Boards continue to be a strong focus for investor and proxy advisor attention in 2019, according to the latest EY Center for Board Matters report on the proxy season so far. Noting that while director opposition has been on the increase over the past few years, only 6% of director votes and 8% of say on pay votes have failed to receive 80% support or more, the report highlighted the following developments for this proxy season:
- Board diversity and disclosure. Currently there are no all-male boards in the S&P 500, and more than half (56%) have at least three female directors. However, 5% of the S&P 1500 have all-male boards and only 34% have three or more women on the board, so it is still an active item for investors. Average votes against all-male boards are very high compared to the norm, with 24% opposition in 2019 for nominating committee chairs of all-male boards. In the same vein, ethnic diversity disclosures for boards continue to climb, with almost half (45%) of the Fortune 100 explicitly disclosing the boards racial/ethnic diversity and 36% disclosing the level of "overall diversity" aggregated across gender, race, ethnicity and sometimes other factors. Skill matrices remain popular with 75% of the Fortune 100 now using them in proxies.
- Sustainability and citizenship. In step with growing investor interest in ESG factors, the number of Fortune 100 companies highlighting corporate sustainability and citizenship in their proxies "has almost doubled," according to the EY report. About 69% of the Fortune 100 now highlights their overall commitment to sustainability, with 62% mentioning environmental sustainability, 56% mentioning community engagement and 53% mentioning diversity initiatives.
- Directors actively engaging shareholders. More than half (56%) of the Fortune 100 reported their board members engaged directly with shareholders in 2019, up from only 29% three years ago. The most typical directors to be included were lead directors and members of the compensation committee, with executive compensation, strategy and performance and ESG among the top topics discussed.
- Climbing support for ESG proposals. Investor support for shareholder proposals on environmental and social topics continues to increase, with almost half (48%) of ESG proposals in 2019 garnering at least 30% support. This reflects a turning point for investors on ESG and highlights the importance of board focus on ESG risks, strategic drivers, and company commitments in this area.