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Amid Increasing Demand for ESG Disclosure, Voting Support for Shareholder Resolutions on Environmental and Social Issues is Rising
Thursday, November 08, 2018

NEW YORK, Nov. 8, 2018 /PRNewswire/ -- A study by The Conference Board and Rutgers Center for Corporate Law and Governance (Rutgers CCLG) finds that voting support on proposals regarding companies' sustainability practices has been steadily rising over the last few years, even though such proposals are still rarely approved. The main impetus comes from issues that have taken center stage in recent proxy seasons, such as the disclosure of corporate political contributions and lobbying activities, investigating the impact of climate change on the business, and the efforts to fill existing gender pay gaps.

Conducted in collaboration with FactSet and data mining firm IRGS Analytics, Proxy Voting Analytics (2015-2018) reviews more than 2,500 annual general meetings (AGMs) held at Russell 3000 corporations in the January 1 and June 30 period. The study details aggregate data on shareholder proposals, management proposals, proxy contests, and other shareholder activism campaigns, segmenting such data for 11 business sectors in accordance with GICS, the Global Industry Classification Standard. To highlight differences between small and larger companies, findings in the Russell 3000 sample are also compared with those for companies that, at the time of their AGM, were in the S&P 500 index. The publication is part of The Conference Board Corporate Intelligence portfolio of benchmarking data and analysis on board practices, executive and director compensation, corporate communications and investor relations, corporate sustainability, and corporate citizenship and philanthropy.

Proposals related to social and environmental policies of corporations received, on average, the support of just 25.7 percent of votes cast at general meetings. "This finding indicates that shareholders of U.S. public companies continue to believe that the board of directors and senior management are better suited to determine the business viability of certain sustainability activities, and that one-size-fits-all policies may lead to inefficiencies or capital misallocations," said Matteo Tonello, Managing Director of Corporate Leadership at The Conference Board and the author of the report. "However, our study also unveils a number of trends suggesting that the demand for additional disclosure in this area will continue to grow in the coming years."

Besides the increase in the volume of these resolutions, two factors may be indicative of their future. First, even though almost all of the proposals fail to receive a majority vote, there is a clear upward trend with respect to average support levels. For resolutions on political contribution disclosure and lobbying, the 28 percent for votes of 2018 represented an uptick from the 24.6 percent in 2017 and the 24 percent in 2015. Resolutions on human rights went from 10.7 percent in 2017 to 17.5 percent in 2018. Health issue-related resolutions received the support of 21.4 percent of votes cast in 2018, up from 18.8 percent in 2017 and only 6.1 percent in 2015. Further, the study reports that abstention rates have dropped from 10.9 percent of votes cast in 2014 to a mere 2.5 percent this year--a figure consistent with the abstention rate that The Conference Board has observed for years for resolutions on executive compensation and corporate governance. Only a handful of social and environmental policy proposals passed in 2018. They include two at energy company Kinder Morgan Inc., for the publication of a sustainability report and the assessment of the risk that policies requiring the company to address climate change may pose to the business; and one sponsored by Calvert Investment Management at transportation company Genesee & Wyoming, requesting the setting of greenhouse gas emission targets.

"Traditional corporate governance issues that kept investors and corporations busy in the last years, such as majority voting and board declassification, appear to be well past their peak hour, possibly because of saturation," said Matteo Gatti, Professor of Law at Rutgers Law School and affiliated with the Rutgers CCLG. "In 2018, investors centered their attentions on the right to call special meetings by shareholders, which was the top corporate governance-related resolution at Russell 3000 corporations, while majority voting and declassification barely made the list."

Other key findings from the report:

    --  Activity in the area of executive compensation by investment funds
        affiliated with labor unions continued to soften as those shareholders
        either ceased their proxy voting initiatives or showed new interests,
        especially in social and environmental policy issues. The 2018 season
        marked another sharp decline in the number of shareholder resolutions
        submitted by multiemployer investment funds affiliated with labor
        unions, such as the United Brotherhood of Carpenters and Joiners of
        America or the American Federation of Labor and Congress of Industrial
        Organizations (AFL-CIO). There were only 45 resolutions filed by this
        type of proponent in 2018 (7.05 percent of the total), down from the 80
        resolutions (11.02 percent) of 2015 and the 151 of 2010. This means
        that, in total, proposal volume by labor-affiliated funds dropped 70.2
        percent from 2010 levels, a phenomenon that is partially responsible for
        the lower aggregate volume of shareholder proposals recorded in 2018.
        Most commentators agree that the gradual, steady decline is attributable
        to the introduction of the say-on-pay vote and the federal regulation
        imposing more widespread executive compensation disclosure, which had
        traditionally been main topics of concern for labor unions. Some of
        these investment funds, including the Sheet Metal Workers' National
        Pension Fund, have completely exited the activism scene in the last few
        years, while others have scaled back their involvement.
    --  The rate of withdrawals of shareholder proposals doubled from a few
        years ago as companies voluntarily implement their own reforms. In 2018,
        the number of voluntary withdrawals of shareholder proposals in the
        Russell 3000 (11.1 percent of the total submissions in the Russell 3000,
        up from 8.7 percent in 2017 and a mere 5.9 percent in 2012), when
        combined with omissions by management, exceeded the number of granted
        SEC no-action letters to companies seeking exclusions. Withdrawn
        proposals were mostly submitted by gadfly investors and the investment
        vehicles of stakeholder groups and religious orders--all investor types
        that rarely elevate these matters to an outright proxy solicitation and
        would rather use the precatory proposal as a tool to receive the
        attention of their portfolio companies on issues of concern. However, in
        2018, 23 of the 71 withdrawn proposals were sponsored by investment
        advisers (mostly, of hedge funds), for which the decision to drop the
        request was likely the result of private discussions or settlements with
        management. Moreover, following the introduction of voting guidelines on
        board responsiveness by proxy advisory firm ISS, withdrawals may be
        prompted by the company's decision to either voluntarily implement the
        requested change or to submit its own proposal on the same topic to
        mitigate the risk of wide opposition to management's nominees to the
        board of directors. Under its policy, ISS recommends that institutions
        voting on director elections exercise close scrutiny in those situations
        where a company failed to implement a precatory shareholder proposal
        that had received majority support of votes cast at a prior AGM.
    --  As large groups of institutional investors reduced their 14a-8 filings
        or shifted their attention to new topics, the percentage of voted
        proposals winning the support of a majority of shareholders reached a
        new low and not a single resolution related to executive compensation
        passed in 2018. The percentage of voted shareholder proposals receiving
        majority support has inexorably declined since 2009, from more than 20
        percent to less than 11.2 percent in the Russell 3000 sample and from
        17.3 percent to eight percent in the S&P 500. This downward trend is
        attributable to a decline in the volume of proposals on topics that are
        traditionally widely supported by shareholders (for example, majority
        voting and board declassification) and an increase in the share of a new
        type of shareholder resolutions (including those on environmental and
        political issues) that do spark a debate on emerging corporate policies
        but that fail to obtain majority support. In the examined 2018 general
        meeting period, on average, more than 70 percent of votes on shareholder
        proposals submitted by other stakeholders, other institutions, and
        religious groups were against the proposal. The highest level of votes
        for was observed for proposals by public pension funds (41.4 percent),
        individuals (35.7 percent), and hedge funds (35.1 percent). Public
        pension funds and individuals had the highest percentage of voted
        proposals receiving majority support (25 and 12 percent, respectively).
        It is notable that none of the executive compensation proposals voted
        during the period received majority support in 2018.
    --  In the year of the nascent #MeToo movement, large pension funds have
        become more vocal about the need for safe work environments while other
        shareholders have urged prominent companies to address gender pay gaps
        and link executive compensation to human capital management. The #MeToo
        movement has barely turned one year old. In a first sign of the
        significance of the current climate, a couple of large and influential
        public pension funds (CalPERS and Blackrock) followed the early example
        of the New York State Common Retirement Fund and were receptive of
        recommendations included in a recent publication by the Council of
        Institutional Investors (CII), announcing revisions to their voting
        policies meant to promote corporate practices combating sexual
        harassment in the workplace. Walmart, Facebook, Alphabet and Texas
        Instruments were among the recipients of gender pay gap proposals in
        2018. There were eight such proposals in the Russell 3000, with five
        that advanced to a vote at the target companies' AGMs. Socially
        responsible investment fund Arjuna Capital filed one for the third
        consecutive year at Google's parent company, Alphabet, in the wake of a
        U.S. Department of Labor investigation as well as leaked
        employee-gathered data suggesting gender pay gaps across the workforce.
        None of the proposals of this type, including the Alphabet one, passed.
        However, at least in some cases, their influence appeared to extend
        beyond the annual shareholder meeting vote. Following the filing of
        Arjuna's proposal, for example, Google published wage data showing a
        zero percent statistically significant pay gap for 89 percent of its
        employees worldwide.
    --  Shareholders' right to call special meetings tops the list of corporate
        governance-related resolutions, while issues that had galvanized
        investors for over a decade barely made the list. The historical
        analysis by topic of filed shareholder proposals on corporate governance
        shows that issues on which shareholders had frequently been putting
        pressure on companies for over a decade barely made the list of
        submissions for 2018. For example, only five proposals on the adoption
        of majority voting in director elections went to a vote at Russell 3000
        companies in the first six months of 2018, down from 14 in the same
        period of 2017; according to an earlier edition of the study, there were
        27 in 2014. Similarly, there were only five voted proposals on board
        declassification in 2018, down from the nine in 2015, 29 in 2013 and 44
        in 2010. Instead, it was the request to allow shareholders to call
        special meetings that topped the 2018 list of governance-related
        proposals by volume. Their proponents were primarily individual
        investors (including John Chevedden, Kenneth Steiner, and
        publisher James McRitchie). Investors voted on 58 of these resolutions
        at Russell 3000 companies in the first six months of the year, a number
        that doubled the one The Conference Board recorded in the same time
        period of 2017 (23 resolutions) and was more than three times as big as
        the one seen in 2015 (17 resolutions) and 2013 (10 resolutions).
    --  Although activism campaign announcements in the Russell 3000 were up in
        2018, the number of campaigns related to a shareholder meeting declined,
        as some hedge funds choose to agitate for change without even filing a
        shareholder proposal. In the first half of 2018, activist investors
        announced 254 campaigns against Russell 3000 companies, compared to 240
        in the same period in 2017 (a 5.8 percent uptick). Activism campaign
        announcements include proxy contests, exempt solicitations, and any
        other public announcement of the investor's intention to agitate for
        change at a target organization--whether through a press release, an
        appearance on a CNBC talk show, a Twitter chat, or the filing of a
        lawsuit. However, the number of campaigns pertaining to a vote at a
        Russell 3000 shareholder meeting held in the January 1-June 30 time
        period declined slightly in 2018, to 147 from the 149 of the prior year.
        The discrepancy between announcements and campaigns related to a
        shareholder vote indicates that a growing number of activists are
        agitating for change without even filing a shareholder proposal. For
        example, on February 2018, Barington Capital sent a letter and detailed
        presentation to the Chairman and CEO of restaurant chain Bloomin'
        Brands, Inc., recommending that the company should implement a variety
        of measures to improve shareholder value--including the spin-off of its
        smaller brands, measures to enhance guest experience and improvements to
        the company's corporate governance and board composition (in particular,
        the addition of new independent directors with strong backgrounds in the
        restaurant industry). The letter was publicly disseminated though a
        press release but it was not followed by an explicit threat of a proxy
        fight or an exempt solicitation.
    --  Proxy contests were the only type of activist campaign related to a
        shareholder vote to increase among Russell 3000 companies in 2018.
        However, the outright success rate of dissidents reached a record low
        this year, with the majority of such contests resulting in settlements.
        Among types of activist campaigns related to a shareholder vote, proxy
        contests were the only one that registered an increase in 2018.
        Activists engaged in 34 proxy contests against Russell 3000 companies
        that held a shareholder meeting in the first six months of the year,
        compared to 28 launched in the corresponding 2017 period, 49 in 2015, 35
        in 2013 and 23 in 2010. Companies in the consumer discretionary sector
        faced seven solicitations and companies in the industrials sector were
        exposed to six; there were four contests in each of the energy,
        financials, real estate and information technology sectors, while only
        one in the telecommunications sector. Hedge funds have consistently been
        the most active dissident type. In 2018, they mounted 19 (or 55.9
        percent of the total) of the voting fights against management, followed
        by other stakeholders (6 proxy contests, or 18.2 percent of the total),
        investment advisers (six contests, or 17.6 percent), and individuals (2
        contests, or 5.9 percent). The vast majority of such contests (23, or
        67.6 percent) were motivated by an attempt to gain a seat on the board
        of directors. In 2018, for the first time since The Conference Board
        began tracking proxy contest outcomes, the majority of initiated proxy
        contests resulted in a settlement between the dissident and the company,
        where the company made certain concessions to obtain the support of the
        activist investor. By the same token, in 2018 the outright success rate
        by dissidents was the lowest recorded by The Conference Board since
        2010, where dissidents won only one of the 23 proxy contests mounted
        then against Russell 3000 companies (or 4.3 percent).

Source: Proxy Voting Analytics (2015-2018)

About The Conference Board
The Conference Board is a member-focused think tank that provides trusted insights for what's ahead. We are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.

To enable peer comparisons among its member companies, The Conference Board offers a portfolio of benchmarking data and analysis on board practices, director and executive compensation, shareholder voting and activism, corporate communications, corporate sustainability and corporate citizenship and philanthropy. It can be accessed at

About The Rutgers Center for Corporate Law and Governance
The Rutgers Center for Corporate Law and Governance is a project of the Rutgers University School of Law, located in Camden and Newark, New Jersey. The Center is an interdisciplinary forum for research, analysis, and discussion of current issues in corporate law and governance. The Center serves as a resource for students, faculty, alumni, and the business and nonprofit communities. Its objectives are to identify and promote best corporate law and governance practices and law reform, and to build bridges between Rutgers Law School, the business and nonprofit communities, government officials, and other Rutgers University units. For more information, visit

About FactSet
FactSet, a leading provider of financial information and analytics, helps the world's best investment professionals outperform. More than 50,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet's desktop analytics, mobile applications, and comprehensive data feeds. The company has been included in FORTUNE's Top 100 Best Companies to Work For, the United Kingdom's Great Places to Work and France's Best Workplaces. FactSet is listed on the New York Stock Exchange and NASDAQ. Learn more at, and follow FactSet on Twitter:

About IRGS Analytics
IRGS Analytics
is the help desk uniquely designed for the professional service firm seeking customized data on U.S. public company disclosure of environmental, social and governance (ESG) practices. Our clients include compensation consultants, law firms, accounting firms, and investment companies. We also partner on research projects with think tanks, academic institutions and media companies. IRGS Analytics intelligence is tailored to specific empirical information needs, with segmentations by select peer groups, business industry, and multiple company size dimensions. Data insights are tagged and hyperlinked to underlying sources. Learn more at

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