In 2019 Proxy Season Recap and 2020 Trends to Watch from consultant ICR, posted on The Harvard Law School Forum on Corporate Governance and Financial Regulation, the author concludes that, although, initially, the changes in voter behavior during the 2019 proxy season appear marginal, on a closer look, the changes portend an “already-shifting pattern of voter behavior, and contain important clues as to what companies must do to prepare for the 2020 proxy season.” These clues are reinforced by recent developments, such as the new Statement on the Purpose of a Corporation issued by the Business Roundtable (see this PubCo post). In the article, the author analyzes trends in say on pay, director elections, shareholder proposals and ESG and IPO governance issues, and prognosticates about what it all means for 2020.
In this article, the authors, from advisor PJT CamberView, talk about their takeaways from the 2019 proxy season, which they expect to see as part of the conversation in the fall.
With 70% of the annual meetings for the Russell 3000 having now taken place (1,812 companies), in this article, ISS takes an early look at the 2019 proxy season. In brief, ISS found increases in opposition to director elections and to say-on-pay proposals, as well as increases in the number of, and withdrawal rates for, environmental and social (E&S) proposals relative to governance (the “G” in ESG) proposals. In addition, the disparity in the levels of support for E&S proposals relative to the historically more popular governance proposals has narrowed dramatically.
In this snapshot review by Willis Towers Watson of U.S. say-on-pay and other compensation-related votes, WTW found that average support for say on pay remained high at 91%. In addition, where ISS identified “high” levels of concern leading to negative recommendations on say on pay, 84% related to pay-for-performance concerns (compared to 75% in 2017).
Not really, according to this study by academics from the University of Pennsylvania Law, Rutgers Business and Berkeley Law Schools to be published in the Harvard Business Law Review. Say on pay was initiated under a Dodd-Frank mandate adopted against the backdrop of the 2008 financial crisis, largely in reaction to the public’s railing against the levels of compensation paid to some corporate executives despite poor performance by their companies, especially where those firms were viewed as contributors to the crisis itself. Say on pay was expected to help rein in excessive levels of compensation and, even though the vote was advisory only, ascribe some level of accountability to boards and compensation committees that set executive compensation levels. So far, however, say-on-pay votes have served largely as confirmations of board decisions regarding executive compensation and not, in most cases, as the kind of rock-throwing exercises that many companies had feared and some governance activists had hoped. The study reported that, since 2011, the average annual percentage of say-on-pay votes in favor has exceeded 90%, while “the percentage of issuers with a failed say on pay vote has never exceeded 3% and, in 2016, that number dropped to just 1.7%.” The study examined what the few failed (or low) votes really meant.
As discussed in this PubCo post, in November of last year, the U.K. Government published a “Green Paper” on Corporate Governance Reform, which, in the face of rising economic inequality, sought “to consider what changes might be appropriate in the corporate governance regime to help ensure that we improve business performance and have an economy that works for everyone.” The Paper requested input on several proposals, including pay-ratio disclosure, giving employees more influence on company boards and making say-on-pay votes binding, leading to “a broad-ranging debate on ways to strengthen the UK’s corporate governance framework.” The results are now in. Corporate Governance Reform, The Government response to the green paper consultation identifies nine proposals for reform that the U.K. Government intends to advance. The reforms, many of which would not require legislation, are expected to become effective by June 2018 to apply in the following fiscal years. Whether any of these reforms will have a significant impact—either at home in the U.K. or as an influence abroad in the U.S.—remains to be seen.
by Cydney Posner A draft of the Financial CHOICE Act of 2017 (fka version 2.0), a bill to create hope and opportunity for investors, consumers, and entrepreneurs — a masterpiece of acronyming — has just been released (and weighs in at 593 pages). The bill, sponsored by Jeb Hensarling, Chair […]