Environmental and social issues dominate shareholder-sponsored resolutions for third consecutive year
New York, 4 April 2012 – Investor attention to the “triple bottom line” of environmental, social and economic performance is growing and raising support levels for shareholder resolutions on environmental and social issues. A new Ernst & Young LLP study – Leading corporate sustainability issues in the 2012 proxy season: is your board prepared? – indicates that investors are challenging boards to further improve oversight and disclosure around hot-button topics.
The Ernst & Young LLP report shows that environmental and social proposals will lead all other major proposal categories, in terms of shareholder resolutions on proxy ballots. These proposals accounted for 40% of all shareholder resolutions in 2011, up from 30% in 2010. The proposals also broke new ground averaging support from 21% of votes cast, up from 18% in 2010.
“Not only do resolutions on corporate sustainability issues represent the largest portion of all shareholder proposals we now see, but average support for these topics reached an all time high last year – and we expect this trend to continue to gain traction,” said Steve Starbuck, Americas Leader Climate Change and Sustainability Services, Ernst & Young LLP.
The number and types of shareholder resolutions reaching proxy ballots represent only a limited aspect of investors’ increasing engagement efforts, however. A significant portion of submitted proposals are withdrawn and never voted on due to the success of company-shareholder engagement efforts as the two sides reach agreement. Companies are increasingly willing to enter into substantive dialogue with investors and other stakeholders and to take action, including by enhancing disclosure around key issues.
“Investor support is raising attention at the board level where there is growing recognition that sustainability is not just about managing risk, but that integrating these considerations into a company’s core business strategy can enhance long-term growth and support revenue opportunities,” said Allie Rutherford, Associate Director of the Corporate Governance Group at Ernst & Young LLP.
To respond to the challenges of a dynamic shareholder proposal landscape, boards and management can consider the following leading practices:
- Enhancing shareholder engagement and improving disclosure on key issue areas;
- Ensuring directors’ skills are relevant to critical areas of stakeholder concern; and
- Considering the use of sustainability-related measures in executive compensation practices as a way to help support broader corporate sustainability goals.
For more information, and to access the full report, Leading corporate sustainability issues in the 2012 proxy season: is your board prepared? visit www.ey.com/climatechange.
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