September 10, 2014
While concerns about shareholder activism and the influence of proxy advisor vote recommendations remained high, the 2014 proxy season continued the modest trend toward calmer, less contentious annual meetings. This is due in part to significant efforts by companies to actively engage with their shareholders and understand and respond to shareholder concerns. It may also reflect a modest waning of proxy advisor influence, as certain large institutional investors increase their capacity to make voting decisions and to engage directly with portfolio companies.
Company engagement with shareholders continues to provide a valve for releasing potential annual meeting tensions. Engagement efforts are driven by a host of factors, including concerns about shareholder votes on say on pay and other proposals, and activist efforts. A recent study from the Investor Responsibility Research Center Institute and Institutional Shareholder Services Inc. (ISS) determined that since say on pay was instituted, shareholder engagement efforts have increased by more than 50%. Further, more than two-thirds of Russell 3000 companies disclosed some form of engagement with their investors.
Companies should begin preparing now for the 2015 proxy season to ensure that they are well-positioned to engage with shareholders on executive compensation issues, as well as on issues that may be the subject of shareholder proposals or campaigns targeting directors in re-election efforts.
In particular, companies should consider:
- Shareholder proposals and voting results from the 2014 proxy season.
- Recent SEC guidance relating to proxy advisory firms and their investment adviser clients.
- Potential changes in proxy advisor policies and policy implementation.
- Steps to take now to identify and address vulnerabilities and engage with shareholders.
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