Proxy Voting Data Study Shows Companies Becoming More Inclined to Engage with Shareholders

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Jan 08, 2013, 10:00 ET

NEW YORK, Jan. 8, 2013 /PRNewswire/ -- The effects of say on pay on shareholder engagement, the introduction of proxy access proposals, and the resurgence of board declassification resolutions were the principal themes of the last proxy season and are expected to continue to take center stage in 2013, according to a report issued today by The Conference Board in collaboration with FactSet Research Systems Inc.

Proxy Voting Analytics (2008-2012) analyzes data on voting by shareholders of U.S. companies that held their annual general meetings (AGMs) in the January 1-June 30 period during the last five years. Aggregate data on shareholder proposals, management proposals, and proxy contests is examined and segmented based on market index (whether the Russell 3000 or the S&P 500) and 20 business industry groups.

"The annual general meetings of the last couple of years have been closely observed as a test on the effective implementation of the advisory vote of shareholders on executive compensation plans, now mandatory in the United States," said Matteo Tonello, managing director of Corporate Leadership at The Conference Board and the co-author of the report with researchers Melissa Aguilar and Thomas Singer. "Generally, year-over-year comparison of voting results proved that say on pay can function as a catalyst to greater company awareness of current compensation issues as well as to more engagement and transparent communication with investors."

Board declassification was by far the hot governance issue of 2012 shareholder meetings, as confirmed by the increased volume of this proposal type and the staggering average support level of 80 percent of votes cast recorded in the Russell 3000. Interest in this issue by activist investors had been shown for some time, and high levels of support were documented in the 2011 season as well. But the numbers of 2012 confirm that shareholders are determined to question the rationale for not having all corporate directors face a confidence vote on an annual basis.

This year also marked the introduction of proposals on proxy access, two of which received the approval of a majority of shareholders and showed that there might be room for increasing levels of support if the formulation of the resolution is consistent with the SEC rules that were vacated by federal courts in 2011.

"Despite what could be described as an experimental year for proponents of proxy access as they fine-tune the language and terms under which shareholders would vote for their proposals, proxy access proposals actually generated more shareholder support than majority voting did in the first year it was proposed by shareholders," said John Laide, vice president at FactSet. "Majority vote standards to elect directors are now overwhelmingly supported by shareholders and have become a corporate governance best practice. If proxy access follows a similar trajectory it will have significant implications for shareholder activism and future proxy battles."

The following are the major findings of Proxy Voting Analytics (2008-2012):

In 2012, shareholders filed more proposals than in prior proxy seasons, marking the reversal of a declining trend observed since 2008.
The number of proposals introduced by hedge funds and religious groups declined sharply, while labor unions were the most prevalent proponent in unionized business sectors.
Voted shareholder proposals declined slightly amid increasing withdrawal levels, especially among proposals on executive compensation and by religious groups and pension funds.
Proposals on environmental and social policy consistently scored low levels of for votes and high levels of abstentions, while the percentage of executive compensation proposals receiving majority support declined sharply.
Following the introduction of say on pay, the focus of shareholder proposals related to executive compensation has shifted to specific themes such as severance agreements and tax gross-ups.
Despite an overall decline of average support levels for executive compensation proposals, shareholders confirmed their support for those to limit golden parachutes and golden coffins.
Shareholder proposals on the right to act by written consent lost traction in the 2012 proxy season, while the issue of board declassification received overwhelming investor support.
Proxy access proposals received solid average support by shareholders in 2012, but only two of the 14 filed passed.
Despite the surge of shareholder proposals on corporate political contributions and lobbying activities, support level remained low.
One out of 10 companies in the Russell 3000 is subject to increased scrutiny by proxy advisory firms as a result of their unsatisfactory say-on-pay vote in 2012.
Encouraging year-over-year comparison of voting results confirms that say on pay can be a catalyst to improved corporate-investor communication.
As say-on-pay resolutions were being voted on during the 2012 proxy season, management nominees to the board of directors faced less opposition by investors.

Source:
Proxy Voting Analytics (2008-2012)
Report #1506-12-RR
The Conference Board/FactSet

About The Conference Board
The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world's leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501(c)(3) tax-exempt status in the United States.
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FactSet, a leading provider of financial information and analytics, helps the world's best investment professionals outperform. More than 48,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet's desktop analytics, mobile applications, and comprehensive data feeds. FactSet's corporate governance database, SharkRepellent, provides information on takeover defense and proxy related issues. FactSet's corporate activism database, SharkWatch, provides access to detailed activist investor profiles. The Company was named the 2012 Best Research Provider at the Inside Market Data and Inside Reference Data Awards and has been included in FORTUNE's Top 100 Best Companies to Work For, the United Kingdom's Great Places to Work and France's Best Workplaces. FactSet is listed on the New York Stock Exchange and NASDAQ. For more information, visit www.factset.com and follow FactSet on Twitter: www.twitter.com/factset

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