Directors Failing to Receive Majority Support Hits Five-Year High

New York - 8 October 2019

Shareholder proposal volume lowest in five years, ProxyPulse™ report shows.

The number of board nominees who failed to receive majority shareholder support in the first six months of 2019 reached a five-year high, according to today’s released ProxyPulse™ report. The number of board nominees failing to get at least 50% support was 478 compared to 416 in the first six months of 2018.

The report, published by Broadridge Financial Solutions, Inc. (NYSE:BR) and PwC US Governance Insights Center, features voting trends from 4,059 public company annual shareholder meetings held between January 1 and June 30, 2019, including results for this proxy season with five-year trends.

Key Takeaways

Institutions own 70% of the shares while individuals own 30% of the shares; the percentages remained constant over the prior-year period. Voting participation (of the shares each segment owns) was 90% for institutions and 28% for individuals.

The overall number of proposals that went to a shareholder vote was the lowest in the last five years, down 23% to 420 from 549 in 2015. Overall average support was down as well – from 31% of shares voted in favor in 2018 to 29% in 2019.

Support for say-on-pay slightly declined from 89% in 2018 to 88% in 2019. Of the 124 companies that had say-on-pay proposals that failed to receive 50% support, 33 also had at least one director fail to receive majority support.

For social and environmental proposals, average support declined to 25% in 2019 from 27% in 2018. This was the first such decline over the last five years.

For corporate political spending proposals, average support has continued to increase each year over the last five years and rose to 31% in 2019 from 28% in 2018.

The ProxyPulse report highlighted policies of a few of the largest institutional investors regarding board diversity and environmental issues.

Co-Authors Comments

Chuck Callan, Broadridge SVP, Regulatory Affairs, commented, “On average, shareholder support for directors remained high at 95% of the shares voted. However, in comparison to five years ago, there was nearly a 40% increase in the number of directors who failed to get a majority of the “street” shares voted in their favor. Moreover, over 45% more directors failed to surpass the 70% support threshold and this will factor into opposition voting next year. These trends are occurring despite lower numbers of directors standing for election.”
“The overall number of shareholder proposals that went to a vote in 2019 was the lowest we’ve seen in the last five years. Similarly, average support for proposals declined,” said Paul DeNicola, Principal, PwC’s Governance Insights Center. “Proposals receiving strong support included corporate political spending and say-on-pay. Areas with diminished shareholder support compared to prior periods included the election of directors and social and environmental proposals.”

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