Early vote results show proactive companies secure strong support amid increased investor scrutiny and targeted activism
New York, 21 May 2012 — Early vote results reveal three key developments this proxy season: targeted “vote no” campaigns are on the rise; proactive companies are able to secure high support for say-on-pay (SOP) proposals; and investors continue to press for greater accountability measures at the board level through shareholder proposals. A new Ernst & Young LLP report – Proxy season 2012: Early voting results – finds that this year boards are under greater scrutiny and are more exposed to targeted activism by an increasingly coordinated investor base. Ongoing engagement efforts and enhanced communication on corporate governance topics in the proxy statement are helping some companies to secure strong support for their proposals.
The early vote results for the 2012 proxy season show three key developments:
- Overall director opposition votes remain low, while exposure to targeted “vote no” campaigns increases. Director opposition votes remain low following a spike in 2009, but recent “vote no” campaigns – targeting at least 14 directors and 9 companies so far – suggest some investors are applying a more selective and targeted approach to pursuing reform on certain boards.
- Proactive companies secure high support on SOP proposals. In the second year of mandatory SOP, overall support levels remain strong, averaging 91.0% compared with 91.5% in 2011, and fewer SOP proposals have received less than 50% support compared to the same period last year. Companies are securing high support for their pay programs by proactively engaging with shareholders, enacting pay reforms and improving messaging in the proxy statement.
- Shareholders continue to press for greater accountability measures at the board level. Many prominent 2012 shareholder proposals focus on board matters and hot-button environmental and social topics, reflecting investors’ long-standing efforts to improve board responsiveness and accountability. Environmental and social topics represent the largest category of shareholder proposals for the third consecutive year, with the category of corporate political spending and lobbying activity expected to include the largest number of shareholder proposals this year.
”Boards increasingly are being evaluated and held accountable for their level of responsiveness to investors. Results to date show that constructive, ongoing dialogue around key topics of interest can help secure investor support,” said Allie Rutherford, Associate Director of the Corporate Governance Group at Ernst & Young LLP. “As always, boards must balance their response with governance practices that are appropriate for their company’s specific circumstances.”
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