Q1'24 Inside The Buy-Side® Earnings Primer®

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On the Ballot: Preliminary Shareholder Proposal Trends

We have officially entered proxy season, and The Big So What™ today covers preliminary insights from shareholder proposals.

To gain a deeper understanding of the most up to date 2023 proxy season trends, we analyzed the DEF 14A filings of U.S. companies greater than $1B in market cap across all sectors.

Out of the 476 proxy statements filed to date, 171 shareholder proposals have been submitted for vote by proxy across 76 companies, representing 16% of the companies analyzed, in line with our findings at this time last year.

While early in the season, Governance shareholder proposals are leading the way, followed by Social, a reversal relative to 2022. Compensation, DEI, GHG emission targets, and lobbying disclosures are some of the most frequent proposals to date.

Our analysis of 171 shareholder resolutions to date reveals:

  • 36% (+12pts YoY) have proposed Governance resolutions
  • 28% (-1pt) have proposed Social resolutions
  • 15% (+5pts) have proposed Environmental resolutions
  • 15% (+4pts) have proposed Political Disclosure resolutions
  • 6% (-17pts) have proposed Special Meeting resolutions

Healthcare, Industrials, Materials, and Consumer Discretionary companies are seeing a large number of Governance proposals, Financials are receiving more Environmental-related resolutions than any other proposal type (specifically, resolutions which take aim at the practice of underwriting emissions-intensive companies), and Consumer Staples and Tech investors are focused on Social resolutions.

The vast majority of proposals, 90%, have been submitted to large- and mega-cap companies, rising from 86% in 2022. That said, while most shareholder proposals at this time last year were submitted to large caps, thus far in 2023, most resolutions have been weighted toward mega caps.

In summary, three things to keep in mind as we navigate this year’s proxy season:

  1. Fewer withdrawn shareholder proposals on E&S matters suggests more polarizing resolutions are being brought to proxy: When responding to proposals in public filings and in conversations with investors, be measured in your communications and not defensive; connect back to the efforts currently in place as a part of the firm’s holistic ESG strategy and refocus the narrative on all the Company is doing for key stakeholders
  2. With more governance resolutions entering the fray, ensure compensation terms are clearly articulated and understood by the investment community, particularly in the context of new pay vs. performance disclosure rules targeting executive pay
  3. Stave off activism with proactive strategies and meaningful engagement with shareholders; pay particular attention to feedback received from key stakeholders in the past, and prioritize the issues brought up by investors and the ratings agencies to determine the ones that you can address or others that you can table for future consideration. Perception Studies are a best practice.

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All Rights Reserved.
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