For most U.S. public companies, the fall is a critical planning period. Management and directors must be keenly focused on preparing and organizing for the upcoming 2018 proxy season, which is done in part by examining the 2017 proxy season to understand the latest regulatory updates, governance developments and other key trends that will likely continue to make an impact. A few of those trends include:
Looking ahead to pay ratio disclosure
Beginning in 2018, proxy statements must contain a disclosure of the ratio between the CEO's compensation and that of the median employee at the company (with the CEO's pay removed from the median calculation). There remains a chance that this requirement will be repealed before the 2018 season, though that is unlikely. Some companies have begun to voluntarily disclose this information with many more preparing to do so already – and all U.S. public companies would be wise to prepare for the disclosure.
Environmental, social and governance (ESG) issues gain steam
2017 has been a watershed year for shareholder proposals related to environmental and sustainability issues. Additionally, institutional investors have signaled – and acted upon – a shift in voting behavior regarding these types of proposals, which is largely driven by a duty to investors to support initiatives that that lead to long-term growth and value creation.
Since 2014, the support for certain environmental and social proposals has increased dramatically:
- Climate change – up 63 percent
- Sustainability – up 20 percent
- Other environmental issues – up 29 percent
Proposals related to the gender pay gap and pay disparity are up 276% since 2014. Board diversity has also come into the spotlight, with 35 diversity-related proposals being put forth in 2017 and nine reaching the threshold for a vote. Institutional investors have stated the intention to support increased diversity on boards by voting.
Passive ownership continues to increase
In the last six years, the number of S&P 500 companies with a majority of passive owners has risen from 20 to 112. BlackRock, Vanguard and State Street, which are majority shareholders in 440 of the S&P 500, retain a large portion of those ownership positions.
To explore these trends in greater depth – and to learn about other trends including executive compensation, shareholder engagement, activism, regulatory reform and more – download our 60-minute on-demand webcast recording (link below) presented in partnership with Latham & Watkins. Experts from both firms also provide recommendations for proactive steps companies should consider taking during the fall planning period in order to prepare for the 2018 proxy season.
This is the first of three webcasts in our annual proxy season webcast series. Follow us on LinkedIn to be the first to hear about our upcoming proxy season webcasts.