What the Latest Proxy Voting Seasons Tell Us
The start of summer marks the winding down of the U.S. proxy season. The vast majority of U.S. publicly traded companies held their annual shareholder meetings between April and early June.
Segal Marco Advisors cast 24,566 votes at 2,973 corporate meetings through June 30, 2019. The 2019 U.S. proxy season brought to investors’ attention the perennial votes to elect directors, weigh in on executive compensation plans, and approve auditors.
Those three issues comprise the bulk of proxy votes each year. In addition, investors voted on a range of new and not-so-new Environmental, Social and Governance (ESG) issues as well as proxy contests launched by activist investors seeking turnover on the board.
Proxy advisory firm ISS reported that director elections and votes on executive compensation faced record-setting opposition rates. Even record-setting opposition rates, however, in the context of proxy votes are modest.
In 2019, 4.9 percent of director nominees received less than 80 percent support and 0.19 percent of director nominees received less than 50 percent support. Segal Marco voted against 30 percent of director nominees through June 2019.
The Segal Marco proxy voting policy calls for a vote against nominees when:
- The board lacks independence
- The company has underperformed on a five-year basis
- Directors fail to attend meetings
- The board lacks diversity; or
- When the board engages in other egregious actions, such as ignoring a majority-supported shareholder proposal.
On advisory votes on executive compensation (“say-on-pay”), 13.5 percent received less than 80 percent support and 2 percent received less than 50 percent support. Segal Marco voted against 43 percent of say-on-pay votes though June 30, 2019.
Investors often prompt companies to report or take action on a range of ESG issues. Those requests frequently come in the form of a shareholder proposal. The research firm Sustainable Investments Institute (“Si2”) found investors submitted 386 shareholder proposals to companies. Many were withdrawn through following negotiated settlements with firms prior to the 2019 annual shareholder meetings.
Segal Marco clients submitted a total of 58 shareholder proposals to companies:
- 41 were withdrawn or not filed following successful negotiations
- 4 were omitted by companies from their proxy statements with SEC support; and
- 12 went to a vote.
The total number of shareholder proposals filed in 2019 was one of the lowest in the past 10 years, according to Si2.
The SEC stayed silent on proposals in the early part of the year given the government shutdown that included the Commission. Staff tackled a number of new issues once the government reopened.
The SEC acts as an arbiter to determine which proposals merit inclusion in the proxy statement and which ones companies may omit.
New topics addressed human rights concerns at detention facilities for immigrants, corporate culture and practices in response to sexual harassment claims, and governance practices in response to the opioid epidemic as well as work place diversity and pay parity.
Each January, Segal Marco publishes an annual Corporate Governance Report that reviews the prior years’ proxy votes and market developments.
The most recent Corporate Governance Report is available online.