2019 confirmed a pattern established over the last three years that has seen the number of E&S shareholder proposals voted on at US AGMs significantly exceed those on governance, reversing a longer-term trend. The proposal subjects remained unchanged from last year, with political spending (93) being the most frequent, followed by environmental (64), mainly related to climate, and human capital management (54). That being said, they did change rankings, with environmental falling from first to second as the number of climate change proposals that were put to a vote falling significantly this year. This resulted from both an uptick in adoption of proponents’ requests by companies leading to these proposals being withdrawn before the shareholder meeting, as well as the US Securities Exchange Commission (SEC) approving 45% of all omission requests by companies, the highest rate in the last five years.
Overall, the withdrawal rate on all shareholder proposals reached a record high for 2019, with nearly half that were filed not being on the final ballot. This is further evidence that companies are more willing to engage proponents and negotiate terms in order to avoid the embarrassment or inconvenience of having to hold a shareholder vote on the subject.
Alongside an increase in frequency, E&S proposals are receiving more support than ever, albeit still typically short of the majority supported needed to have them pass. For 2019 nearly half received significant support (defined as more than 30% votes in favour), which is an increase on the year before and a long way from the figures in 2010, when this was the case for only one in ten proposals.
This results from two main drivers. First, E&S issues are seen as more relevant to a broader range of the investor base, with the historical stigma on supporting such proposals largely gone. Second, and linked to this, proponents are getting better at drafting proposals that are not overly prescriptive but focus on issues that are material to company performance.