The Long View: The Role of Shareholder Proposals in Shaping US Corporate Governance (2000-2018)
FEBRUARY 5, 2019
Over the past three decades, shareholder proposals have transformed the corporate landscape in the U.S. by spurring the adoption of governance best practices. Annual director elections, majority vote rules for director elections, shareholder approval for poison pills, and proxy access bylaws are some of the critical governance practices that have become common practice thanks to investor support for shareholder proposal campaigns led by a wide variety of investors—some large; others small. Despite the advisory (non-binding) nature of most shareholder proposals in the U.S., successive waves of campaigns eroded boardroom entrenchment by convincing directors to respond to shareholders’ calls for accountability, transparency and stewardship.
In this second installment of our examination of long-term trends in proxy voting, we examine the impact of shareholder proposals on corporate governance practices since the turn of the century, and we forecast the potential paths forward for corporate governance changes in the future. As many of the key corporate governance practices listed above have been adopted by close to 90 percent (or more) of large market capitalization firms, proponents are turning their attention to governance topics, such as independent board chairs and written consent rights, that boards have been slower to address. Notably, voting results demonstrate that members of the investment community often have varying views on these topics, as evidenced by the declining number and percentage of governance shareholder proposals receiving majority support in recent proxy seasons.