Shareholders have responded positively to corporate governance and quality of director improvements, but still want to have the right to nominate their own candidates and have them head-to-head on the company’s proxy.
Shareholders have shown increasingly strong support for leadership of corporations in voting in favor of directors, while at the same time they have firmly embraced proxy access, enabling them to rebel by nominating their own members to corporate boards, a study by Ernst & Young LLP’s Center for Board Matters found.
Shareholder opposition to the elections of board nominees has fallen almost steadily since 2009.
In 2015, through June 10, only 3.5% of some 15,500 nominees received opposition votes of more than 20%. That is down from 4.1% for the full year of 2014, 4.7% in 2013, 5.3% in 2012, 5.1% in 2011, 8% in 2010 and 9.8% in 2009, the farthest back the EY data go.
Boards generally consider that 20% opposition a threshold for concern, said Jamie Smith, San Francisco-based assistant director of the center, which offers thought leadership on corporate governance for corporations and institutional investors and doesn’t serve any clients.
“That’s the level boards are likely to want to better understand what’s driving that opposition and reaching out to shareholders,” Ms. Smith said in an interview.
“Boards have gotten a lot smarter about … a lot of factors that currently drive investor votes against directors,” Ms. Smith said, explaining the increasing shareholder support for directors.