The Dbriefs Governance, Risk & Compliance series
presents:
2015 proxy season highlights and
other corporate governance
developments
Tom Ball, Senior Managing Director, Morrow & Co. LLC
Maureen Bujno, Director, Deloitte LLP
Robert Lamm, Senior Advisor to Deloitte LLP
July 30, 2015
Agenda
2015 proxy season highlights
2016 proxy season outlook
Other topics impacting the governance landscape
Board and management considerations
Question and answer
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Governance framework
Increasing board efficiency and effectiveness
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Poll question #1
My company is classified as:
• Public
• Private
• Nonprofit
• Governmental
• Not applicable
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Summary of shareholder proposal results by category
Voted on
251
Corporate
Governanace
Corporate
Governanace
87
Passed
Voted on
47
Executive
Compensation
Executive
Compensation
0
Voted on
125
Environmental
& Social
Environmental
& Social
0
Total proposals = 423
Source: Institutional Shareholder Services (ISS)
Note: Data is as of July 16, 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Summary of shareholder proposal results by category
Corporate Governance
Executive Compensation
Proxy Access
Report on Lobbying
Payments and Policy
84
Independent Chair
62
Written Consent
Pro-rata Vesting of
Equity Awards
21
36
Special Meetings
21
Supermajority Vote
11
Recapitalization
Stock Plan
11
Majority Vote
Director Elections
11
Declassify Board
11
Amend Bylaws
Environmental, Political, and Social
4
30
Report on Political
Contributions
26
Report on Methane
Emissions
Claw-back of
Payments under
Restatements
15
23
Report on Sustainability
19
Report on Financial Risks
of Climate Change
Stock
Retention/Holding
Period
11
11
Prohibit Political Spending
8
Policy and Report on
Board Diversity
4
Report on Human Rights
Risk Assessment Process
4
Source: Institutional Shareholder Services (ISS)
Note: Data is as of July 16, 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Most common shareholder proposals
•
•
•
•
Proxy access
Require independent board chairman
Provide right to act by written consent
Report on political spending/lobbying
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Poll question #2
Did your organization receive any shareholder proposals
during the 2015 proxy season?
• Yes
• No
• No (my company is not public)
• Don’t know / Not applicable
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Corporate governance – shareholder proposals
Shareholder Proposal
Number of proposals Number that
voted on in 2015
passed
Average
Support
Number of proposals Number that
voted on in 2014
passed
Average
Support
Proxy Access
84
49
54.60%
17
5
33.80%
Require Independent Board
Chairman
62
2
29.05%
59
3
31.14%
Provide Right to Act by
Written Consent
36
2
39.41%
28
0
38.40%
Amend Bylaws - Call Special
Meetings
21
4
42.39%
13
4
41.58%
Reduce Supermajority Vote
Requirement
11
7
59.83%
12
8
67.27%
Approve Recapitalization Plan
for all Stock to Have One-vote
per Share
11
1
33.60%
10
0
25.82%
Require a Majority Vote for the
Election of Directors
11
8
64.40%
28
16
58.21%
Declassify the Board of
Directors
11
11
78.05%
17
15
82.49%
Amend Vote Requirement to
Amend Bylaws
4
3
68.90%
0
0
0%
Source: Institutional Shareholder Services (ISS)
Note: Data is as of July 16, 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Corporate governance – shareholder proposals
Proxy access
• What is it?
• Proposals put forth by management vs. investors
− Most shareholder proposals were 3% / 3-year
− Management proposals were split – 3% and 5% thresholds
− Levels of support; outcome
• Proposal sponsors
− New York City Comptroller Boardroom Accountability Project
◦ Filed 75 resolutions based on three areas: climate change, board diversity
and CEO pay
− Pension funds, individuals, others
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Executive compensation – shareholder proposals
Shareholder Proposal
Number of proposals Number that
voted on in 2015
passed
Average
Support
Number of proposals Number that
voted on in 2014
passed
Average
Support
Pro-rata Vesting of Equity
Awards
21
0
32.31%
23
4
35.90%
Clawback of Payments
under Restatements
15
0
28.42%
3
0
28.70%
Stock Retention/Holding
Period
11
0
23.33%
27
0
22.22%
Source: Institutional Shareholder Services (ISS)
Note: Data is as of July 16, 2015
• Many executive compensation-related proposals were put forth by individuals
• Proposals related to CEO-median employee pay ratio appear to have been
withdrawn; a few were deemed excludable by the SEC on the basis of Rule 14a8(i)(7)1
 Rule 14a-8(i)(7) provides that a proposal is excludable when the proposal deals with a matter
relating to the company’s ordinary business operations
1Source:
Gibson, Dunn & Crutcher LLP
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Environmental, political & social – shareholder proposals
Shareholder Proposal
Number of proposals Number that
voted on in 2015
passed
Average
Support
Number of proposals Number that
voted on in 2014
passed
Average
Support
Report on Lobbying
Payments and Policy
30
0
25.40%
38
0
25.88%
Report on Political
Contributions
26
0
33.33%
45
1
30.24%
Report on Methane
Emissions Management
and Reduction Targets
23
0
22.70%
20
0
24.57%
Report on Sustainability
19
0
30.90%
11
0
29.97%
Report on Financial Risks
of Climate Change
11
0
21.66%
9
0
22.07%
Prohibit Political
Spending/Shareholder
Approval of Political
Spending
8
0
13.30%
14
0
7.75%
Adopt Policy and Report
on Board Diversity
4
0
15.05%
2
0
25.10%
Report on Human Rights
Risk Assessment Process
4
0
9.25%
8
0
24.62%
Source: Institutional Shareholder Services (ISS)
Note: Data is as of July 16, 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2015 proxy season highlights
Environmental, political & social – shareholder proposals
Report on lobbying payments and policy and report on political
contributions
• Many investors seek reports that include lobbying payments (federal and
state), payments to trade associations used to lobby, political contributions,
and payments to tax-exempt organizations that write and endorse model
legislation
• Push for SEC to adopt rule requiring political expenditure disclosure by all
public companies; petition has received record level support
Environmental and sustainability reporting
• Increased Catholic investor activity
− Pope Francis’s encyclical; a call to action on global warming
− Catholic groups submitted 12 environmental related proposals at the
largest 250 U.S. companies. Proposals called for reports on
sustainability and climate-change risk, creation of targets for
greenhouse-gas emissions, appointing directors with environmental
expertise, etc.
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Poll question #3
Which of the following do you believe will be the most
significant hot topic in the 2016 proxy season?
• Pay ratio disclosure
• Proxy access and rules for electing directors
• Environmental and sustainability reporting
• Leadership structure
• Board diversity policies
• Don’t know / Not applicable
Copyright © 2015 Deloitte Development LLC. All rights reserved.
2016 proxy season outlook
What could next year hold?
A continued focus on:
• Shareholder activism
• Proxy access
− Board composition – consideration to tenure, board
diversity, refreshment practices, and skills/expertise
• Proxy disclosure enhancements
• Environmental and social issues
• Majority voting
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Other topics that may impact the governance
landscape
• Shareholder engagement and shareholder activism
− Potential for increased focus on retail investors (case-by-case)
• Asset managers send letters to CEOs, shareholders
• Board diversity
− Thirty Percent Coalition’s “Adopt a Company” campaign regarding
companies with no female board directors; filed 25 board diversity
resolutions for 2015
− Proponents seek corporate commitments to gender diversity and
progress reports on board composition changes
• Bylaw and charter provisions – impact on shareholder rights
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Other topics that may impact the governance
landscape
• SEC activity
− Mary Jo White’s viewpoint on shareholder engagement
− Concept release on audit committee disclosure requirements
− Dodd-Frank implementation pending
◦ Pay ratio
◦ Pay-for-performance
◦ Clawback policies
◦ Hedging policies
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Board and management considerations
• Conduct a vulnerability assessment of company and board
practices in light of shareholder interests and consider a
response plan for shareholder proposals
• Understand mix of shareholder base and consider
respective approach for outreach
• Review policies and criteria related to board selection,
including diversity
• Assess current levels of disclosures and opportunities for
enhancement
• Be aware of any voting policy changes put forth by proxy
advisory firms
• Prepare for Dodd-Frank requirements effective 2016, 2017
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Poll question #4
Overall, what level of impact do you think engaging with
shareholders has on mitigating proposals being
submitted?
• High impact
• Moderate impact
• Low impact
• Don’t know / Not applicable
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Question and answer
Join us August 27 at 2 PM ET as our
Governance, Risk & Compliance
series presents:
When risk drives performance:
Leveraging the extended
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excellence
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Contact info
Tom Ball
Senior Managing Director
Morrow & Co. LLC
tomball@morrowco.com
Maureen Bujno
Director
Center for Corporate Governance
Deloitte LLP
mbujno@deloitte.com
Robert B. Lamm
Senior Advisor to Deloitte LLP
Center for Corporate Governance
rlamm@deloitte.com
Copyright © 2015 Deloitte Development LLC. All rights reserved.
This presentation contains general information only and Deloitte is not, by means of this presentation,
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Copyright © 2015 Deloitte Development LLC. All rights reserved.
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Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules
and regulations of public accounting.
About Morrow & Co., LLC
Morrow & Co., LLC is a world leader in security-holder services and the advisor of choice for more than
750 publicly-traded companies worldwide, mutual funds, and well-known activists looking to reach and
influence shareholders. We believe our depth of knowledge and practical experience are what sets us
apart from our competitors. This is an outgrowth of the stability and longevity of our organization – with
more than four decades in the business, and a seasoned senior management team. This foundation,
coupled with our unique understanding of the investment community and a disciplined approach to
research and strategic analysis, is at the core of our broad range of fully-integrated services.
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