Amplification, not apathy: Investor proxy votes increasingly challenge corporates in 2023

Shareholders are adapting how they engage with issuers, making requests more precise and increasingly turning to the media and using public statements to amplify their asks.

And management proposals and director elections – which were once all-but-guaranteed to gain near unanimous support – are increasingly being used as a channel for discontent.

At the same time, shareholder proposals are being filed across more jurisdictions, investors are requesting greater shareholder rights and reaching more agreements with companies ahead of AGMs, marking a positive step in engagement communications.

In the US, the backlash against considering environmental, social and governance (ESG) factors in investments has shaped how investors approach sustainability, impacting levels of support at the proxy ballot.

This proxy season, the PRI compiled over 800 ESG-related shareholder resolutions, management proposals and director votes on the Resolution Database. As of 30 June, 431 have had their vote results published, and 214 have been withdrawn.^[1] In this blog post, we highlight some of the main trends from these filings.

Beyond the low hanging fruit

The 2022 proxy season had one of the highest records for majority-supported ESG shareholder proposals in recent years, according to PwC, but 2023 saw this trend reverse. As of 31 May, only 15 resolutions have received majority support, compared to 50 at that time last year.

While there are several reasons for lower levels of shareholder support, this should not be mistaken for apathy. Rather, it is, in part, a sign of growing investor attention towards specific and more challenging asks.

Many shareholders also achieved success before the AGM date, through carefully negotiated withdrawal agreements. As Ceres argued in Reuters: “The sheer number of proposals calling for action on climate change that were withdrawn in return for corporate commitments is the quiet victory of the 2023 proxy season.”

Climate resolutions are evolving

Support for resolutions asking insurance providers to phase out their underwriting and/or lending to fossil fuel projects has declined, despite many companies consistently scoring poorly on these practices over the last three years.^[2]

More broadly, resolutions seeking disclosures have gained higher levels of backing, mirroring a broader trend this year. For example, resolutions seeking disclosures on climate transition plans received shareholder support of up to 42.8% and a vote at Coterra Energy seeking greater methane emissions disclosures gained 74.4% support.^[3]

The just transition is also featuring more on the proxy ballot. Seven resolutions were filed this year, compared to only two in 2022.

Akemi Yamasaki, Chief Consultant, ESG, Japan Shareholder Services, noted in a PRI report that “stewardship in Japan is in a transition stage…institutions have become more willing to use their voting powers” – a trend that has played out this proxy season.

Following two years of investor engagement with Toyota on climate lobbying, shareholders voted on the topic for the first time in Japan this year at the company’s AGM.

National Grid’s board chair and CEO have also been under scrutiny over the company’s failure to disclose its climate lobbing activities. Coming under investor pressure, and included as one of Climate Action 100+’s flagged votes^[4], the company publicly committed to regularly reviewing its lobbying, regaining investor support for the upcoming director elections as a result.

Meanwhile, J-Power made headlines last year as it navigated, and ultimately responded to, shareholder pressure to increase its 2023 emissions targets. This year, the same investor group voted against J-Power’s Executive Vice President, highlighting “[its] failure … to meaningfully respond to a material shareholder vote” and opposing its Blue Mission strategy.

Healthcare for workers

Many investors are advancing their approach to social issues, reflecting the link between human rights and overall performance for clients and beneficiaries, as well as their obligation to respect human rights more broadly.

In 2021, investors argued that paid sick leave (PSL) should be a standard employee benefit, targeting CVS Health Corporation. The resolution highlighted how companies providing PSL can benefit, through increased productivity and reduced staff turnover, for example. Although it was later withdrawn, it has been filed again in the two consecutive proxy seasons, gaining 26.2% support each time.

The number of resolutions seeking paid sick pay for employees increased from five in 2022 to nine in 2023, reflecting a broader year-on-year trend of increasing resolutions relating to decent work.

Basic public goods require tax fairness

Last year, the PRI published guidance on how to consider tax in voting practices. The topic also appeared on the proxy ballot for the first time – three resolutions gained 22.5% shareholder support on average. This year, six companies saw shareholders file resolutions on tax transparency, seeking disclosure in line with the Global Reporting Initiative’s Tax Standard.

Sustainability in responsible investment

The debate on the role of sustainability considerations in investment came to the proxy ballot last year, and in 2023, new anti-ESG filers emerged. Of the 62 resolutions filed so far, 17 focused on issues relating to diversity, equity and inclusion. Yet, as with other years, support remains low, with an average of 2.8%, according to our database analysis.

As emphasised by PRI CEO David Atkin: “ESG investing is inherently apolitical. It holds that investors are more likely to succeed when they consider all potentially economically relevant and useful information in their investment decisions.” The PRI will continue to support financial firms to incorporate and adopt responsible investment practices, including in their voting activities.

A focus on management

As we highlighted in Are corporate boards responding to successful shareholder ESG proposals?, holding directors to account for failing to act on majority-supported resolutions can be a powerful escalation strategy, particularly in jurisdictions where shareholder resolutions are non-binding.

Our analysis shows that investors are increasingly linking board director compensation to ESG performance targets and voting against directors that fail to respond to sustainability issues that shareholders raise.

Investors have a strong appetite for holding boards to account, and as they continue to update their voting policies – particularly in relation to opposing director re-elections – we expect to see more management opposition next year.

Just a snapshot - join our upcoming webinar to find out more

For a deeper dive into emerging proxy voting trends, regional nuances and focus areas ahead of proxy season 2024, join our experts on 26 July for a proxy season webinar.