Troubling News For Corporate Governance Professionals from Broadridge’s 2023 Review

• Expectations of directors are increasing. Fewer directors stood for election this past season (23,829) than in 2022 season, but more failed to attain majority support (654) than at any time in the last 5 years.
• Support has declined for Say-on-Pay. 131 say-on-pay proposals failed to receive majority support (out of 2,720 proposals). Average support for say-on-pay proposals this past season was 86%, the lowest in 5 years.
• The climate has cooled on ESG. Support for environmental and social proposals decreased to 25%, on average, from 30% the prior season, the lowest in 5 years. This was due largely to a decline in institutional support and persistently low levels of retail support generally.

But The Most Troubling News Of All, We Say – And The Root Cause Behind The Scary Numbers – Is The Precipitous Decline In Retail Investor Voting, Where Retail Investor “Engagement” on Shareholder Proposals (normally pro-management) dropped to a Mere 17.6 Percent Of The Total Retail Vote – A Five-Year Low

What, exactly, is behind this drop, we need to ask:

• First, we’d say, is “retail investor fatigue” with the large number of proposals on so many ballots this year, where we saw the ‘automatic renewal’ of choices for Say On Pay frequency on about 85% of the proxies we looked at – where it really is time for every company to permanently adopt the one-year-Say. This was coupled with the huge host of new and often totally confusing Anti-ESG proposals – and with a number of new and often confusing proposals from the “usual suspects” as well – where many proponents – and many companies too - are simply protesting too much for too little of value to ordinary mortals. “Investor fatigue” in spades - for sure.
• Second, as we’d note here for probably the 20th time – those mindless slogans on proxy envelopes and scattered randomly throughout the other AGM materials, urging us to VOTE NOW…LET YOUR VOICE (??) BE HEARD…LET YOUR VOTE COUNT…are simply not resonating at all with ordinary mortals. In fact, we think they are creating even MORE “voter fatigue” - with more and more of the same-ole-same-ole.
• Third, as we have also said 20+ times, is the lack of time that everyone in the world seems to have available to do anything these days.
• Fourth, and most important to note – and the conclusion is inescapable – the importance of voting one’s proxy is simply failing to register with ordinary mortals these days.

What Should A Smart Corporate Citizen Be Doing About the Decline in Retail Investor Voting?

From the earliest beginnings of the digital era – when “old-time, paper-loving investors” were voting their paper proxies about 73% of the time – both issuers, and the SEC, seemed to recognize that better investor education was becoming essential. But let’s face it – to date, mindless – and useless sloganeering has been the extent of it.

In 2007 we first offered up our educational booklet “Shareholder Votes Have Value” – which tried to explain, as simply as we could, why and how they do have value, how to make up one’s mind on the issues (or to simply abstain if one could not – or simply did not care about one or more of them) and how to vote quickly and in time for the meeting.

“Too long!” – “Too complicated” our test audiences said. While we continued to edit, and to shorten and simplify as best we could, we came to the conclusion that yes, this is a complex subject – but that investors really do need to understand it – and will indeed be better off for doing so – and that issuers absolutely do need to offer up the kind of education that’s so sorely needed.

PLEASE, we urge you – take a few minutes to review the sample letter to shareholders and the text of our educational booklet with a view toward (1) enclosing it with your 2024 proxy materials – and (2) in your “NOTICE” where you don’t plan to mail printed packages (and where we feel sure the SEC will allow enclosing it) – and (3) posting a permanent link to the text on your company’s Investor Page, with frequent prompts to investors to take a look.

We would also urge you to consider promising a donation to charity for every account that casts a vote. Quite aside from the fact that it PROVES to investors that “Shareholder Votes HAVE Value” – we know of three companies that increased their quorum by six percentage points or more – of overwhelmingly company-friendly votes. Think what that can do for your own company’s final numbers.

On our part, we are willing to reduce our own modest copyright fee by one-half – to the first three companies to take up our offer – and to donate one-third of THAT to our own two favorite charities. Please reach out to Carl Hagberg (cthagberg@aol.com – 732-778-5971) or Peder Hagberg (phagberg@cthagbergllc.com – 917-848-6772)