This week, the Gibson Dunn law firm reported that the overall number of shareholder proposals decreased in 2018 compared to 2017 while the average shareholder support for proposals voted on increased, consistent with the Center’s analysis of S&P 500 shareholder proposals. Among the more interesting takeaways from Gibson Dunn's annual analysis of Russell 3000 shareholder proposal trends for the 2018 proxy season include:
- Russell 3000 shareholder proposals decreased by 5% to 788, while the average support for proposals grew four percentage points to 32.7%. Similarly, the Center’s database of S&P 500 proposals mirrors this data showing about an 8% decrease in the number of proposals but a 3.7% increase in shareholder support for those which did go to a vote.
- Gibson Dunn notes that social and environmental proposals totaled 43% of all proposals submitted. Of these, shareholders submitted 139 environmental proposals and 68 proposals aimed at diversity and anti-discrimination policies. The Center’s data showed that social and environmental proposals represented about 35% of total S&P 500 proposals (10% were environmental proposals and 25% were social proposals). Notably, the average shareholder support for environmental proposals among S&P 500 was almost 30% with social proposals coming in at 24.2% - an increase of over 5% for each category compared to 2017.
- Mirroring the Center’s S&P 500 data, Gibson Dunn cites a slight decrease in corporate governance proposals among the Russell 300 in 2018 (down from 288 to 281). Like the Center’s data, the most frequent governance proposal was to call special meetings.
- Although smaller, the number of executive compensation proposals in the Russell 3000 increased slightly to 55 in 2018 from 48 in 2017. According to the Center’s data, S&P 500 companies saw a slight decrease in shareholder executive compensation proposals from 46 to 38 perhaps reflecting investors' greater focus on improving executive compensation practices at smaller companies. Gibson Dunn notes that the most frequent executive compensation proposal, comprising 20 of 55 proposals, requested companies to include social or environmental-focused performance measures in executive compensation plans.
Even though shareholder support for proposals is increasing, to date there has not been a significant increase in the number of proposals that receive majority support. According to Center data, among the S&P 500, only 26 of 328 proposals received majority support. Of these 26 proposals, 22 were core "governance proposals" (i.e., proxy access, right to call a special meeting) while four were environmental. No social or executive compensation proposals received majority support. Many companies have opted to negotiated withdrawals of specific social shareholder proposals (most focusing on gender pay equity) instead of allowing them to them go to a shareholder vote. However, it is worth noting that these proposals did not see success when they went to a vote.
The Gibson Dunn report also examined SEC trends in excluding shareholder proposals, noting that it has “generally becom[e] more challenging to exclude proposals” which is interesting given the SEC Staff’s releases this year aimed at the shareholder proposal process.