Posted by Matteo Tonello, The
Conference Board, on Monday October 6, 2014 at
Matteo Tonello is vice president at The Conference Board. This
post relates to a report released jointly by The Conference Board
and FactSet, authored by Dr. Tonello and
Melissa Aguilar of The Conference Board. The Executive Summary
here (the document is free but registration is required). For
details regarding how to obtain a copy of the full report, contact
Proxy Voting Analytics (2010-2014), a report recently released by
The Conference Board in collaboration with FactSet, reviews the last five
years of shareholder activism and proxy voting at Russell 3000 and S&P 500
Data analyzed in the report includes:
Shareholder activism, including proxy fights, exempt solicitations, and
other public agitations for change.
Most frequent activist funds and their tactics.
Volume, sponsors, and subjects of shareholder proposals.
Voted, omitted, and withdrawn shareholder proposals.
Voting results of shareholder proposals.
Shareholder proposals on executive compensation.
Shareholder proposals on corporate governance.
Shareholder proposals on social and environmental policy.
Volume and subjects of management proposals.
Failed say-on-pay proposals among Russell 3000 companies.
Say-on-pay proposals that received the support of less than 70 percent
of votes cast.
Additional insights (including volume by index, industry, and sponsor,
most frequent sponsors, and support levels) are offered with respect to
key issues from the last few proxy seasons, including: majority voting;
board declassification; supermajority vote requirements; independent board
chairmen; proxy access; sustainability reporting; political issues;
election of dissident’s director nominee.
report pays special attention to trends and developments that have emerged
in the last few months. In fact, what started as an unremarkable proxy
voting season has blossomed into a series of developments that may
influence annual general meetings for years to come.
There is a clear indication that activist investors are turning their
attention to new issues. For example, in the Russell 3000, five
investor-sponsored proposals restricting golden parachutes received the
support of a majority of shareholders. While the volume remains low, it is
the highest ever recorded on this topic and it signals that voting on
executive compensation issues other than say on pay can still find its way
to general meetings of shareholders. Political spending and lobbying
activities, a topic virtually absent from voting ballots until a few years
ago, became the most frequently submitted shareholder proposal type of
2014, with 86 voted proposals and five receiving more than 40 percent of
votes cast (compared to only one in 2013). Finally, support for
resolutions on proxy access reached a tipping point in the first six
months of the year, with five proposals approved and four receiving more
than 40 percent of votes cast in favor.
advisory vote on executive compensation was a game changer for
corporate/investor relations and, in 2014, more than ever before,
shareholders have been pursuing opportunities to engage with senior
management and be heard ahead of a shareholder meeting. This trend was
reflected in the rate of withdrawals of shareholder proposals, which
doubled from a few years ago as companies chose to preempt a vote on
certain investor requests by voluntarily implementing their own reforms.
It was not all a product of engagement, however, and guidelines on board
responsiveness from proxy advisory firm ISS also drove the surge of
management proposals on issues previously raised by activists.
Increased dialogue with senior executives and board members as well as the
progress made by many large companies in the adoption of baseline
corporate governance practices prompted large institutional investors to
reconsider their role as agents of corporate change. For example, while
some public pension funds such as the California State Teachers Retirement
System (CalSTRS) cut back significantly on their submissions in 2014,
others such as the New York City Employees’ Retirement Systems remained
prolific proponents and galvanized around proxy access requests.
Similarly, the popularity of social and environmental policy issues
observed this year is in part explained by the larger number of proposals
filed by labor-affiliated investment funds, which, before the introduction
of mandatory say on pay, had always concentrated on executive compensation
issues. Despite the traditional focus of this type of fund on industrial
sectors, in 2014, for the first time, more than 20 percent of the 86
proposals submitted by labor unions were directed at companies in the
Social media and other new technologies allow a broad outreach that was
unimaginable only a few years ago, and activists are perfecting their use.
This year, a growing number of activist investors, especially hedge funds,
have agitated for change without even filing a shareholder proposal, let
alone waging a proxy fight. Despite the increase in activism campaign
announcements, there was a sensible decline in the number of campaigns
related to shareholder meetings held in the first six months of 2014. This
decline suggests that, rather than urge other shareholders to oppose a
director election or vote for a certain resolution, these activism
campaign announcements now serve to publicize the investor’s view of the
business strategy or organizational performance. It is a first step that
may lead to the future filing of a proposal or the solicitation of proxies
but that may also prove sufficient to persuade the company to seek
dialogue and reach a compromise.
following are the major findings of the report:
Although activism campaign
announcements in the Russell 3000 were up in 2014, the number of
campaigns related to a shareholder meeting declined, as some hedge funds
chose to agitate for change without even filing a shareholder proposal.
Observations made in 2013 that
hedge funds were starting to set their sights on larger companies appear
disputed by numbers for 2014, when a sharp decline in activism campaign
volume was recorded among S&P 500 companies.
Proxy contests were the only
type of activist campaign related to a shareholder vote to increase
among Russell 3000 companies in 2014, with a concentration in the retail
trade and finance industries, and dissidents reported their highest
success rates in years.
corporations and investors has not curbed the most hostile forms of
activism, as the volume of proposals to elect a dissident’s nominee
remains fairly high.
Shareholder proposal volume
was slightly lower this year, with a sharper decline among larger
companies as investors focus on new topics and broaden their targets.
Excess cash on US companies’
balance sheets fueled the growth of the activist hedge fund industry,
and the number of resolutions sponsored by hedge funds surpassed the
record levels of 2008.
The 2014 proxy season marked
another sharp year-over-year decline in the number of proposals
submitted by multiemployer investment funds affiliated with labor
unions, as those investors showed new interests, especially in social
and environmental policy issues.
Proposals on corporate
governance, once a stronghold for pension funds, were sharply reduced as
more companies introduced engagement policies with large investors.
Shareholder resolutions on
social and environmental policy rose to unprecedented levels, while some
institutional investors dropped governance issues that were a staple of
their past activity but never garnered widespread support.
The rate of withdrawals of
shareholder proposals doubled from a few years ago as companies
preempted some of the issues by voluntarily implementing their own
As large groups of
institutional investors reduced their 14a-8 filings or shifted their
attention to new and less popular topics, the percentage of voted
proposals winning the support of a majority of shareholders reached a
Proposals on board
declassification and majority voting have become a sure bet for labor
unions and public pension funds, as they are widely recognized as a
baseline in corporate governance.
A surge in requests from
corporate gadflies made the separation of CEO and chairman roles the top
shareholder proposal topic by volume, but the institutional investment
community remains skeptical of a one-size-fits-all approach to board
For the first time in the same
proxy season, five investor-sponsored proposals restricting golden
parachutes received majority support, signaling that voting on executive
compensation issues other than say on pay may still find its way to the
Shareholder proposals on
political spending and lobbying activities skyrocketed this year, with
five receiving more than 40 percent of votes cast (compared to only one
Support for shareholder
proposals on proxy access rights reached a tipping point in 2014, with
five proposals approved and four others receiving the support of more
than 40 percent of votes cast, and a handful of companies submitted
Say-on-pay analysis confirms a
significant turnover in failed votes, with several companies losing the
confidence of their shareholders this year after winning the vote by a
wide margin in 2013.
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