Fewer fireworks for this year’s proxy season


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The conference rooms are cleared out. The activists have gone home. And this year's proxy season -- the heyday period for corporate annual meetings -- has largely come to a close.

But while there were far fewer fireworks this year than last year -- which included boardroom battles at giants such as Hewlett-Packard and JPMorgan Chase -- a new preliminary report from proxy adviser Institutional Shareholder Services (ISS) still offers a few notable takeaways from this year's annual investor events to date.

For one, environmental and social issues are having a moment. For the first time, the report says, the number of shareholder proposals on environmental and social matters, such as calls for companies to disclose political contributions or improve their sustainability practices, is expected to surpass the number of resolutions on governance issues. That's in part because many of the changes on investors' traditional governance wish lists, such as directors being elected by a majority vote, have already been widely adopted by big companies.

There's also heightened interest in environmental and social issues from investors, says Sean Quinn, an executive director at ISS, as evidenced by increasingly higher votes in support of these proposals. "These issues appear to be part of the shareholder consciousness more than several years ago," he says.

Quinn says that this year's season also showed a higher amount of engagement and outreach between investors and boards. Direct communication and letter-writing campaigns between the two sides, the report states, "eclipsed shareholder proposals as the major catalyst for governance reform." Increasingly, Quinn says, investors are using these interactions to push boards to be more accountable and responsive -- such as when boards ignore a majority vote or adopt bylaws that might not be good for investors.

Finally, while high executive pay may have generated plenty of headlines this year -- investors closely watched votes on eye-opening pay packages at companies such as JPMorgan and Coca-Cola -- they also largely approved of corporations' executive compensation plans. In fact, they did so overwhelmingly: The report found that roughly three-quarters of "say-on-pay" proposals received more than 90 percent support.

Under the 2010 Dodd-Frank Act, companies must now offer shareholders the chance to weigh in on executive pay each year with a "say-on-pay" vote. But the vote is only advisory, so boards can ignore shareholders' votes if they choose. Most companies, however, make changes following votes that don't receive a majority, improving the performance metrics in their plans, eliminating deluxe perks, or dumping tax "gross-ups" that cover executives' tax bills. For instance, Abercrombie & Fitch failed its say-on-pay votes in 2012 and 2013, ISS reports, but made major changes to its plan that resulted in a 96 percent approval rate at this year's meeting.

But even when they make changes to their pay plans to appease investors, some companies still manage to repeatedly fail to get shareholders' approval. ISS's report named eight companies where executives' pay failed to win a majority of votes in both 2013 and 2014. Another company, Masimo Corp., didn't get a majority of votes in the past three years, according to ISS.

And despite efforts to engage shareholders and make changes to their plans, two companies have yet to see shareholders approve their executives' pay, failing to earn majority support for four years running. Oilfield services firm Nabors Industries, which gave its CEO a one-time $45 million payment to settle the termination of his prior employment agreement, saw just 40.3 percent of votes cast in favor of its plan in 2014. At general contractor Tutor Perini, just 44.5 percent of votes were supportive in 2014, a result due at least in part, according to ISS's report, to perquisites that include nearly $800,000 for the CEO's personal use of corporate aircraft.

A spokesman for Nabors said feedback from shareholders on the CEO's new contract has been positive. Meanwhile, a spokesman for Tutor Perini said the company has made "positive strides in addressing shareholders' concerns." The aircraft benefit, he said, has been part of the CEO's employment contract since 2008.

Read also:

Shareholders approve Jamie Dimon's 74 percent raise

Dismantling CEOs' golden parachutes

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Jena McGregor writes a daily column analyzing leadership in the news for the Washington Post’s On Leadership section.
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