What the Latest Proxy Voting Seasons Tell Us
The arrival of summer marks the winding down of the U.S. proxy season, with the vast majority of U.S. publicly traded companies holding their annual shareholder meetings between April and early June.
Segal Marco cast 24,566 votes at 2,973 corporate meetings through June 30, 2019. The 2019 U.S. proxy season brought the perennial shareholder votes for electing directors, weighing in on executive compensation plans; and approving auditors.
Those three issues comprise the bulk of proxy votes each year. In addition, though, investors voted on a range of new and not-so-new ESG issues as well as proxy contests launched by activist investors seeking turnover on the board.
Nominees for a company’s board of directors usually face little opposition in shareholder voting, because voters default towards support unless a compelling reason surfaces to warrant opposition. This year, proxy advisory firm ISS reported that director elections and votes on executive compensation faced record-setting opposition rates. In the context of proxy votes, however, even record-setting opposition rates are modest, and most director nominees receive overwhelming support.
In 2019, only 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.
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.
Research firm the Sustainable Investments Institute (“Si2”) found investors submitted 386 shareholder proposals to companies, but many were withdrawn following negotiated settlements with firms prior to their 2019 annual shareholder meetings.
Segal Marco clients collectively submitted 58 shareholder proposals to companies:
- 41 of which were withdrawn or not filed following successful negotiations
- 4 of which companies omitted from their proxy statements with SEC support; and
- 12 went to a vote
The total number of shareholder proposals filed in 2019 amounted to one of the lowest amounts in the past 10 years, according to Si2.
The SEC stayed silent on shareholder proposals in the early part of the year, as the federal government shutdown of early 2019 included the Commission.
Once the government reopened in late January, staff tackled a number of new issues. The SEC acts as an arbiter for which proposals merit inclusion in the proxy statement and which 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 workplace 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.