Shareholder activism continued to thrive in the 2014 proxy season, spurring corporate action as well as renewed engagement between issuers and investors. While the total number of shareholder proposals declined in 2014, lively activity continued with calls for independent chairs as well as burgeoning growth for social issues. And while few in number, change-in-control payout proposals were notably successful for the first time this year, while equity retention proposals continued to have a weak showing. In addition, support for proxy access proposals also grew at a rate greater than any other type of proposal.
Posts Tagged ‘Proxy voting’
Calls for independent board chairs were the most prevalent type of shareholder proposal offered for consideration at U.S. companies’ annual meetings in 2014. As of June 30, 62 of these proposals have come to a shareholder vote, up from 55 resolutions over the same time period in 2013. Notably, the number of proposals calling for independent board chairs has more than doubled over the past five years. Under the current policy formulation, ISS recommended against 32 of these 62 proposals in 2014. In line with results from recent seasons, independent chair proposals received average support of 31.2 percent of votes cast at 2014 meetings. Only four of these proposals received the support of a majority of votes cast.
On October 15, 2014, Institutional Shareholder Services (“ISS”) released proposed amendments to its proxy voting policies for the 2015 proxy season. ISS is seeking comments by 6:00 p.m. EDT on October 29, 2014.  ISS has stated that it expects to release its final 2015 policies on or around November 7, 2014. The policies as revised will apply to meetings held on or after February 1, 2015.
As issues around cost transparency and best practices in equity-based compensation have evolved in recent years, ISS proposes updates to its Equity Plans policy in order to provide for a more nuanced consideration of equity plan proposals. As an alternative to applying a series of standalone tests (focused on cost and certain egregious practices) to determine when a proposal warrants an “Against” recommendation, the proposed approach will incorporate a model that takes into account multiple factors, both positive and negative, related to plan features and historical grant practices.
Feedback from clients and corporate issuers in recent years, beginning with the 2011-2012 ISS policy cycle, indicates strong support for the proposed approach, which incorporates the following key goals:
Good morning, and welcome to today’s [October 9, 2014] meeting of the Investor Advisory Committee.
I want to touch briefly today on the Commission’s rulemaking agenda since you last met, mention a few other developments and give a brief update on the status of our consideration of your recommendations.
The Commission has completed three sets of important rulemakings since your last meeting in July. They each put in place critical new investor protections to address some of the most significant risks in the securities markets highlighted by the financial crisis.
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 companies.
Data analyzed in the report includes:
…continue reading: The Recent Evolution of Shareholder Activism
As 2014 winds down and 2015 approaches, proxy advisory firms—and the investment managers who hire them—are finding themselves under increased scrutiny. Staff guidance issued by the Securities and Exchange Commission at the end of June and a working paper published in August by SEC Commissioner Daniel M. Gallagher both indicate that oversight of proxy advisory services will be a significant focus for the SEC during next year’s proxy season. Under the rubric of corporate governance, annual proxy solicitations have become referenda on an ever-widening assortment of corporate, social, and political issues, and, as a result, the influence and power of proxy advisors—and their relative lack of accountability—have become increasingly problematic. The SEC’s recent actions and statements suggest that the tide may be turning. Proxy advisory firms appear to be entering a new era of increasing accountability and potentially decreasing influence, possibly with further, more significant, SEC action to come.
It is time for calendar year-end public companies to focus on the upcoming 2015 proxy and annual reporting season. This post discusses the following key issues for companies to consider in their preparations:
- Pending Dodd-Frank Regulation
- Say-on-Pay and Compensation Disclosure Considerations
- Shareholder Proposals
- Proxy Access
- Compensation Committee Independence Determinations
- Compensation Adviser Independence Assessment
- Compensation Consultant Conflict of Interest Disclosure
- NYSE Quorum Requirement Change
- Director and Officer Questionnaires
- Proxy Advisory Firm and Investment Adviser Matters
- Conflict Minerals
- Management’s Discussion and Analysis
- Proxy Bundling
- Foreign Issuer Preliminary Proxy Statement Relief
- Technology and the Proxy Season
In our paper, Influence of Public Opinion on Investor Voting and Proxy Advisors, which was recently made publicly available on SSRN, we address the question of how public opinion influences the proxy voting process. We find strong influence of public opinion on the evolution in both investor voting behavior and proxy advisor recommendations. Therefore, our results suggest that an additional channel through which the public can communicate with corporate management (and potentially influence corporate behavior) is the proxy voting process. We provide new evidence that media coverage can also influence firm behavior through the voting channel. This channel is important because media coverage captures the attention of proxy advisors, institutional investors and individual investors, and is thus reflected in recommendations and votes.
Commissioner Daniel M. Gallagher of the Securities and Exchange Commission (“SEC”) authored a working paper, published last month by the Washington Legal Foundation, regarding the outsized power and influence of proxy advisory firms.  In his paper, Commissioner Gallagher provides his view of the most important aspects of Staff Legal Bulletin No. 20 (“SLB 20”), in which the SEC staff recently “moved toward addressing some of the serious issues” resulting from the emergence of proxy advisory firms as a dominant player in American corporate governance. Notably, Gallagher also offers some critical advice to public companies engaging with proxy advisory firms.