Forum Home Page [see Broadridge note below]

 The Shareholder ForumTM`

Fair Investor Access

This public program was initiated in collaboration with The Conference Board Task Force on Corporate/Investor Engagement and with Thomson Reuters support of communication technologies. The Forum is providing continuing reports of the issues that concern this program's participants, as summarized  in the January 5, 2015 Forum Report of Conclusions.

"Fair Access" Home Page

"Fair Access" Program Reference

 

Related Projects 2012-2019

For graphed analyses of company and related industry returns, see

Returns on Corporate Capital

See also analyses of

Shareholder Support Rankings

 
 
 

Forum distribution:

Statistics of increasing involvement in shareholder decisions by ultimate owners of capital

 

For a full copy of the report summarized below, and for its referenced report on fund manager marketing of  "pass-through" voting processes, see

Note: The source of the report below, Broadridge Financial Solutions, Inc., provided leadership support of the Shareholder Forum's 2010 program for Electronic Participation in Shareholder Meetings that established regulatory and marketplace foundations for the use of new technologies for "virtual" shareholder meetings and other investor communications, and is currently the manager of patented applications developed by a Forum project to support the requirements of those communications for verifications of investor identity.

 

Source: The Harvard Law School Forum on Corporate Governance, October 13, 2023, posting

2023 Proxy Season Review

Posted by Chuck Callan, and Mike Donowitz, Broadridge, on Friday, October 13, 2023
 

Editor’s Note: Chuck Callan is a Senior Vice President of Regulatory Affairs and Mike Donowitz is a Vice President Regulatory Affairs at Broadridge Financial Solutions. This post is based on their Broadridge memorandum.

Highlights from the 2023 Proxy Season

Shareholder support overall is at its lowest level in five years. Support is lower for management proposals and for shareholder proposals alike. We believe this is due—at least in part—both to a decline in market valuations (support for directors and Say-on-Pay proposals generally tracks stock price movements) and a general decrease in support for ESG proposals because many companies have taken steps to be more proactive and transparent.

Specifically, the data shows that:

  • Expectations of directors are increasing. 654 directors failed to attain majority support, the greatest number in five years.

  • Support has declined for Say-on-Pay. 131 Say-on-Pay proposals failed to receive majority support. The average level of support (at 86.3%) was the lowest in five years.

  • More shareholder proposals and less support. While there were more shareholder proposals (588) than at any time over the past five years, shareholder support for them fell to 24.6% on average (a 10 percentage point drop from last season).

  • The climate has cooled for ESG. Support for environmental and social proposals decreased to 25.5%, on average, from 30% the prior season and was the lowest in five years. And support for corporate political spending proposals decreased by 11 percentage points to 27.1%, on average, from 38% the prior season (the lowest in five years).

  • More retail investors are finding their voice. Retail share ownership is at its highest level in five years. As a group, retail investors held 31.5% of the shares in the 2023 proxy season (up from 29.6%, five years ago) while institutions held the balance (at 68.5%). Voting participation by retail shareholders inched up to 29.6% of the shares they hold from 29.4% last year.

There continues to be a gap in voting sentiment between retail investors as a group and institutional investors. For example, when it comes to environmental and social proposals, retail investors cast 16% of their votes in favor, while by contrast, institutions cast 25.5% of their votes in favor. Institutional support has declined markedly during the past three seasons, but is still greater than retail support.

What to Expect in 2024

VIRTUAL SHAREHOLDER MEETINGS (VSMs)

The number of virtual-only meetings in 2023 was close to the all-time high at the height of the pandemic and few companies will return to an in-person only meeting format. Companies and shareholders are realizing the benefits of online meetings as the technology continues to advance.

CLIMATE AND CYBERSECURITY DISCLOSURES

New SEC rules begin to require public companies to disclose material cyber security incidents in 2024, through a form 8K, along with information on their cyber security risk management and governance practices in their annual 10K.

The SEC is expected to adopt final climate disclosure rules for public companies in the fall of 2023. As proposed, there is a phased-in approach for different sized companies over the next few years.

IMPACT OF UNIVERSAL PROXY

Some industry stakeholders had expected the SEC’s 2022 Universal Proxy rules to dramatically increase the number of proxy contests. Thus far, the rules seem to have little impact on the number of opposition solicitations that actually go to a distribution. The number of contests was within a typical range over the past three years.[1]

PASS-THROUGH VOTING

Pass-through voting is the practice of providing retail investors in institutional accounts with a voice on how asset managers should vote their proxies. We are seeing greater adoption of pass-through voting by fund companies through a variety of technologies and approaches.[2]

Five-Year Trends

DIRECTOR ELECTIONS

Expectations of directors are increasing. Fewer directors stood for election this past season (23,829) than in 2022 season, but more failed to attain majority support (654) than at any time in the last five years. On average, institutional investors cast 31.4% of their votes against directors while retail shareholders cast 26.3% of their votes against directors. Moreover, 2,161 directors failed to surpass the 70% support threshold that is closely watched by some governance advocates and proxy advisors. The decline in director support may be due in part to shareholder displeasure with lower or flat market valuations at some firms as well as new voting policies from proxy advisory firms.

SAY-ON-PAY

Support has declined for Say-on-Pay. 131 Say-on-Pay proposals failed to receive majority support. Average support for Say-on-Pay proposals this past season was 86.3%, the lowest in five years. A closer look at the data shows that low support for Say-on-Pay correlates to low support for corporate directors. That is, 31.5% of issuers who failed to achieve at least 50% favorability on their Say-on-Pay proposals also had at least one director fail to achieve majority support.

 

SHAREHOLDER PROPOSALS

More shareholder proposals and less support. The number of shareholder proposals submitted for a vote increased significantly to 588 this season from 510 last season and shareholder support fell to 24.6% from 34.4% in 2022. Institutional investor support declined to 25.7% this past season from 36.2% in 2022, and retail support declined from 20% in 2022 to 17.6% in 2023, the lowest levels in five years. There continues to be a significant voting divergence among these segments of investors.

ENVIRONMENTAL AND SOCIAL PROPOSALS

The climate has cooled for ESG. The number of environmental and social proposals decreased to 137 this season, from 142 the prior season. [3] Overall, support decreased to 25.5% of the votes, on average, this season from 30.3% the prior season the lowest in five years. This was due largely to a decline in institutional support and persistently low levels of retail support generally.

POLITICAL SPENDING PROPOSALS

Overall shareholder support for corporate political spending proposals decreased by 11 percentage points to 27.1%, on average, this past season from 38.3% the prior season. Institutional investors cooled to these proposals at most firms.

SHARE OWNERSHIP

More individual investors are entering the market. As a group, retail ownership grew from 30.6% to 31.5% of the “beneficial” shares we processed, the highest percentage in the last five years. This is due in part to the continuing growth of managed accounts.

SHAREHOLDER VOTING

More retail investors are finding their voice. As a group, retail investors voted 29.6% of the shares they owned in 2023, a slight uptick from the prior year. However, voting participation by institutional investors was at its lowest level in five years. This was primarily driven by a decline in voting by smaller institutional investors (at small and microcap companies).

 

Endnotes

1Some proxy contests settle after materials are distributed and before a meeting occurs. Excludes non-U.S. issuer meetings.(go back)

2https://www.broadridge.com/_assets/pdf/broadridge-pass-through-voting.pdf(go back)

3Environmental proposal types include, but are not limited to reports on climate policies, greenhouse emissions, and deforestation. Social proposal types include, but are not limited to reports on human and civil rights audits, employee rights, and privacy and information.(go back)

 

Harvard Law School Forum on Corporate Governance
All copyright and trademarks in content on this site are owned by their respective owners. Other content © 2023 The President and Fellows of Harvard College.

 

 

This Forum program was open, free of charge, to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the purpose of this public Forum's program was to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant was expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program was initiated in 2012 in collaboration with The Conference Board and with Thomson Reuters support of communication technologies to address issues and objectives defined by participants in the 2010 "E-Meetings" program relevant to broad public interests in marketplace practices. The website is being maintained to provide continuing reports of the issues addressed in the program, as summarized in the January 5, 2015 Forum Report of Conclusions.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to access@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.