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Directors and Investors: Are They on the Same Page?

Insights from the 2014 proxy season and recent governance surveys

This edition of ProxyPulse looks at results from 4,113 shareholder meetings held between January 1 and June 30, 2014, with data and analysis on topics including share ownership, director elections, “say-on-pay”, shareholder proposals, proxy material distribution and voting mechanics. We also provide perspectives from recent governance surveys of directors and institutionalshareholders, and where appropriate, discuss them alongside the actual voting results from the 2014 proxy season.

2014 Proxy Season Highlights:

Director Elections – Average shareholder support for directors was 96% in 2014. Large-cap company directors received the highest average support (97%) and micro-cap directors the lowest (90%). Five percent of directors failed to attain at least 70% shareholder support, versus 6% in 2013, and 2% (or 365 directors) failed to get majority support.

Say-on-Pay – There was a season-over-season increase in the number of pay plans that failed to receive majority shareholder support – from 123 in the 2014 season to 104 in the 2013 season. While overall, shareholders continued to support “say-on-pay” proposals at high levels, (average support of 89%), there were signs of weakening support levels at mid-, small-, and micro-cap firms. Average support was 89%, about the same as in 2013.

Shareholder Activism – Shareholder activism has intensified, particularly at the largest companies. While the number of actual proxy contests, and exempt solicitations (i.e. “no vote” campaigns against directors) decreased between 2013 and 2014, a significant number of companies indicated that they were impacted by activist campaigns. Some of these were resolved without requiring a shareholder vote.

Shareholder Proposals – Shareholder proposals to split the roles of Chair and CEO increased in number (there were 62 such proposals in 2014 compared to 53 in 2013). Average support was 30% and 6 proposals received majority support. Social and environmental proposal volume saw a slight uptick in 2014, although none received majority support.