Environmental, social and sustainable governance (ESG) resolutions make up about half of all the proposals that shareholders will vote on. Other proposals –commonly referred to as governance proposals – include issues such as executive compensation and voting rules that often strike at the heart of both good management practices and shareholder rights.
For the fourth consecutive year, the New York City Comptroller's Office is challenging the old boys club culture that dominates U.S. corporate boardrooms. Since 2014 hundreds of companies have responded positively to proxy access resolutions that demand policies that make it easier for shareholders to nominate board members. This year the NYC funds are continuing the effort with a focus on board refreshment and evaluation, emphasizing board diversity.
Shareholder advocates were key players in the successful fight to attain what is now a required advisory vote on executive compensation known as say-on-pay. This year will see the adoption of another shareholder initiative to evaluate executive compensation with the release of CEO-median worker pay ratios. The CEO pay ratio is part of the Dodd-Frank Act passed in response to the financial crisis. The Act also included new SEC rules on CEO pay performance and clawback provisions (i.e. the recovery of money already disbursed). The Financial CHOICE Act that passed the House in 2017 would gut much of the Dodd-Frank requirements, including these initiatives, but faces an uncertain future in the Senate.
Two threats to shareholder democracy – one old and one new – have resulted in several shareholder resolutions that will be voted on this spring. A growing number of companies are conducting virtual-only annual general meetings that are held online without a physical location or an in-person shareholder meeting. Among the shareholder concerns over virtual meetings is the ability of management to control the meeting and suppress shareholder feedback. Meanwhile, the issue of how management counts proxy votes has been debated for years but has been getting renewed attention from shareholders. The most glaring example being that of many companies that count "abstain" votes in favor of management’s recommendation – which clearly contradicts the dictionary definition of "abstain" (i.e. “formally decline to vote either for or against a proposal or motion”).