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Proxy Access Proposals: Preliminary 2015 U.S. Postseason Review

Proxy Access Proposals: Preliminary 2015 U.S. Postseason Review by Patrick McGurn and Edward Kamonjoh, ISS

Key Takeaways

  • Proxy access exploded on to the scene in 2015 as shareholder proponents lobbed almost 120 proposals into U.S. boardrooms. Almost 60 percent of the proposals voted on so far this year have drawn majority support. Average votes in favor of access have jumped by more than 20 percentage points—from 34 percent in 2014 to 54.4 percent so far in 2015. Spurred by this campaign, more than 40 companies have adopted or made commitments to adopt proxy access provisions.
  • Hedge fund activists entered the 2015 season emboldended by two consecutive seasons of sky-high (70 percent) success rates in placing their nominees on boards. This losing streak for incumbent directors appeared to have weakened the resolve of board members, who opted to ink settlements with many dissidents this season. Even with the resulting attrition, contested meetings for the first half of the year still ran ahead of 2014’s volume over the same period, and the median market-cap of targeted firms hit an all-time record of $518 million.
  • For directors running without challengers this season, it was the best of times. Average support for nominees at Russell 3000 (R3K) Index companies soared to 96.3 percent; more than 90 percent of them drew support of 90 percent or greater. Unlike recent seasons, the 2015 proxy season failed to produce a signature "vote no” campaign against a group of sitting directors.
  • Despite the proxy access juggernaut, proponents of environmental & social (E&S) issues managed to hold their lead dog position with respect to total shareholder proposal submissions to U.S. firms. However, as has been the case in prior years, governance topic proposals ended up grabbing the spotlight at meetings after about 40 percent of the E&S propsals were withdrawn. This high attrition rate reflects continued successful engagements between boards and proponents.
  • Compensation issues receded into the background during the 2015 proxy season as the fifth year of Dodd-Frank mandated management say-on-pay votes (MSoP) proved to be less contentious, for some firms at least. Average support on MSoP at R3K firms hit 91.6 percent of votes cast, with almost 80 percent of firms topping the 90 percent support line, slightly above prior years.

Proxy Access Proposals: Preliminary 2015 U.S. Postseason Review - Introduction

Momentum is the buzzword that best describes the 2015 Proxy Season in the U.S. market. Some issues, such as proxy access, hit the ground running and emerged as ballot box juggernauts. Other topics, such as...