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In boardrooms across the US, directors are in the process of interpreting the results of this year’s proxy season as part of their annual governance reviews. As we predicted in our proxy season preview, a series of trends from the last several years has continued to shape voting.
We are starting to see this new era of transparency impact proxy voting, particularly when it comes to support for say on pay, thematic proposals (environmental and social) and director elections.
Proxy season at a glance
- Just 26 companies in the Russell 3000 stock index failed to gain majority support for their compensation plans. In addition to overall pay and performance alignment, to comply with new disclosure rules, companies have begun reporting new compensation information that gives investors a deeper understanding of these plans.
- Average support for shareholder proposals advocating for positive action on environmental and social issues continued to decline from a high of 39% in 2021, dropping to 20% this year. New regulations that are triggering expanded disclosures combined with ongoing market forces explain the trend.
- Average director support at Russell 3000 companies was 94.8%, the highest level since 2020. Some of the increase can likely be attributed to the increasing quality of proxy statement disclosures.
- Management slates won out in 14 of the 16 proxy contests that went to a vote. One impact of universal proxy cards may be limiting votes to situations when there are irreconcilable differences between the two sides rather than differing opinions on the margins.
- Nineteen percent of no-action requests were granted based on micromanagement, up from 8% last year. While requests on such grounds may have seemed futile in recent years, the increasing specificity of shareholder proposals may have reached a tipping point.
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