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April 2012 Archives

James R. Copland
March 27, 2012

In 2012, we'll again be tracking annual meetings among America's largest public companies at the Manhattan Institute's Our 2012 Proxy Scorecard contains relevant proxy-ballot information on the largest 200 public companies, as ranked by Fortune magazine, including links to all shareholder proposals and executive compensation advisory votes. Our publicly available, easy-to-use database is sortable by meeting date, company name, type of proposal, proponent, and voting results. We will be adding companies' information to the scorecard throughout the year, as soon as ballots have been distributed to shareholders, and we will update the database with voting results after meetings occur and results have been reported to the Securities and Exchange Commission's Edgar website.

Although the corporate annual meeting season begins in earnest in mid-April, twelve Fortune 200 companies have already held their annual meetings, and 51 had mailed proxy ballots as of March 15. From this partial sample, we can already discern some trends of interest.

Of the 12 companies to hold meetings to date, three companies have seen shareholder proposals receive majority support:

• Johnson Controls, which at its January 25 annual meeting saw over 85 percent of its shareholders vote for a proposal by Gerald Armstrong calling on the company to declassify its board;

• Emerson Electric, which at its February 7 annual meeting saw over 76 percent of its shareholders vote for a proposal by the pension fund of the American Federation of State, County, and Municipal Employees (AFSCME) to declassify its board; and

• Apple, which at its February 23 annual meeting saw over 80 percent of its shareholders vote for a proposal by the California Public Employees' Retirement System to adopt a majority-voting standard for director elections.

That 2012's successful shareholder proposals have involved procedural rules such as board declassification and majority voting is in keeping with recent trends.

Such corporate-governance related proposals, not involving executive compensation or social or public-policy issues, thusfar constitute a majority of all shareholder proposals in 2012, a higher share than that seen recently. Proposals relating to executive compensation remain far less frequent relative to their levels before 2011, when executive compensation advisory votes became mandatory for all public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

2012's early returns involving such say-on-pay votes demonstrate the substantial role being played by the nation's largest shareholder advisory firm, Institutional Shareholder Services (ISS), in such voting. While no Fortune 200 company has seen shareholders reject executive pay packages in 2012, the four companies to have received the lowest percentage support--Johnson Controls, Navistar, Qualcomm, and Walt Disney--each received "no" vote recommendations from ISS on their executive pay plans. On average, these companies received 64 percent support from shareholders in say-on-pay votes, as compared to an average 94 percent support for other companies meeting by mid-March.

Since ISS's position almost certainly helped to influence the markedly different shareholder votes on pay packages, it would seem that an unintended side effect of Dodd-Frank-mandated say-on-pay votes is to give the proxy advisory firm a major "gatekeeper" role over executive pay. ISS's strengthened position might be enhanced further if institutional investors heed its newly promulgated advice to challenge management to respond whenever fewer than 70 percent of shareholders approve of board-proposed compensation packages--a position that would seem to be rather self-fulfilling given ISS's influence over the votes in the first place. Given that many of ISS's clients are labor-union pension funds and social-investing funds that may be motivated by issues other than maximizing shareholder value--and have respectively sponsored one-third and one-fifth of all shareholder proposals to date in 2012--I'll be watching the proxy advisory firm's role closely.

What else will I be watching in the upcoming annual meeting season? I'll be paying particular attention to certain classes of shareholder proposals in which union and social funds have taken a special interest:

• Proposals related to corporate spending on politics and lobbying (looming for Citigroup on April 17, Honeywell on April 23, BB&T and IBM on April 24, Johnson & Johnson on April 26, AT&T on April 27, and UPS on May 3), which have been increasing in number--though not getting majority support--in the wake of the Supreme Court's 2010 Citizens United decision affirming First Amendment protection for corporate political speech;

• Proposals calling on the company to separate the positions of chairman and CEO (looming for Bank of New York Mellon on April 10, Honeywell on April 23, General Electric on April 25, Johnson & Johnson and Lockheed Martin on April 26, and AT&T on April 27), which have been pushed hard by union funds and certain shareholder activists; and

• Proposals calling on the company to grant proxy access to shareholders nominating directors (looming for Wells Fargo on April 24), which are reappearing on this year's proxy ballots after the D.C. Circuit last summer rejected the mandatory proxy access rule proposed by the SEC.

Check Proxy Monitor during the annual meeting season for my ongoing analyses of these and other issues, as well as our up-to-date scorecard of scheduled meetings and voting results.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.