Proxy Season Gets Real. What to Watch for This Year


Leslie P. Norton

Apr 26, 2019

Proxy season rarely warrants much attention: It’s typically little more than a springtime ritual during which dissident shareholders voice their frustrations with corporate management, institutional investors side with management, and little is accomplished. That, however, is changing.

This year, there are several high-profile annual shareholder meetings with proxy votes along a few big themes—specifically, excessive power concentrated in a company’s leadership, as well as an increasing number of proposals targeting social and environmental concerns. This is also the year that plenty of formerly silent fund managers publicly expressed dissatisfaction with corporate management, a stance formerly reserved for activist investors.


Two recent meetings exemplify how votes might go. In one, 24% of shareholders voted against Bristol-Myers Squibb ’s (ticker: BMY) $74 billion acquisition of rival Celgene (CELG). The deal passed, but given the large chunk of dissidents, including the venerated, press-shy Wellington Management, it seems likely that Bristol’s management will pay increased attention to shareholder concerns.

And shareholders are increasingly protesting big CEO pay packages. Last year, Disney shareholders voted against Chairman and CEO Bob Iger’s compensation package. At the March 7 annual meeting this year, they narrowly approved it after Disney reduced Iger’s compensation. Says Kern McPherson, vice president of research and engagement at proxy advisor Glass Lewis, “We still didn’t feel [Disney] got to the heart to the concern, so we continue to recommend against the pay program despite the changes made at the last minute. We have clients in Europe, and they get sticker shock.”


Says Peter Reali, senior director of responsible investing at Nuveen, the asset management arm of TIAA: “Investors’ demand for accountability has intensified.” There are more high-profile calls, for example, to split the chairman and CEO roles, on the theory that a more robust board provides better oversight.

Even when shareholders win a majority and a resolution passes, management is not obligated to act. But corporations are paying more and more attention—and so should investors. Some key meetings to watch this season:

Boeing (BA), April 29. Boeing faces a call to split the chairman and CEO roles. Why? The theory goes that better oversight, especially from an independent director, might have prevented the two fatal crashes of its 737 MAX plane. Both Glass Lewis and Institutional Shareholder Services recommended that shareholders support the proposal. Glass Lewis also recommended that Boeing’s audit-committee head Lawrence Kellner be removed, since the audit committee plays a key role in risk management.

Allergan (AGN) May 1. Allergan faces a call by activist shareholders led by Appaloosa Management to split the chairman and CEO roles after the company’s underperformance. Allergan agreed to split the roles now held by Brent Saunders, but only at the next leadership transition, arguing that doing so now could “create a crisis of confidence in Saunders at a time when leadership stability and effectiveness is critical.” Says Don Bilson, special situations analyst at Gordon Haskett: Saunders “has bitterly resisted this and turned it into a referendum on his job performance.” Both Glass Lewis and ISS supported Saunders. As a result, says Bilson, Saunders “might skate by because the passive investors are behind him. But he has put his job on the line.”

General Electric (GE), May 8. Proxy advisors recommend that shareholders vote against keeping KPMG as the firm’s accountant. This year, GE disclosed massive charges related to insurance operations and a need to put $15 billion into reserves over seven years, and said that the Securities and Exchange Commission is looking into its accounting. GE has already hintedthat it may switch to a new auditor. Moreover, people will be looking at the compensation of new CEO Larry Culp, which is 345 times greater than the median pay of its quarter-million employees.

Mattel (MAT), May 16. CEO Ynon Kreiz, the company’s fourth CEO in four years, has been criticized for his pay package even as the company struggles to revive sales at key franchises. Kreiz earns $18.7 million, or 3,408 times the typical Mattel employee. (AMZN), May 22. The world’s third-most valuable company faces more than a dozen shareholder proposals, including one from employees to disclose its plans to address climate-change risk, and another about limiting sales of facial-recognition software to governments.

Facebook (FB), May 30, faces a raft of proposals, many of which want to reduce control by the founder, Chairman, and CEO Mark Zuckerberg, at its annual meeting on May 30. Among other things, there’s a proposal to split the positions of chairman and CEO. In a letter to the company, Jonas Kron of Trillium Asset Management wrote, “A lead independent director is no substitute for an independent board chair. A lead independent director does not chair the board meetings or control the board agenda—the cornerstones of an independent board chair’s role. Alphabet [GOOGL], Apple [AAPL], eBay[EBAY], Xilinx [XLNX], Tesla [TSLA], Autodesk [ADSK], and Microsoft [MSFT] all have independent board chairs. And Alphabet has both a founder CEO and an independent board chair.”

Tesla (TSLA) has its turn on June 11. The company settled in September with the SEC, which forced founder Elon Musk to step down as chairman for three years in favor of an independent board chair and the appointment of two new independent directors. Tesla said recently that it will shrink the size of its board to seven directors, from 11, and take other measures as part of the move to improve corporate governance.

PG&E (PCG), the embattled California utility blamed for starting one of the deadliest wildfires in the state’s history, has postponed its annual meeting to sometime in June, “to allow additional time following the board’s substantial refreshment announced on April 3.” Recently, PG&E agreed to a deal with activist hedge fund BlueMountain Capital in which it would appoint new independent director and a safety adviser, in exchange for BlueMountain withdrawing its slate of directors.

Like PG&E, companies often settle in advance of the annual meeting. For example, L Brands (LB), which has its annual meeting on May 16, fended off a proxy battle with activist Barington Capital by appointing two new independent directors to the board and by inviting Barington to serve as a special adviser. Barington, among other things, had criticized L Brands failure to refresh Victoria’s Secret merchandising.

In the past two years, environmental and social issues overtook the number of governance-related shareholder proposals on proxies. Companies are facing calls for greater transparency on three key issues: “board refreshment, climate change, and board diversity,” says Reali. “Many companies are now addressing these issues for the first time.” Investors will push for companies to link sustainability and business strategy, and continue to request broader human-capital policies from companies, including addressing pay disparity and workplace diversity. Board refreshment, meanwhile, improves a board’s skills to address the ever-expanding slate of risks faced by companies.

So far this proxy season, 628 shareholder proposals have been presented to companies, Reali says. Of these, 18% are related to environmental issues, 41% to social issues, and 42% to governance. In part, says Reali, that’s because companies and investors understand the investment impact of governance and are now grappling with environmental and social issues.

TIAA itself has enhanced its proxy voting guidelines. Today, the firm will consider voting against directors on a company board’s nominating and governance committees if the board has no gender diversity or if the average director tenure is greater than 12 years and there has been no refreshment in the last five years. Reali adds that it also encourages companies “to consider the impact of their operations on a broader set of stakeholders beyond just shareholders, including customers, employees, suppliers, and the larger community.”

Says Reali: “The proliferation of investor and company focus on ESG issues is really starting to solidify. What was at times on the fringe a few years ago has really become mainstream.”

Write to Leslie P. Norton at