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Proxy Voting

ISS Releases 2018-2019 Policy Survey Results

Institutional Shareholder Services received 669 responses (from 638 different organizations, predominantly North American) to their annual Governance Principles Survey – which seeks input to guide future policy on both high-level topical corporate governance areas and more granular international policy applications from investors, issuers, boards and other relevant parties.

Among the key-findings this year from the high-level governance aspect:

Auditors and Audit Committees:  When evaluating the auditor, investor and non-investor respondents agreed that past regulatory fines stemming from weak practices or accounting errors, and the independence of the audit partner with company management are top of list.

Director Accountability and Track Records: Investors and non-investors agreed the premier director oversight issue was risk oversight – more specifically fraud and other types of corporate malfeasance.

Gender Diversity on Boards: Investors and non-investors concurred that the absence of women on the board could be symptomatic of poor recruiting practices and could potentially lead to increased management or board engagement, support for shareholder resolutions to increasing diversity and opposition to chair of the Nom. & Gov. committee.

In a recent Rivel study, North American and, especially, European investors drove home the point that exhibiting sufficient board diversity aids board effectiveness and helps shape strategic flexibility – especially at companies with a diverse range of global stakeholders and markets.

One-Share, One-Vote Principle: Investors overwhelmingly reacted positively (92% – Yes) when ISS proposed a hypothetical adjusted vote result at uneven voting dual class companies – leveling the votes as if they were all one vote per share. A major consideration for the use of this analysis is the sunset provision. When asked about the appropriate sunset horizon on the voting right provision, 41% of investors answered “It depends”, 25% responded one to three years and 21% responded four to six years.

Institutional Holders at Tesla like Musk in the Driver’s Seat

Tesla’s CEO and Chair, Elon Musk, has been in the hot seat after a thread of eyebrow raising actions, tweets and abrupt company resignations in recent months. With investor N-PX filings aggregating, TSLA’s three largest institutional holders, wielding 21.3% of the votes (on top of Musk’s 19.8%, reported on June 30th) voted against the proposal calling for the board’s Chair to be SEC “independent.” The shareholder resolution garnered 16% support from investors—well below the 31% average of like proposals submitted at Russell 3000 companies this past proxy season. Notably, this was the only one of its kind this year to be voted on at a company where an insider (also the CEO/Chair) held between 20% and 50% of voting share control.

General research regarding the Independent Chair shareholder proposal can currently be accessed by all clients on the Governance gateway. For more information or to receive a copy of this report, contact Managing Director, Dave M. Bobker at

Vanguard Publishes 2018 Investment Stewardship Annual Report

Highlighting their active engagement with 721 companies during the past proxy season (down from the 954 engagements in the prior year), Vanguard’s primary focus was placed on companies’ boards composition – specifically director independence, diversity of skills and tenure (discussed in half of conversations with companies). The alignment of executives’ pay with performance and the magnitude of total compensation received a similar amount of consideration. Aside from these two, other emerging topics included  the annual elections for directors (discussed in approximately one-quarter of meetings) and conversations regarding risk oversight and strategy.

Vanguard has identified the significance of certain Environmental and Social matters and how they affect a companies’ long-term financial value. Citing the need for greater transparency, disclosure and dual management and board oversight surrounding these topics, Vanguard increasingly engaged with carbon intensive companies.

The passive investor acknowledges the rise in activism in recent years – and importantly, that certain activists can raise legitimate concerns about a company which can usher in necessary changes. While historically cautious to support an activist, Vanguard has shown a willingness to listen, having supported them in five out of 13 US proxy contests last year.

The full report can be found on Rivel’s Gateway in the Governance Library Reading Room.

ISS Annual Policy Survey

Last week, Institutional Shareholder Services Inc. (ISS) announced the launch of its Annual Policy Survey. The survey aims to solicit responses from investors, companies, corporate directors and other constituents to help shape the proxy voting guidelines for the year ahead. The survey consists of two parts: the “high-level ISS Governance Principles Survey,” and the “ISS Policy Application Survey.” The ISS Governance Principles Survey looks to cover a number of global high-profile governance topics, including board accountability, gender diversity and auditors. ISS also plans on examining the “one-share, one-vote” principle.

The second part of the survey will be a more detailed set of questions, broken down by region. By focusing on questions linked to specific geographic regions, ISS hopes to gain a greater understanding of voting issues on a granular level. After collecting data from these surveys, ISS will consider changes to its voting policies for the 2019 proxy season.

The high-level ISS Governance Principles Survey closes on August 24th, and the ISS Policy Application Survey will remain open until September 21st.

Season’s Meetings: Proxy Season Highlights

Management Proposals

Support for management proposals remained unchanged from last year, standing at 94.7 percent. While the overall balance seemed to stay the same, a few interesting trends emerged during the past proxy season. Executive pay, which is a hot topic on an annual basis, saw opposition rates hit a new high this proxy season. 67 US Say-on-Pay votes failed to receive a majority vote from shareholders. This number is drastically higher than last year’s final figure, which saw 38 votes fail to reach majority. While 67 proposals failed to receive a majority vote, another 141 proposals only received between 51-69% support, and 631 proposals received less than 90% support from shareholders.

Auditor ratification proposals were highlighted by a few high-profile instances this season as well, which is uncommon. These proposals have received no less than 99.7 percent support on average in each of the last three years, yet General Electric and Wells Fargo faced backlash for their proposals. General Electric’s reappointment of KPMG faced a rebellion from shareholders, receiving 35.1 percent opposition after ISS and Glass Lewis both issued their recommendations to oppose the ratification of KPMG. Glass Lewis made a similar recommendation for Wells Fargo’s proposal, but the proposal still received 91 percent support.

Shareholder Proposals

Support for shareholder proposals saw an increase to 32.9 percent, almost up a full percentage point from last year (32 percent).

Although many had high hopes for ESG issues this season, support fell after a successful 2017 campaign. Average support for two degree proposals fell from 45.4 percent to 35.7 percent. The number of resolutions also dropped from 17 to 8.

Shareholder rights seemed to be a key focus point, however. Proposals to amend the right to call a special meeting were the most popular type of shareholder resolution. 61 of these resolutions were submitted this year, up from the 20 that were introduced last year.