Corporate Management Was Less Successful at Excluding Shareholder Proposals in 2013 Proxy Season, The Conference Board Says

Sep 17, 2013, 10:00 ET from The Conference Board

NEW YORK, Sept. 17, 2013 /PRNewswire/ -- While the number of shareholder proposals filed at U.S. public companies continued to increase this year, management has been less successful at obtaining permission from the Securities and Exchange Commission (SEC) to exclude new types of investor demands from the voting ballot. The finding is discussed in Proxy Voting Analytics (2009-2013), released today by The Conference Board in collaboration with FactSet.

The report, which examines data from more than 2,400 annual general meetings (AGMs) held at Russell 3000 companies between January 1 and June 30, 2013, shows that shareholders submitted 769 proposals on a variety of topics, up nearly 6 percent from the 726 recorded during the same period in 2012. Among S&P 500 companies, the number of filed shareholder proposals increased from 585 to 612 (or 4.6 percent). Both indexes, however, showed a sensible decline in the proportion of proposals that were omitted based on no-action relief granted by the SEC staff: from 24.5 to 22.3 percent among Russell 3000 companies and from 27.7 to 23.7 percent in the S&P 500.

"In the last few years, companies increasingly sought guidance from the SEC on the excludability of a variety of new proposal types, especially in the areas of executive compensation and environmental and social policy," says Matteo Tonello, managing director of Corporate Leadership at The Conference Board and coauthor of the report. "In the 2013 proxy season, while no-action requests continued to increase in number, the percentage of exclusions granted by the SEC was lower, in a sign that investors are learning from the most recent interpretive guidance and perfecting the formulation of their new demands so as to comply with securities regulations."

"The proportion of proposals reported as withdrawn also increased, signaling improved engagement between shareholders and companies," says Melissa Aguilar, a researcher at The Conference Board and a coauthor of the study. "Withdrawals were most frequent among proposals related to social and environmental policy and executive compensation, areas where shareholders often use precatory proposals as a way to start a dialogue about their concerns." During the January—June period, the level of proposals withdrawn rose to 10.1 percent, up from 5.9 percent in 2012 for the Russell 3000, and to 11.5 percent for the S&P 500, up from 6.5 percent during the same period last year.

Other findings highlighted in the new Proxy Voting Analytics (2009-2013) include:

  • Hedge fund proposals started to rebound in 2013, after the sharp decline registered following the record levels of 2009. A more speculative, short-term approach to shareholder activism may be resurfacing, as the economic situation continues to improve.
  • Religious groups were also more frequent proponents this year, while labor unions softened their activity amid waning interest in traditional demands for executive compensation disclosure.
  • As activist investors begin to shift their attention to new topics, the percentage of voted proposals winning the support of a majority of shareholders reached a five-year low.
  • Shareholders continued to challenge management on key governance issues of board declassification and majority voting, in particular by targeting smaller companies. The Harvard Law School Shareholder Rights Project initiated nearly all of the successful proposals seeking to declassify boards.
  • Although there has been a resurgence of shareholder proposal activity related to executive compensation, with a focus on new issues, public pension funds were seldom proponents and none of the resolutions voted in 2013 received majority support.
  • Despite overall low support and high abstention levels, year-on-year voting results show that certain social and environmental issues—including board diversity, sustainability reporting, and human rights—are steadily gaining traction among investors.
  • Political spending and lobbying proposals comprised nearly 40 percent of social and environmental policy proposals in 2013. While overall support remains low, it often depends on the formulation. Average support was higher for traditional proposals seeking more disclosure, while newer variations (such as those requesting a complete ban on political spending or calling for the adoption of a strict ratio between corporate assets and political spending) performed more poorly.
  • Shareholders were more successful in getting proxy access proposals onto corporate ballots this year, and two companies submitted their own access proposals to shareholder votes.
  • Director opposition levels and the volume of proposals to elect a dissident's nominee continued to remain far below the record numbers of 2009, as say on pay and opportunities for constructive dialogue provide shareholders a more economical alternative to pursue corporate changes.
  • Efforts to improve communication of the rationale for executive compensation policies can pay off, with an average increase of nearly 16 percentage points in year-over-year say-on-pay support levels for certain companies.
  • Shareholders engaged in more proxy contests and, in a sign that activism as an investment strategy may be evolving further, they started to set their sights on larger companies. Record-low borrowing costs and the search for new asset classes are fueling an increasing interest in shareholder activism tactics by mainstream investors, including pension funds.

Download the Executive Summary at: The complete report, Proxy Voting Analytics (2009-2013), will be released in October. For an advance copy, contact Peter Tulupman (212) 339-0231 /

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