Key Issues From the 2013 Proxy Season
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2013-08-30
During this year’s annual meeting season, issuers experienced better outcomes on say on pay (SOP) and shareholder resolutions, underpinned by a high degree of engagement and responsiveness to past votes. With SOP in its third year, companies addressed many of investors’ and proxy advisors’ pivotal compensation concerns, which was reflected in a modest improvement in average SOP support and proportionately fewer failed votes.
Similarly, although the volume of shareholder resolutions on ballots was nearly comparable to the first half of 2012, average support declined across many categories and there were 27% fewer majority votes (See Table 1). This was due in large part to corporate actions on resolutions that are traditionally high vote-getters, such as board declassification, adoption of majority voting in director elections, and the repeal of supermajority voting provisions, resulting in the withdrawal or omission of the shareholder proposal. Indeed, issuers made a conscious effort to avoid the prospect of majority votes, mindful of potential fallout against directors by proxy advisory firms. Beginning in 2014, ISS will oppose board members who fail to adequately address shareholder resolutions that are approved by a majority of votes cast in the prior year, while Glass Lewis is scrutinizing board responses to those that receive as little as 25% support (see our January newsletter).