Proxy season 2019: Focus on long-term strategy as proposal support grows
Companies wanting to know what to look out for in the 2019 proxy season should take note of the long-term-focused messages coming from some of the world’s largest investors, according to the latest ProxyPulse report from Broadridge and PwC.
Citing BlackRock CEO Larry Fink’s 2019 annual letter to portfolio company CEOs and State Street Global Advisors (SSGA) president and CEO Cyrus Taraporevala’s 2019 letter to portfolio company boards, the ProxyPulse report notes that investors are ‘highlighting the impact of culture, purpose and stewardship on a company’s long-term strategy and success.’
Looking back on trends from the 2018 proxy season, the report also notes that ESG is expected to remain a key trend in 2019, as is gender diversity with ‘legislators, investors and proxy advisers weighing in’ on the issue.
It adds that the 2018 ‘mini-season’ saw an increase in support for shareholder proposals, with support greatest for shareholder voting rights and reporting on diversity. Proposals along diversity lines typically saw support in the range of 40 percent to 55 percent, while those focused on shareholder voting rights typically saw support in the range of 40 percent to 50 percent, explains a Broadridge spokesperson.
‘Support for shareholder proposals rose among institutional investors and retail shareholders alike to 43 percent of the shares voted. That’s a higher level than we’ve seen in recent years,’ Chuck Callan, Broadridge senior vice president of regulatory affairs, tells IR Magazine. ‘The proposals spanned a wide range of topics, including gender diversity, climate change, political contributions, voting rights, proxy access and executive pay, among other topics.’
As evidence for the ongoing drive to greater gender diversity, the ProxyPulse authors cite the California bill aimed at boosting female representation on company boards headquartered in the state of California, which was signed into law in September last year, followed by a similar bill introduced in New Jersey in late November 2018.
On the voting front, the report notes that SSGA will, from 2020, begin voting against the entire nominating and governance committee (not just the chair) at companies without at least one woman on the board, adding that ‘BlackRock ‘encourages’ boards to have at least two female directors and Vanguard is broadly supportive of initiatives to increase gender diversity in the boardroom.
‘Starting in 2019, proxy advisory firm Glass Lewis will generally recommend voting against nominating committee chairs on boards without a single female director,’ continue the report authors. ‘In some cases, the recommendation may extend to other members of the committee as well. ISS will recommend voting against nominating committee chairs on boards of Russell 3000 or S&P 1500 companies with no female directors in the 2020 proxy season.’
The mini-season, which saw 1,024 US company meetings held between July 1 and December 31, 2018, typically sees fewer companies – around 20 percent of listed firms, with most tending to be smaller companies – hold their AGMs, according to ProxyPulse.