More Shareholder Proposals Win Majority Support Due to Proxy Access

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Yin Wilczek

June 8 — Proxy access is fueling overall support for shareholder proposals at the largest U.S. companies, a June 8 report finds.

According to the Manhattan Institute Proxy Monitor's mid-proxy season report, 12 percent of all shareholder resolutions voted upon at Fortune 250 companies as of May 27 received majority support—the highest percentage since 2010.

The report found that excluding access resolutions, only 3.5 percent of shareholder proposals received majority support, which is the lowest percentage in the last 10 years tracked by Proxy Monitor's database.

The report ascribed the high level of support for access proposals primarily to the efforts of New York City Comptroller Scott Stringer. According to the report, 72 percent of access resolutions submitted by Stringer's office that came to a vote at Fortune 250 companies by the end of May won majority support.

‘Opening Salvo.'

Stringer told Bloomberg BNA that shareholders clearly have “galvanized” around the “need for meaningful proxy access” in the U.S. He also suggested that companies can expect more access proposals in 2016.

“While shareowners would prefer to gain the right to nominate directors through regulatory reform, this issue is too important to wait for the SEC to revisit,” Stringer said in an e-mail. “This season is the opening salvo in a coordinated effort to implement proxy access across the market.”

On behalf of the $160 billion New York City Pension Funds, Stringer last fall submitted resolutions at 75 companies requesting bylaws to give shareholders that own 3 percent of the company stock for three or more years the right to list their director candidates on the company's ballot.

The comptroller said in April that the U.S. is well on its way to achieving “viable proxy access”.

Across All Companies 

More generally, Simpson Thacher & Bartlett LLP found that the average level of support for shareholder access proposals across all companies as of May 28 was 56.1 percent, compared to 30.9 percent in 2014 and 32.5 percent in 2013.

However, the Proxy Monitor report warned that although most access proposals as of May 27 received majority support, “shareholder opinion on the question remains divided.”

The report noted that the level of support for access proposals opposed by the board ranged from 40 percent to 62 percent. It also found that some large investors—including mutual fund groups Fidelity and Vanguard—largely oppose such resolutions.

Political Spending Proposals 

In other highlights, the report found that the number of shareholder proposals on political spending or lobbying submitted to Fortune 250 companies fell significantly this year. As of May 27, there were only 47 of such proposals, compared to 67 in 2014, 61 in 2013 and 58 in 2012.

The report also found that there was an increase in the number of proposals relating to environmental issues that were sponsored by social-investing funds. As of May 27, there were 57 such proposals submitted at Fortune 250 companies.

The energy industry is facing increased scrutiny from institutional investors and fielding a large number of resolutions over environmental concerns. 

The report found that the top three proponents of shareholder resolutions thus far at Fortune 250 companies this season are:

• John Chevedden, 41 resolutions;

• Stringer, 27 resolutions; and

• William and Kenneth Steiner, 24 resolutions.

 

The report noted that of the 27 resolutions filed by Stringer, 21 seek proxy access.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The report is available at http://www.proxymonitor.org/Forms/2015Finding2.aspx.