Shareholder Year in Review

Institutional Shareholder Services tracks the trends and changes for the 2007 proxy season in report.

By Danielle Lee

Institutional Shareholder Services (ISS) discovered a focus on accountability, engagement, proposals for takeover defenses and social issues in their report on the 2007 U.S. proxy season. Overall, ISS found that individual investors had a good season in terms of attracting investor support.

Specific shareholder proposals targeting takeover defenses made headway, such as the “poison pills” proposal that won 73.4 percent at Hewlett-Packard and the proposal at Walt Disney for a 75 percent independent director vote to adopt or amend a pill plan, which was later adopted by the company after modification and 58 percent support. Conversely, ISS found that pill-related proposals received 47.8 percent support across eight meetings where results are known, a drop from 55.6 percent support last year.

Investors did show great support for proposals asking companies to abolish classified boards and hold annual elections for all directors and proposals asking companies to eliminate supermajority requirements to approve bylaw changes.

Proposals seeking majority threshold voting earned 49.3 percent support at 29 meetings, though the number of majority vote resolution withdrawals was also high, with more than 70 proposals withdrawn by proponents after discussion with the companies, up from 35 withdrawals last year.

Shareholder proposals to end dual-class structures also earned significant support, though advocates of separating the role of chairman and CEO fared less well, dropping 4.8 percent from last year (at the 23 meetings with known results).

This year’s increased support for proposals asking companies to report on sustainability efforts also marks a shift in corporate concern for environmental issues. These reports averaged 24.4 percent support at the 13 meetings with known results, while the number has historically been below 15 percent, according to ISS.

The largest number of social proposals requested company disclosure of political contributions, while proposals asking companies to implement anti-discrimination policies on the basis of sexual orientation and reduce or report on greenhouse gas emissions received 35.7 and 23.2 percent support, respectively.

In the realm of accountability, strong support was given to proposals seeking annual investor votes on executive pay and majority voting in director elections, according to ISS. “Say on pay” proposals made the most ground, with proposals averaging 42.4 percent at 29 meetings as of June 30.

Pay-for-performance proposals averaged 35.1 percent support over 22 meetings where results are known, decreasing slightly from last year's average of 36.1 percent.

Proposals asking for disclosure or a vote on Supplemental Executive Retirement Plans received an average of 33.8 percent in the 12 meetings calculated, while proposals asking for a vote on “golden parachute” packages for outgoing executives received 55.9 percent at seven meetings, according to ISS, up from 50 percent support at 11 firms last year.