Proxy Season ’12: Some Observations and Trends – Part 3

Posted on Aug 2, 2012 in Governance and Compliance, IR Therefore I Am | 0 comments

By Gene Marbach, SVP, Makovsky+Co.

Part One Here

Part Two Here

Keith Gottfried

We conclude our series on the recently-concluded Proxy Season ’12  with a review of recent trends in “say on pay” and corporate governance proposals taken from a presentation delivered by my good friend, Keith Gottfried, Partner at the law firm of Alston + Bird (www.alston.com). 

In his presentation, entitled, “2012 Proxy Season Recap:  Activism, Private Ordering, and More…,” which references some very interesting data from both ISS and Factset SharkRepellent, Keith notes:

  • That there were 49 say on pay failures so far in 2012 compared to 44 failures in all of 2011.  Five companies failed two years in row (Cooper Industries, Hercules Offshore, Kilroy Realty, Nabors Industries, Tutor Perini)
  • That there were more large companies with failed say on pay votes in 2012 than in the previous year
  • Companies that recovered from failed 2011 say on pay votes and had their 2012 say on pay proposals approved included HP, Beazer Homes USA and Jacobs Engineering
  • Of those companies that held a say on frequency vote in 2012:
    • 75% recommended an annual say on pay vote compared to  the 55% in 2011
    • 23% recommended a triennial say on pay vote compared to 40% in 2011
  • ISS recommendations with respect to say on pay proposals were approximately 86% “FOR” and 14% “AGAINST.”  While ISS recommended against companies only 14% of the time, ISS recommended “AGAINST” each of the 49 companies to fail their say on pay vote.  This means that a negative recommendation from ISS correlates with a 20% failure rate

In terms of corporate governance proposals during the past season, Keith notes:

  • Declassification of board proposals were by far the most prevalent general governance proposal with 83 proposals submitted
  • Right to call a special meeting was another popular corporate governance proposal with 39 proposals submitted
  • Declassification of the board proposals also led the pack in getting passed, 40 (89%) proposals passed
  • More than 2/3 of S&P 500 already have declassified boards, 89% approval rate was for all Russell 3000 companies, indicating a broadening of the proposal to a wider group of companies
  • Chairman independence proposals have increased significantly in 2012.  According to ISS, 50 such proposals in the Russell 3000 in 2012, compared to 28 in all of 2011
    • Companies receiving such proposals include Wells Fargo, General Electric, PepsiCo
  • Chairman independence proposals remain steady in their low passage rate from last year:
    • In 2011 the passage rate was 10% (only 3)
    • In 2012 the passage rate has been 8% as of June 19th)

For those interested, Keith, with expertise in shareholder activism, mergers and acquisitions, corporate governance, SEC reporting, among other areas, can be contacted via email at   Keith.Gottfried@alston.com or by phone at 202.239.3679.