The companies best placed for 2026 will start with the pay story, not the disclosure template. They will explain what happened, what was paid, why it was appropriate, and how the framework supports future performance.

How TRP can help

The Reward Practice supports ASX-listed companies with remuneration report drafting, independent disclosure review, strike-risk assessment, shareholder and proxy advisor engagement preparation, and AGM Q&A support. If your company would benefit from an independent review before Board sign-off, please contact us.

Continue the Conversation

Preparing a remuneration report is just one part of effective remuneration governance. If you’re planning your next remuneration review, refining your reward framework or preparing for the upcoming AGM season, you may also find these related articles helpful:

• Part One: What are the latest trends & what’s your plan of attack? – Explore the latest remuneration trends shaping the market and practical considerations for planning your next remuneration review.
• Part Two: How clean are your Remuneration Report windows? – A practical guide to strengthening your remuneration report by improving clarity, transparency and the overall shareholder narrative.
• Part Three: How to Avoid a “Strike” in 2025 – Understand the common issues that lead to remuneration report strikes and the proactive steps Boards can take to reduce governance and AGM risk.