[This story previously appeared in Securities Regulation Daily.]
By Matthew Garza, J.D.
Investor communication firm Broadridge Financial Solutions and PricewaterhouseCoopers have released an analysis of the 2014 proxy “mini-season,” which included data from 1,077 public company shareholder meetings held between July 1 to December 31, 2014, and provided a preview of the 2015 proxy season in a new edition of the ProxyPulse newsletter.
Ownership. The firms reported that institutional shareholders owned 59 percent of “street name” shares, up three percent from 2013, while retail shareholders held 41 percent. Institutional shareholders voted 83 percent of the shares they owned, but retail shareholders voted only 28 percent of their shares. There was also a wide gap in voting participation based on the company’s capitalization. Institutions voted 88 percent of their shares at mid-cap companies, but only 55 percent at micro-caps. Retail shareholders voted 34 percent of their mid-cap shares and 24 percent of their micro-cap shares.
Director support. The number of directors failing to receive the support of a majority of shareholders increased 26 percent over the 2013 mini-season, with 125 directors at 45 different companies failing to receive majority support, and 344 directors failing to receive 70 percent support. Ninety-nine directors at 53 different companies failed to attain majority shareholder approval in 2013. One-third of the companies that had a director fail to attain majority support in 2013 also had a director fail to obtain majority support in 2014, the report pointed out.
Chuck Callan, senior vice president of regulatory affairs for Broadridge said “The 70 percent ‘support’ benchmark is important to many companies and proxy advisors. At the same time, retail shareholders were not broadly engaged in voting and their ‘un-voted’ shares amounted to 29 percent of street shares outstanding.” The report said over 22 billion retail shares in total were not voted, which presented an opportunity for greater company engagement with shareholders.
Say-on-pay. The average level of shareholder support for pay plans declined from 83 to 80 percent from 2013 to 2014, with the declines most pronounced at large caps. Six large-cap companies failed to achieve at least 70 percent support for pay plans, compared to only one in the 2013 mini-season. Support for say-on-pay increased at micro-caps, however, from 71 percent to 80 percent. Overall, 35 out of 471 companies failed to obtain majority support in their say-on-pay votes. The firms again said the 2014 results for particular companies followed 2013 results, with almost half of all companies whose pay plans fell short of 70 percent shareholder support in 2013 showing the same result in the 2014 mini-season.
2015. Looking ahead to 2015, the report predicted that proxy access will remain a hot issue, especially after SEC Chair Mary Jo White directed her staff to review Rule 14a-8(i)(9) following the controversy over proxy access at Whole Foods. Cybersecurity disclosures are likely to get increased scrutiny by shareholders in 2015, and the new “scorecard” approach to evaluating independent chair and equity plan shareholder proposals at ISS could impact voting. The adoption of fee-shifting bylaws at some companies will also garner attention in 2015, the firms predicted.