Two more reviews of the 2013 proxy season came out the other day. The quickest read is from Jackie Cook at CookESG (Proxy Season Roundup: Shareholder Resolutions) who analyzed 502 shareholder-sponsored resolutions voted between July 2012 and June 2013. Two-thirds are governance-related, averaging 41% support. One-third address social and environmental issues, with an average 21% level of support.
Cook goes into what was hot this year and what was new. About 20% of companies failed to provide the name of the filer in the proxy, so that’s near the historic high end of 15-21%. I hate that. Reputation counts for something and leaving the name off makes that difficult to assess. It also makes it hard to contact proponents and share information… I guess that’s the point.
Interestingly, Cook also analyzed what type of sponsor got the highest and lowest votes. Public pension funds were top vote getters for both governance resolutions and environmental/social resolutions, where they were tied with labor. The lowest vote getters were advocacy organizations for governance proposals and mainstream asset managers for environmental/social.
My mind can easily accept all but the last. Why should mainstream asset managers be the lowest vote getters on any topic? I would think other shareowners would more readily identify with them. Well, the number of resolutions was 1, so that’s not much of a universe. Maybe it was such an anomaly other shareowners couldn’t believe their eyes. Individuals filed by far the most proposals in the governance category.
The Proxy Voting Fact Sheet from the Conference Board (CB), using data from FactSet for meetings held between January 1, 2013 and June 30, 2013, is the much more extensive document, primarily because it covers in detail each “say on pay” vote, whereas Cook only covers shareowner resolutions. The Fact Sheet breaks proposals into four categories: corporate governance, social and environmental policy, executive compensation and other. Having its own category demonstrates the increased focus on executive compensation, which I would include in governance.
Average support was highest for proposals related to corporate governance at 44.7%, while the small “other” category proposals averaged 28.3% support, executive compensation proposals faired 26.9% support and social and environmental obtained an average support level of 18.7%.
This site is primarily concerned with corporate governance, so here’s how the most frequently voted proposals fared:
|Written Consent/Special Meetings|
|Require Senior Executive Stock Retention|
|Limit Severance/Change of Control Payments|
|Majority Vote for Directors|
|Eliminate Supermajority Requirements|
With regard to environmental/social issues, by far the highest number of proposals involved political issues (contributions, lobbying disclosure) and support is growing. With regard to say on pay, the average support was reported at 90%. Only 2.4% failed to win majority support. I don’t think shareowners have a good grip on this. If they did, I would expect a much higher rate of failure. Maybe this will change once required reporting on pay ratios is in place.
Board elections is a topic covered by neither review. However, a review of the 43 directors who failed to win reelection by the Council of Institutional Investors (CII) concluded that multiple variables explained the failure to receive a majority level of investor support: 1) service on three or more boards (aka, “over-boarded” directors); 2) weaknesses in executive compensation practices; 3) a history of unresponsiveness to majority-supported shareowner proposals or majority-opposed directors; 4) a lack of director independence; 5) extended board tenure (defined as 10 or more years); and 6) attendance problems (participating in less than 75 percent of board/committee meetings). CII found that 72 percent of the rejected directors had at least two of these criteria.
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