N.Y. Official Boosts Shareholder Proposals in 2015
By: Stephen Joyce
September 29, 2015

The percentage of shareholder proposals receiving majority support at large publicly traded U.S. companies increased to 11 percent in 2015, largely as a result of the New York City Comptroller's proxy access initiative.

In 2014, only 4 percent of the proposals were supported by a majority of shareholders, a report issued Sept. 29 by the Manhattan Institute for Policy Research said.

A material increase in support for proposals seeking proxy access was a key reason for the increase: 23 of 35 proxy access proposals won majority backing during the 2015 season. New York City Comptroller Scott Stringer's Boardroom Accountability Project, which was launched during the run-up to the 2015 season in November 2014, targeted 75 companies in a national campaign to press for changes in corporate board operations (12 CARE 1576, 11/21/14)(46 SRLR 2262, 11/24/14)(225 DER EE-10, 11/21/14)(225 Securities Law Daily, 11/21/14)(225 Securities Law Daily, 11/21/14).

Most Successful Campaign.

“This has been the most successful proxy access campaign of all time,” Stringer told Bloomberg BNA at a Sept. 29 event in New York to unveil the report.

Stringer said he discussed his proxy access campaign with Securities and Exchange Commission Chairman Mary Jo White but did not elaborate on the substance of that conversation.

The U.S. Court of Appeals for the District of Columbia Circuit in 2011 struck down an SEC proxy access rule, deciding the agency acted arbitrarily by failing to properly assess the regulation's economic impact (09 CARE 895, 7/29/11)(142 Securities Law Daily, 7/25/11)(142 Securities Law Daily, 7/25/11)(43 SRLR 1510, 7/25/11)(142 DER EE-6, 7/25/11).

Proposals Hit Five-Year High.

The Manhattan Institute report was the fifth annual survey analyzing the proxy activities of 250 of the largest publicly traded U.S. companies, a collection of companies similar to the Fortune 250 which excludes large companies not publicly traded. The report found 43 percent of shareholder proposals sponsored in 2015 involved corporate governance issues while 42 percent involved social or policy issues. The remaining 15 percent involved executive compensation, the report said.

More broadly, the average large publicly traded U.S. company faced 1.34 shareholder proposals in 2015, an increase from the 2014 level of 1.22 and the highest level of shareholder proposal activity since 2010, the report said. All told, more than 300 shareholder proposals were submitted at publicly traded companies during the 2015 proxy season, the report said.

Proxy access shareholder resolutions that garnered majority support in 2015 include those submitted to Apache Corp., Avon Products Inc. and eBay Inc. The proposals received by those companies were filed by Stringer.

Chevron Corp., Duke Energy Corp., Marathon Oil Corp. and Occidental Petroleum Corp. were four energy companies whose proxy access resolutions received majority support, the report's survey data said.

Effect of New York Comptrollers.

Stringer and New York State Comptroller Thomas DiNapoli, fiduciaries for the state's city and state pension funds, respectively, each played a key role in sponsoring shareholder proposals, the report said.

“By far, the public-employee pension funds that have been most active in sponsoring shareholder proposals have been those affiliated with New York City and State,” the report said.

The state's Common Retirement Fund, for the first time since it began sponsoring shareholder proposals in 2010, received majority support in 2015 for an executive pay proposal submitted to Staples Inc.

Meanwhile, Stringer's Boardroom Accountability Project aims to increase the number of independent and accountable directors at public companies using three criteria: climate change, diversity and executive pay.

“Comptroller Stringer’s campaign has been remarkably successful in terms of winning majority support from shareholders: among 22 Fortune 250 companies facing a NYC fund-sponsored proxy-access proposal in 2015, 18 received majority shareholder support,” the report said.

Three activist shareholders were responsible for about one-third of all shareholder proposals, the report said. Labor-affiliated pension funds, while accounting for about 28 percent of shareholder proposals, were less active in 2015 compared with 2014, the report said. About 30 percent of the proposals were initiated by religious-affiliated groups, social investors or groups advocating a public policy, and the remaining 10 percent were other individual and institutional investors, the report said.

‘Lenient' SEC.

The report also said the increase in shareholder proposals was in part because the SEC has been “more lenient in allowing shareholder proposals on the ballot.”

Under SEC Rule 14a-8, the agency allows a company to exclude shareholder resolutions from its proxy materials under certain conditions, including if there is a conflicting management proposal. White, the SEC chairman, in January directed her staff to review the rule after investors raised concerns that companies were using it to avoid shareholder access proposals with thresholds they considered too lax (13 CARE 179, 1/23/15)(47 SRLR 152, 1/26/15)(13 SLD, 1/21/15)(12 DER EE-12, 1/20/15). The result? The SEC issued fewer no-action letters allowing firms to exclude shareholder proposals in 2015, the report said.

The SEC issued 82 no-action responses in 2015, compared to 116 in 2014, the report said.

The agency denied 68 no-action petitions in 2015, compared to 50 denials in 2014, the report said.


Reproduced with permission from Daily Report for Executives, 189 DER (Sep. 30, 2015). Copyright 2015 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com.

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