Shares in data centre company NextDC Ltd (ASX: NXT) have fallen almost 4% after the company copped a huge protest vote against its remuneration report at its annual general meeting.
While the company's chair, Douglas Flynn, defended the company's remuneration policies during his address to the meeting, more than 71% of votes cast went against the adoption of the report.
A vote of more than 25% against a remuneration report constitutes a first strike under Australian corporations law, with two consecutive strikes triggering a vote to potentially spill the board.
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Record year for the company
Mr Flynn told the meeting that the $9.7 billion data centre company had a record-setting year in FY25 on several fronts, securing 72.2 megawatts of new contracted utilisation during the year, up 42% from the previous year.
He also laid out the company's ambitious growth agenda.
Demand for digital infrastructure has evolved, and so must we. Our business now operates across Hyperscale campuses; metro and regional colocation as well as Edge infrastructure supporting subsea cable landing stations as well as remote data services for industries such as mining and energy. We are simultaneously scaling domestically and expanding across international markets and have established strong regional development capability by building in Kuala Lumpur. We are taking our development expertise to Tokyo and have based our regional leadership in Singapore.
Pay settings appropriate
On the remuneration front, Mr Flynn said delivering large-scale data centre infrastructure in a rapidly-growing and capital-intensive sector "carries high execution risk''.
He added:
Exceptional leadership is therefore a critical success factor. Under (chief executive officer Craig Scroggie's) leadership we have built and retained a world-class senior team for more than a decade and developed a strong management bench.
Mr Flynn said competitors were targeting NextDC's staff with huge pay packets, "often with offers at multiples of their current packages''.
We are faced with the reality that standard ASX pay frameworks are not competitive for attracting, rewarding or retaining the people needed to deliver our growth objectives and create shareholder value. Remuneration structures in private markets can differ materially from ASX norms. That landscape made it necessary and informed the Board's decision to introduce a fully at-risk, one-off Growth Incentive Plan (GIP) for the CEO, executive leadership, and a select group of critical senior management personnel.
Mr Flynn said the GIP was aimed at driving sustainable market outperformance, "and the fully at-risk rewards are aligned to long-term shareholder value creation''.
But the large protest vote against the remuneration report indicates that many shareholders were unhappy with the pay policies.
NextDC shares were 3.9% lower on Thursday afternoon at $14.54.
