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In the 2024 proxy season, support for shareholder proposals will likely stay well below the 2021 peak – even when considering the low support for proposals labeled “anti-ESG”. After several tumultuous years, investors have found a baseline for expectations across corporate governance, environmental and social topics. Additionally, activism is picking up and shareholders are digesting new disclosures. While there might not be many surprises, there is still plenty to be considered.
Shareholder proposals trends
Shareholder proposal support may remain depressed compared to the peak we witnessed in 2021, due to several factors.
- The preference of proposal filers to seek specific action and address specific topics related to environmental and social issues.
- The continued evolution of the no-action process. There has been a 30% increase in the number of no-action requests compared to this time last year.
- Impacts of the final SEC disclosure requirements.
Shareholder proposals by the numbers
Before proxy statements are filed, we can gain preliminary insights into which proposals may be included on the corporate ballot through the tracking of 14a-8 no-action requests to the SEC and voluntary disclosures made by shareholder proponents. The following data indicates that the shift toward environmental and social proposals is likely the new normal.
Russell 3000 shareholder proposals |
2024 YTD |
2023 |
2022 |
Proposal announced before proxy filed |
277** |
194 |
256 |
| 14a-8 no-action letters submitted |
240 |
130 |
140 |
| Proposals in proxy statements |
35 |
639 |
562 |
| Total | 552 |
963 |
958 |
The following data shows how proposals break down by category. Based on our observations to date, the number of proposals will likely be below last year’s peak. There are several shareholders that do not announce where they have filed proposals ahead of time, so we will not know the final makeup until after proxy season.
Submissions by category |
2024 YTD |
2023 |
2022 |
Environmental and social |
391 | 591 |
595 |
| Governance | 121 |
256 |
266 |
| Other | 40 |
116 |
97 |
| Total | 552 |
963 |
958 |
| Submissions by E&S subcategory*** | 2024 YTD |
2023 |
2022 |
General environmental and social policies |
48 | 54 |
52 |
| Diversity and human capital | 93 |
154 |
183 |
| Human rights-related | 56 |
96 |
62 |
| Climate and natural capital | 100 | 160 | 150 |
| Political and civic activities | 83 | 110 | 138 |
| Animal rights-related | 11 | 17 | 10 |
| Total | 391 |
591 |
595 |
** Some of the 277 proposals tracked will be withdrawn based on engagement activities before the annual meeting. The rest will appear in proxy statements.
***Categories are based on PwC analysis of data provided by Proxy Analytics.
Hedge fund activism
It is crucial for boards to be aware of the evolving landscape of shareholder activism. Behind the scenes, there is significant capital deployed and a flurry of activity, with settlement emerging as the easiest path due to the uncertainty surrounding universal proxy. However, what is particularly intriguing is the unusually quiet nature of discussions between companies and activists.
Evolution of voting guidelines
Each year, we eagerly await changes to voting guidelines from influential entities such as ISS, Glass Lewis and the largest investors. However, this year’s dearth of headline changes could lead one to question whether investor focus on stewardship is waning.
The shareholder proposals that pass this proxy season are likely to define the floor of environmental, social and corporate governance expectations for the US market.
There was one significant update to the Glass Lewis guidelines of which boards should be aware, related to ESG oversight. Specifically, Glass Lewis may recommend voting against board members at Russell 1000 companies if board oversight of the environmental and social issues most important to the company is not codified in committee charters or other governing documents. Further, for S&P 500 companies with significant climate risks, Glass Lewis will be looking for disclosures aligned with the Taskforce on Climate-related Financial Disclosures. More information on the board oversight of ESG/sustainability can be found in our guide.
New disclosures
Over the past decade, the proxy statement has evolved from a legalese-driven disclosure to a blend between a legal filing and broader communications tool. Most of that evolution has been voluntary, as companies seek to address shareholder expectations for increased transparency. More recently, they have also faced new required disclosures on pay for performance, cyber risk governance and clawback policies. Investors are still digesting the information, and it will likely be discussed in engagement activities.
Conclusion:
Directors may feel relieved by proxy trends continuing, with subdued shareholder activism and predictable voting outcomes, rather than having to deal with game-changing upheavals. But boards need to stay vigilant, watching new disclosures and how ESG-related issues evolve further over the year to come.
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