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2023 Shareholder Proposal Update

2022 was a banner year for shareholder proposals, with 562 proposals going to a vote (25% increase over the prior year), almost half of which involved social issues. Proposals on racial equity and civil rights audits, pay equity and sexual harassment all received majority support for the first time, while proposals on EEO-1 disclosure decreased dramatically due to the extreme success of prior year campaigns on that front. Overall, about 86 ESG proposals passed – one of the highest records in recent years. 

In 2023, we can expect even more challenges, according to a recent Conference Board piece. Below are some key insights for the year:

  • Increase in Volume. The overall level of proposals is expected to continue to rise, both because of 2022’s success and because of the SEC’s recent rule that made it harder to exclude proposals from the proxy.

  • War on ESG. The unfortunately continuing battle over ESG is now being fought on the shareholder proposal field, with an expected increase in “anti-woke” proposals that may directly contradict ESG proposals from different shareholders.

  • Quality Matters. The lower average support rates for shareholder proposals last year were likely due to the far greater number of proposals submitted rather than declining interest in the topics. Major investors like BlackRock and Vanguard still support ESG but have stated they will vote against overly prescriptive or poor-quality proposals. Activists have learned from this and will adjust accordingly.

Meanwhile, a number of activists have issued statements on the number of proposals they filed or intend to file this year. “Gadfly” investor James McRitchie has filed pay equity proposals at 9 large companies so far asking for raw or unadjusted median pay gaps across race and gender globally and/or by country as appropriate. Rhia Ventures has filed over 30 proposals on reproductive health care, while the NYC Comptroller has been busy filing proposals on workers’ rights, including demanding companies initiate a third-party assessment of their “commitment to workers’ freedom of association and collective bargaining rights.” 

Finally, a recent UN PRI (Principles for Responsible Investment) piece aimed at investors is instructive: the article includes the results of a study into whether companies with majority-supported proposals have actually implemented those proposals, and found that more than a quarter have no evidence to show that they will ever be implemented. The piece offers advice to investors to curb this, including how to define issuer inaction, hold directors accountable for failing to act, and engage with proxy advisors to put pressure on boards.

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Authors: Ani Huang

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