Shareholder Proposals Jumped During Proxy Season

The 2022 proxy season saw increased shareholder proposals and lower support for Say on Pay and directors.

The number of shareholder proposals continued to rise, reaching a new record, according to a report from professional services firm PwC. A total of 555 proposals went to a vote this year, 25% more than in 2021. The number of proposals filed grew by 17%, while the number of “no-action” requests approved by the U.S. Securities and Exchange Commission (SEC) dropped by 40%. A no-action request is filed when a company seeks to exclude a shareholder proposal from its proxy statement.

Environmental, social and governance (ESG) proposals received a record number of majority votes, but support varied considerably depending on the details of the proposal. The most common environmental and social topics proposed were diversity and human capital. Climate proposals nearly doubled on a year-over-year basis.

chart: Record numbers of companies failed to receive majority support for say on pay

Say on Pay is a law that requires companies subject to the federal proxy rules to provide shareholders with a vote on executive compensation. Say-on-Pay votes failed to receive majority support for a record number of companies this year. In the S&P 500 index, 21 companies failed their Say-on-Pay vote, while 71 companies in the Russell 3000 index failed. The PwC report concludes, “The results this year indicate that investors are growing more comfortable casting no votes” on common issues such as pay and performance alignment, one-time awards, uncommon pay structures and unchallenging performance targets. Furthermore, the report speculates that a trend to link ESG goals to pay metrics may be the cause of some no votes on Say to Pay.

The majority of directors still receive strong support (greater than 95%). However, over the past five years, the percentage of directors receiving 50% to 95% support has increased from 22% to 30%. The drop-off in director support could be tied to a multitude of factors, with the most common being a lack of diversity.

Source: “Boardroom recap: The 2022 proxy season,” by Maria Castañón Moats, Paul DeNicola and Matt DiGuiseppe; PwC, 2022.