Shareholder activism and Rule 452 changes fail to make waves
The 2010 annual meeting season was meant to unleash a shower of trouble on companies, from activism provoked by the financial crisis to problems bringing in the retail vote. But according to a report issued by BNY Mellon Shareowner Services, the 2010 season was more notable for what didn’t happen: activism didn’t rise, Rule 452 didn’t harm director elections, and meetings didn’t get long and complicated.
The conclusions come from BNY Mellon’s internal survey of 460 client annual meetings, covering the type and number of proxy proposals, the impact of changes to voting rules and the use of proxy solicitors. A summary of the results is available to download from BNY Mellon.
‘When all was said and done, we were a little bit surprised,’ admits Robert Folinus, vice president and meeting services product manager for BNY Mellon. ‘All of us in the industry expected to see things happen differently.’
In the wake of the financial crisis, with increased media scrutiny on executive pay, say-on-pay proposals and new compensation, discussion and analysis disclosures, a high level of activism was predicted. Yet proposals were kept to a minimum, with a total of three or fewer proposals at 68 percent of the companies in BNY Mellon’s study.
Only 11 percent had more than five proposals. Besides votes for directors, now classified as non-routine under Rule 452, there were very few other non-routine proposals, and only 15 proposals failed out of the total of 1,000 at meetings BNY Mellon supported.
The biggest surprise was how little Rule 452 changes affected proxy voting. Companies feared that eliminating the broker vote in director elections could make it hard for them to reach a quorum or elect directors. As it turned out, BNY Mellon saw a drop in the vote for directors at only 35 of the hundreds of companies it studied. The average drop was 11 percent of votes cast, which didn’t have any real impact on the outcome of the votes.
Out of all the possible reasons behind activism’s no-show and the Rule 452 anti-climax, BNY Mellon says it was companies’ careful planning that kept the peace. ‘Many companies made sure their meetings were compliant, just covering the essentials, while staying away from things that might cause controversy. This led to a smoother season overall,’ Folinus says.
However, Folinus warns that a peaceful 2010 is no indicator of things to come. ‘In fact, I have every belief that 2011 is going to be different,’ he says, pointing to last week’s proxy mechanics concept release from the SEC and the Dodd-Frank financial reform bill. ‘Later this year we’re going to see how all this impacts our clients and then we will be able to make our prognostications,’ he adds.
While BNY Mellon has always collected information about the annual meetings it works on as a vote tabulator and inspector of elections, this is the first time it has taken a systematic approach to collecting data. Folinus says next year’s study should yield clear comparisons and identify trends between annual meeting seasons.
