In the past calendar year we saw an increase in midterm voter turnout—a 50-year record high—and though we did not quite see that big of a jump in shareholder votes, there were certainly some shareholder activism trends and developments to take note of, including the substantial increase in the number of exempt solicitation filings made by institutional and retail investors alike.
In fact, these filings for 2018 were up 43 percent compared to 2016. We also saw an increase in the visibility of “vote no” or “withhold” campaigns. Upon review, while the voting numbers remained stable, the number of topics shareholders deem important has grown. What this seems to mean is though shareholder voting has not reached that level of voter turnout we saw in the midterms—perhaps because shareholders have not been faced with such an incident to spur that turnout—shareholders are continuing to use their votes in a meaningful, powerful way, and it appears we are only just beginning to see the effects this will inevitably have on proxy advisory firms and the SEC. This is exemplified by statements from SEC Chair Jay Clayton and the fact that the SEC held a roundtable in November 2018 about proxy process, focusing on the role of proxy advisory firms, the importance of which was underscored by the introduction of the Corporate Governance Fairness Act (an act that was implemented and designed in order to “help ensure that investors may confidently rely on the advice of proxy advisory firms by requiring all the [SEC] to regulate all major proxy advisory firms under the Investment Advisers Act . . .”). The SEC’s roundtable also covered proxy voting mechanics and technology and shareholder proposals. The Proxy Roundtable Transcript can be accessed here.
To prepare for the 2019 proxy season, companies should review the new rules and trends and take inventory of their base, policies, and procedures. Preparing for this season is still as much about hedging risk as it is about strategically planning for the future. However, as we move into 2019, it will likely prove useful to reassess (and to benchmark) proxy disclosures in the key areas of interest to shareholders and promote engagement with company shareholders. Remember, what companies do on their off season is as important as what they do during their proxy season.
Courtesy of Dinsmore
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