With shareholders up in arms over their diminishing portfolios and CEOs from the banking, automotive, and other industries getting keelhauled before Congress for extended grilling sessions, it’s reasonable to expect that this year’s proxy season would be chock-full of shareholder proposals on everything from executive pay to increased director independence.
But surprisingly, the total number of shareholder resolutions at annual meetings this year is slated to fall below 1,000, well under the average of 1,100 achieved over the past six years.
Patrick McGurn, special counsel at corporate governance service provider RiskMetrics, says there are three reasons behind the "significant drop-off" in shareholder proposals this year. And, conveniently, they all begin with "E".
The first is engagement. Some major pension funds are sitting on the sidelines this year. Take the United Brotherhood of Carpenters and Joiners, which tabled about 100 pay-for-performance resolutions until next year. Instead, the Carpenters union decided to directly engage those companies, hoping for a better outcome that way.
The second is the economy. Cutbacks and tight budgets may limit travel to annual meetings, especially those held at far-flung locations, and proxy rules normally mandate attendance for a shareholder resolution to come before the meeting. Further, McGurn says that the stock market's plummet may leave some small shareholders below the $2,000 ownership that's required to submit a proposal.
Finally, the election of President Obama will also limit shareholder proposals. Some players, convinced that the Obama administration will tackle issues like "say on pay" directly via legislation, have held off on submitting proposals on that topic this season.
While the overall number of proposals will be down, some companies will see more than their fair share. Not surprisingly, many of those will be banks, who have accounted for 24% of the total compensation resolutions so far this year, compared with just 10% in 2008.
Bank of America, for one, is currently being targeted with nine proposals on issues ranging from limiting compensation to installing an independent lead director. Citigroup, meanwhile, faces 11 resolutions from disgruntled shareholders.
Many resolutions never make it to votes at meetings - some are withdrawn, while the SEC nixes others - but it's safe to assume that Ken Lewis and Vikram Pandit will get an earful come April.
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