New York, NY, 13 October 2021—A new publication from the Deloitte Global Boardroom Programme analyses differences across published voting guidelines of 17 global institutional investors, and compares these with actual voting patterns across markets in the Americas, Europe, and Asia. The report, Deeper Engagement: Investor Behavior in the 2021 Proxy Season, highlights four takeaways from the voting season just concluded, including evidence of more shareholder votes against incumbent directors compared to previous years, more support of environmentally-focussed proposals brought by shareholders, more social proposals linked to leadership and workforce diversity, and modest increases in votes against executive pay (“say-on-pay”) proposals.
“Stakeholders, including investors, are becoming increasingly vocal about their expectations for organisations when it comes to climate risks, diversity and inclusion, and other social concerns,” says Sharon Thorne, Deloitte Global Board Chair. “Tackling these concerns requires long-term thinking, greater trust in the institutions that can lead large-scale change, and unprecedented global collaboration. Boards are naturally positioned to help lead these efforts and will be increasingly called upon to do so.”
Shareholder proposals focussing on the environment, particularly those addressing climate change, reached a record number this year. In the US, shareholders submitted 115 proposals related to the environment in 2021, of which 89 (74%) related to climate. This is a significant increase from 2020, when shareholders submitted only 89 environment-related proposals.
Investor concerns extend beyond those related to climate. “Our research indicates a deepening of investor engagement with companies spanning environmental, societal, and financial performance concerns – concerns that can sometimes lead to opposition at shareholder meetings,” said Dan Konigsburg, senior managing director of the Deloitte Global Boardroom Programme and member of the Board of Governors of the International Corporate Governance Network (ICGN). “For example, when it comes to investor expectations for gender diversity on boards, 47% of investor guidelines we reviewed express a specific view on board composition and indicate a target number.”
Additional findings from the report
The number of shareholder proposals about diversity, equity, and inclusion (DEI) increased in the US this year, but social proposals like these are not purely an American phenomenon. While most resolutions were filed at US companies, shareholders filed five resolutions in Canada and one in Korea.
The report reveals an overarching trend from this proxy season that shareholders seem marginally more willing to register a vote against incumbent directors. In the US, directors in the Russell 3000 Index are receiving less than 80% support in higher numbers than in previous years. Outside the US, voting results in India show high rates of contested director elections. In Europe, France and Switzerland experienced an unusually high level of votes against incumbent directors, with an average increase of “against” votes across both countries at 37%.
Annual votes on remuneration policies (the “Say-on-Pay” vote) give voice to shareholders on executive pay and related policies and have resulted in more remuneration reports and policies contested in Europe in 2021 compared to 2020. However, this does not necessarily mean that remuneration reports were rejected outright.
One of the report’s findings is a modest increase, across more than one country, in shareholder votes against the re-election of directors. “Just why we are seeing these increases in votes against incumbent directors is a matter of debate,” said Konigsburg.
“Investor voting policies suggest a number of reasons. Investors may wish to send a signal of concern about board composition, a lack of diversity on the board, or a lack of knowledge or time constraints from serving on large numbers of other boards. Equally, there may be perceived weaknesses in executive compensation decisions; or there may be concerns about climate-related action or inaction.”
Find the full report here.