The proxy season opens with the biggest number of shareholder proposals corporations confront coming from a group of investors representing $428.1 billion in combined assets and led by a Harvard University initiative, filing 74 resolutions calling for annual elections for directors.
On other issues, Walt Disney Co. and Verizon Communications Inc. have been fighting shareholders to keep proposals out of their proxy statements, while Hewlett-Packard Co. and Chesapeake Energy Corp. are cutting a new path to quell shareholder conflict over proxy access.
Despite the upcoming clashes, corporate governance has reached a new harmony. Corporations this year face a likelihood of far fewer shareholder proposals and higher shareholder support for directors and executive compensation, according to experts.
Corporations increasingly have reached out to shareholders to initiate discussions on executive pay and other key issues to reach agreement on reforms.
There âis more engagement between institutional investors and companies over pay issues, bringing directors into that discussion â" members of the executive compensation committee, in a very significant way,â said Patrick McGurn, special counsel, Institutional Shareholder Services Inc., Rockville, Md., a corporate governance and proxy-voting advisory firm. âBoards are being very responsive to shareholders concerns on say on pay,â he said of what has been one of the most contentious issues.
âCompanies are much more likely today than they were a few years ago to pick up the phone and reach out to institutional investors to listen to their concerns about executive compensation,â he said.
Cornish F. Hitchcock, attorney with Hitchcock Law Firm PLLC, Washington, who is working with pension funds and other institutional investors on proposals, said, âI think companies realize they need to do more outreach ... I think there is more engagement of shareholders.â
Michael P. McCauley, senior officer, investment programs and governance of the $160.9 billion Florida State Board of Administration, Tallahassee, sees a relationship between market performance and shareholder indignation.
âThere is a high correlation of what the market does and I think the investor appetite for evaluating pay-for-performance relationships,â Mr. McCauley said. âIf you have a really strong market, I think that would damp down the antagonism toward some of these say-on-pay (ratifications). But if it were to stay flat or decline, a lot more attention would be paid to it.â
So far for this year, shareholders have filed 450 proposals, well off the pace of last year, according to ISS data.
While shareholder proposals could grow substantially, âit looks unlikelyâ to surpass last year's level, Mr. McGurn said. Overall, there are ânot a lot of new issues coming up in 2013,â he said.
Proposals filed so far
Among key issues, according to ISS data, shareholder proposals filed so far for this proxy season include:
76 calling for annual election of directors;
40 on executive compensation;
39 calling for disclosure of corporate political spending;
28 calling for an independent chair of the board of directors; and
three calling for proxy access.
In addition, shareholders filed 221 proposals on social issues, excluding resolutions filed on political spending, according to ISS data.
âRight now, the biggest shareholder proposal campaign we are looking at by farâ this year is the one led by Lucian Arye Bebchuk, professor of law, economics and finance at Harvard Law School, Cambridge, Mass., said Mr. McGurn.
Mr. Bebchuk leads the campaign as part of the Shareholder Rights Project he directs.
Under the project, seven major pension funds and a foundation are targeting 74 S&P 500 and other U.S. large-cap companies to end classified boards and move to annual elections of all their corporate directors.
The investors are the Florida SBA; Illinois State Board of Investment; Los Angeles County Employees' Retirement Association; Massachusetts Pension Reserves Investment Management Board; North Carolina Department of State Treasurer, which oversees the North Carolina Retirement Systems; Ohio Public Employees Retirement System; Ohio School Employees Retirement System; and Nathan Cummings Foundation.
Each fund worked with the Shareholder Rights Project independently of the others and targeted different companies, Mr. McCauley said.
Companies targeted include NCR Corp., Lincoln National Corp., Cigna Corp., United States Steel Corp., FMC Corp., Apache Corp., Ashland Inc. and Airgas Inc.
âWe expect that a substantial proportion of these proposals will result in negotiated outcomes involving a move to annual elections with the remainder going to a vote and commonly receiving majority support,â Mr. Bebchuk, who is also director of the Harvard Law School's Program on Corporate Governance, wrote in an e-mail.
âThe (Shareholder Rights Project
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