Voting Analytics Offer Insights for 2020 Proxy Season

This year, what should companies expect heading into Annual General Meetings (AGMs)? A recent deep dive into 2016-2019 proxy voting data, representing about 98 percent of the largest 3,000 companies in the United States, offers some key takeaways.

1. Boards and management could be confronted with a counternarrative to their company’s strategy and governance. From private engagements to public campaigns, investors are pursuing alternative approaches to push for change. Since 2010, exempt solicitations, such as “just vote no” campaigns, have been on the rise, resulting in a 30 percent decline in shareholder proposals.
2. Companies must be prepared to make a clear case for nominees in the context of overall board composition. Diversity — from multiple standpoints including demographics, expertise and experience — is a hot topic for Environmental, Social and Governance (ESG). While still a fraction overall, more board members failed to earn majority support in 2019 than ever before.
3. Voluntary disclosure offers a way to shape the discussion for investors about environmental and social (E&S) concerns. Although E&S proposals are not usually adopted, the issues they represent are now top of mind for mainstream investors and media. As a result, E&S matters have the potential to prompt attention and affect perception beyond the annual meeting itself.
4. Companies must be prepared to either disclose, discuss or defend gender pay equity. At the very least, firms should consider pulling together their internal data and develop a plan to address major incongruities. Heavyweights such as Amazon, American Express, Intel and Facebook all had to respond to shareholder resolutions on gender pay equity in 2019.
5. Smaller firms are not immune from the influence of investors seeking to have an impact on governance. If a business operates outside of widely accepted best practices, the proxy statement and investor relations are ways to frame those matters before they are raised. Investors are now looking beyond the S&P 500 to influence director election systems and board composition.

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