Despite the fair share of drama offered by the 2021 proxy season, Say on Pay vote results did not, in the end, show dramatic shifts in shareholder views on compensation. However, we did see significant increases in support for shareholder proposals related to climate change and diversity disclosures. The finding were published by Georgeson in its
2021 proxy season review (covering Russell 3000 company meetings from July 1, 2020 through June 2, 2021).
Say-on-Pay:
- Overall average levels of say-on-pay support were in line with previous years. Median support for 2020 was 95.5% and 95.3% for 2021.
- Failed say-on-pay votes increased from 41 in 2020 to 53 in 2021, but the number of companies in the 50-80% level declined from 206 to 193.
- These results indicate that views on compensation are becoming more uniform as well as increased pressure on some of the largest institutional investors to oppose more say-on-pay proposals.
Shareholder Proposals:
- There was a sharp increase in shareholder proposals – 861 in 2021 versus 789 in 2020.
- There was a similar increase in withdrawn proposals following agreements between proponents and companies – 268 in 2021 versus 140 in 2020.
- Companies may have been more willing to settle in response to BlackRock, State Street, and Vanguard becoming increasingly vocal about climate and diversity.
- In 2021, 66 shareholder proposals received majority support.
- This included 12 environment proposals, 18 social proposals, and 36 governance proposals. In 2020, the numbers were 6, 14, and 36, respectively.
- More than a third of environmental proposals passed (36%), as did nearly a fifth of social proposals (18%).
- Average support for environmental proposals increased from 31% to 39%. For social proposals, average support increased from 31% to 35%.
- Diversity was a major component of the social proposals. There were 3 successful proposals on board diversity, 4 on enhanced disclosures for DEI efforts, and 2 on disclosing the EEO-1 data.
- The total number of proposals on workforce diversity increased from 21 in 2020 to 91 in 2021.
- 65 were withdrawn (presumably due to an agreement).
The report did not touch on proposals to link ESG metrics to compensation. For the period covered by the report, ISS data indicates there were 6 such proposals with the highest support level at approximately 16% (compared to less than 10%). Going forward, activist shareholders may increasingly submit such proposals as more companies publish previously requested reports on diversity or greenhouse gas emissions. Potential SEC rules requiring specific HCM and ESG data disclosures could also fuel proposals to link pay to ESG metrics.
