Activism: Shareholders Making More Demands, Winning More

Activism has become a hot topic on Wall Street, with every major study showing that it’s on the rise. So far this trend is continuing this year, as measured by the number of shareholder proposals that made it to big companies’ proxy ballots. There’s also another trend right now, which is that shareholders are becoming more successful in getting their proposals passed.

Shareholder activism on the rise

The Manhattan Institute has just published the latest edition of its Proxy Monitor report. They’ve found that so far, the average big company has faced 1.34 proposals from shareholders so far this year, compared to 1.22 last year. That’s the highest level the Proxy Monitor has measured in the last five years.

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Why more proposals are getting on corporate ballots

The firm reports that the main driver of this increase is proxy access demands from New York City pension funds. If passed, those demands would enable large, long-term shareholders to nominate their own candidates for the board of directors ballot.

The Proxy Monitor also reports that the Securities and Exchange Commission has become more lenient with shareholder proposals, allowing more of them to get on the ballot. The reason for this is because the SEC adopted a wider stance in terms of assessing whether shareholder proposals are appropriate to include on companies’ ballots.

Regulators letting more proposals pass

In January, the SEC stopped enforcing the conflicting proposals rule, which has resulted in some activism campaigns which managed to get shareholder proposals that conflicted with management proposals on the same ballot.

According to the Proxy Monitor, so far this year, the agency has issued 82 letters telling companies that it wouldn’t move against them if they chose to exclude a shareholder proposal from their ballot. That’s a decline from 116 last year. Also this year, the SEC refused to send no-action letters on 68 petitions. That’s an increase from 50 last year.


Activism focuses on corporate governance

The Proxy Monitor also reports that 43% of shareholder proposals so far this year have involved issues with corporate governance. That includes the 11% of proposals from shareholders seeking proxy access.

The report also indicates that 42% of proposals focused on either social or policy issues. That includes 19% which focused on the environment. Also shareholder proposals about lobbying or political spending were still quite common, making up 17% of all proposals this year. However, the number of this type of proposals decline from 67 last year to 51 this year.




Activism getting more shareholder support

The Proxy Monitor also found that 11% of proposals brought by shareholders received majority support this year, marking a significant increase from last year’s 4%. The reason is because there was strong support for proxy access proposals, with 23 of the 35 proxy access proposals winning the support of a shareholder majority.


Looking at other types of proposals, just 4% of them received majority shareholder support. The Proxy Monitor also found that not a single proposal about policy or social concerns raised at Fortune 250 companies received majority backing. This is a trend that has remained solid over the last decade.