While still low overall, the percentage of companies in the S&P 500 and Russell 3000 failing their SOP has doubled so far in 2021. It remains to be seen if shareholder discontent with executive pay decisions related to COVID-19 will have an ongoing impact, or if a sustained return to normalcy will reduce concerns. However, the sharp increase in support for proposals focused on climate and environmental risks as well as diversity and inclusion are likely to continue. Semler Brossy’s most recent
proxy season report highlights the following vote results for SOP and ESG proposals:
SOP
- Average support for SOP proposals ticked back up to 90.8% in the Russell 3000 Index and 88.4% in the S&P 500. Previous reports showed the support at 89% for Russell 3000 companies and 87.1% for the S&P 500.
- 12 S&P 500 companies have failed to receive majority support for their SOP proposals through May 21, 2021.
- 12 S&P 500 companies failed their SOP vote in all of 2020.
- For the S&P 500, the rate of failure has increased from 2.4% in 2020 to 4.5% so far in 2021.
- For the Russell 3000, the rate of failure has increased from 2.2% in 2020 to 3.1% in 2021.
- ISS has recommended against almost 23% of S&P 500 SOP proposals in 2021, compared to just 11% in 2020.
- ISS is much more generous with Russell 3000 index companies. They have recommended against about 13.5% of proposals in 2021 versus about 10% in 2020.
ESG
- The average support for an environmental proposal has risen from 22% in 2020 to a whopping 59% in 2021.
- However, so far, the report has only captured 6 environmental proposals in 2021 as compared to 38 in 2020. Three of the 2021 proposals have received majority support.
- Social proposals continue to see increased results as well, up from 29% in 2020 to 33% in 2021.
- The report notes “significantly higher support (often above 70%) for proposals that request reporting on EEO-1 statistics, diversity and inclusion efforts, Board diversity, lobbying payments, and certain environmental-related topics.”
- An article published by Alliance Advisors provides some interesting data on BlackRock’s shift in voting – from July 1, 2020 to date, BlackRock has backed 91% of environmental proposals, 23% of social proposals and 26% of corporate-governance proposals. From July 1, 2019 through June 30, 2020, BlackRock backed only 6% of environmental proposals, 7% of social proposals and 17% of governance proposals.
The events of 2020 were bound to have lasting impacts into the 2021 proxy season, and it appears that institutional investors have matched voting policies to statements on climate change and social justice. The ISS vote recommendation rate disparity between S&P 500 companies and Russell 3000 companies bears ongoing monitoring, as it may indicate a stark difference between how various ISS analyst teams evaluate say-on-pay.
