Shareholder activism — convincing management of public firms to take steps to increase shareholder value — has been one of the most prominent themes relating to stock markets since the financial crisis. Most shareholder activism occurs either through proposals made in the proxy statement (given proxy access) or by pressure on execs backed up by a threat of a proxy battle (a “battle” for shareholder votes on proposals listed in the proxy).
Global law firm Sullivan & Cromwell published the 2015 Proxy Season Review on July 20th. The 2015 review highlights that dramatically increased proxy access is the major story of this proxy season. The number of proxy access proposals is up almost 500% and the number of approved proxy access proposals is up over 900% so far this proxy season.
The 2015 review includes data from the 415 out of the 500 firms on the S&P 500 index who already have held their annual meeting.
2015 is the year of increased proxy access
Sullivan & Cromwell’s review points out that there have been 82 proxy access proposals so far 2015, as opposed to 17 in the entire 2014 proxy season. So far this year, shareholders have approved 48 proposals, compared to just five for all of 2014, and the average votes cast in favor are up significantly to 55% from a mere 33% in 2014.
The review notes: “Perhaps most significantly, modestly more restrictive management-enacted proxy access provisions apparently did not deter shareholders from proposing, and, in many cases, winning on the now standard shareholder proposal format of 3%/3-year/25% of board.”
If you take out proxy access proposals, overall governance proposals were down by 6% this year, with majority election of directors and board declassification proposals notably much less frequent than the last few years. The authors of the review note this may be because so many firms have already adopted these two governance arrangements.
Although ISS support for independent chair proposals was up this year due to the organization’s new approach to this idea, the average support and total number of successful proposals were down this year.
Also of interest, ISS recommendations to withhold or vote against directors increased in 2015 with big increases in the number of withhold recommendations for a lack of responsiveness and for unilateral actions taken by the board that limited shareholder rights, and relating to independence, compensation and overboarding issues. Importantly, the average support on advisory say-on-pay votes stayed strong at about the same level as the last several years.
Who is making shareholder proposals in 2015 proxy season?
The Sullivan & Cromwell 2015 Proxy Season Review also analyzed who was actually submitting proposals to be included in proxies this year. Based on data provided by ISS’s voting analytics with respect to 969 shareholder proposals, John Chevedden, by himself or with others, was involved in nearly 200 proposals. More than 75 proxy access proposals were made by NYC Comptroller on behalf of New York City Pension Funds, and other public sector pension funds and entities were associated with over 80 proposals. Of note, labor unions had a hand in close to 120 proposals.
Some groups that are typically active in making shareholder proposals were less involved this year. For example, CalPERS made only three proposals and Norgesbank one; CalSTRS made 11 proposals. Analysis of the ISS data also showed that “socially responsible” entities continued to be active this year. Trillium Asset Management, Calvert Asset Management, Walden Asset Management and As You Sow Foundation were each associated with with over 20 shareholder proposals.
