Proxypulse Reveals Shareholder Voting Trends

Trends To Watch

By Charles V. Callan and Michelle Jackson

Increased disclosure requirements and greater outreach efforts make it more important than ever for executives, boards of directors, corporate secretaries, IROs and other governance professionals to understand the makeup and behavior of their entire shareholder base, as well as trends related to proxy voting and overall corporate governance.

Early in 2013, a collaboration between Broadridge and PwC’s Center for Board Governance was announced that would combine Broadridges’s voting data with PwC’s insights on governance. The result is ProxyPulseTM, a series of reports that provide governance professionals and boards information to benchmark their own company’s results to companies of a similar size.

The fi ProxyPulse analyzed the 549 shareholder meetings held from Jan. 1 to April 23, 2013. While ownership and voting rates remained consistent throughout the season, the early look showed that on average, institutions own approximately 67 percent of public company shares and retail shareholders own 33 percent of the shares. With respect to voting, the report showed that 70 percent of the street name shares were voted: of this number, 60 percentage points were voted by institutions and 10 percentage points were voted by retail shareholders.

The second ProxyPulse, published midway through proxy season, provided a cumulative analysis of shareholder meetings from Jan. 1 to May 23, 2013, totaling 55 percent of the expected meetings for the full season. One fi focused on say-on pay voting results. Support for executive compensation plans was strong—more than two-thirds of the plans received support from at least 90 percent of the shares voted. The report noted that approximately 10 percent of company plans failed to surpass the 70 percent support threshold which is closely looked at by proxy advisory fi

The third ProxyPulse wraps up the 2013 proxy season. It provides a cumulative analysis of more than 4,000 shareholder meetings from Jan. 1 to June 29, 2013. The report compares the 2013 season to the 2012 proxy season, and provides key season-over- season trends, including among others:

• Directors continued to be elected with substantial shareholder support
• Consistent with 2012, 94 percent of directors received at least 70 percent of benefishares voted in their favor
• There was a slight increase in directors receiving at least 90 percent or greater support—81 percent in 2013 versus 79 percent in 2012
• About 2 percent (380) directors failed to receive majority shareholder support in 2013, compared to 428 in 2012

While there were 13 percent more say-on pay proposals in 2013 than in 2012, the percentage of companies with favorable say-on pay votes greater than 70 percent remained the same at 88 percent. Only 104 proposals failed to achieve majority favorable vote.

Given the importance of engaging all shareholders in the governance process, ProxyPulse offers questions executives, boards and governance professionals should consider. It also suggests a number of practical ways to better engage with shareholders in order to encourage them to vote.

Some key questions to consider in preparation for the next annual meeting and proxy vote include:

• What is the institutional and retail mix of our company’s share ownership?
• Do we fully understand the impact of retail voting at our company?
• How does our company’s size and mix of institutional and retail ownership impact the voting participation of our shareholders?
• Does the company have a communication program that allows for adequate engagement with all shareholders?
• How does our company’s shareholder support compare to that of our peers?
• Does the company anticipate a close shareholder vote on a sensitive issue?
• Will additional outreach to retail shareholders make a difference on a close or sensitive voting issue?
• Do we understand the concerns of shareholders who may decide to vote against one or more of our directors, and/ or pay plan, and what have we done to engage them?
• Have we done sufficient cost/benefit analysis of our distribution method(s) for proxy materials and their effect on voting participation?
• Have we had sufficient discussions around potential changes to how the company distributes proxy material?

For more information, visit www.proxypulse.com

Charles V. Callan is senior vice president of regulatory affairs and policy research at Broadridge Financial Solutions.

Michelle Jackson is vice president, business development and strategy at Broadridge Financial Solutions.