TheCorporateCounsel.net

Late last week, Insightia/Diligent released its “Proxy Voting Snapshot” (available for download), which summarizes year-over-year voting trends from the five largest institutional investors – BlackRock, Vanguard, State Street, Fidelity and JPMorgan.

This summary is the preview to Insightia’s deeper dive on voting trends that is coming later this month, based on analysis of annual N-PX filings. Here are the key takeaways:

– The five largest institutional investors decreased their support of environmental and social shareholder proposals by an average 15.1 and 13.5 percentage points, respectively, between the 2021 and 2022 proxy seasons.

– Combined, the top five investors voted the dissident card 25 times out of 83 (30.1%) in proxy contests held during the 2022 proxy season, compared to 14 times out of 58 (24.1%) one season prior.

– The top five’s alignment with Institutional Shareholder Services (ISS) and Glass Lewis recommendations declined by an average of 4.1 and 3.2 percentage points, respectively, between the 2021 and 2022 proxy seasons.

– Support for advisory “say on pay” proposals from the top five investors decreased by an average of 1.4 percentage points between the 2021 and 2022 proxy seasons.

Stewardship teams have gotten out in front of the narrative on ESG proposals, signaling for months that support for these proposals would be lower this year because many of the “asks” were too prescriptive. So, that data point is not too surprising. Plus, because proponents are likely to adapt their proposals to this feedback as we look to the 2023 proxy season – and because SEC no-action relief remains scarce – it’s unlikely that these support levels will dampen proponent enthusiasm or make proxy season any easier for companies.

In fact, the data points here suggest that proxy season could keep getting more difficult, because investor voting behavior is becoming less predictable and doesn’t reliably align with management. Here are two examples from Insightia that support that conclusion:

– The influence of ISS and Glass Lewis appears to be waning – at least with the Big 5.

– Although activists won fewer board seats this year, the Big 5 supported more dissidents, especially at smaller companies. They were in a “swing vote” position with several high-profile proxy contests, but ended up siding with management.

In other words, directors aren’t getting a free pass to reelection these days. Luckily, since you’re reading this blog, you’ll be prepared! Start thinking now about your solicitation strategies for spring – including your budget & team.

– Liz Dunshee