TheCorporateCounsel.net

A recent Squarewell Partners report (download required) of the 100 largest US & European companies by market cap confirms that things are getting back to “normal” in some ways. For example, 75% of big companies have increased their dividend to be paid out of 2020 earnings, compared to 2019. That includes nearly all companies within the Health Care & Materials sectors (in the Energy, Financials & Utilities sectors, however, nearly a third of companies have decreased their dividends, and buybacks have not yet returned to pre-pandemic levels).

Yet, when it comes to proxy season, “normal” might be less company-friendly than the “Before Times.” Support for shareholder proposals is up and support for management proposals and director elections is down. Here are some of the key takeaways:

– Half of the companies that held their AGM between 1 January 2021 and 30 June 2021 received at least one ESG-related shareholder proposal. Most companies targeted were in the US.

– Governance-related proposals made up over half of all ESG-related shareholder proposals filed, followed by social- and environmental-related proposals. Overall, 14 proposals were approved by shareholders, with environmental-related shareholder proposals receiving the highest average support at 44%.

– 31 of the 88 companies that held their AGM during the period under review saw at least one agenda item receiving 20% or more opposition, namely to a pay-related and/or director election proposal. More than half of the most contested votes took place at US companies.

– 38 companies had at least one director with 10% or more opposition, with several of these directors being held accountable by investors for overseeing pay/governance failures as committee members. For example, the chair of Rio Tinto’s sustainability committee received only 74% support due to an ongoing ESG controversy.

– 27 companies saw at least 10% opposition to their say-on-pay/remuneration report proposals, with the most common reason for opposition being a misalignment between pay and performance. Eight companies received at least 10% opposition to their remuneration policy proposals.

– ISS and Glass Lewis had recommended against less than half of the proposals where significant investor opposition was registered on director elections and/or pay-related proposals, confirming a trend that investors are applying their own guidelines which are stricter than the policies adopted by the two leading proxy advisors.

The bright spot for companies is that, despite the high-profile Exxon outcome, only nine companies were the subject of traditional activist campaigns this past year. Also, this report just covers very large companies. Smaller companies may not be facing these same pressures on shareholder proposals, but they do have their own issues.

– Liz Dunshee