Social and environmental support continues to grow among institutional investors

There has been a 10 percentage-point increase in institutional investor support for shareholder proposals focused on environmental and social issues, according to the latest ProxyPulse report from Broadridge and PwC’s Governance Insights Center.

But the report, based on an analysis of 4,090 US public company annual shareholder meetings held between January 1 and June 30, 2018, highlights a divide between the voting habits of institutional investors and those of retail investors.

Although average support from institutional investors for social and environmental proposals stands at 29 percent, it drops to just 16 percent among retail investors; support for political spending proposals among institutional investors also stands at 29 percent, dropping to 21 percent among retail investors. The biggest gap, however, is in voting for proxy access: support for these proposals stood at 35 percent among institutions in the 2018 proxy season, compared with just 13 percent of retail investors.

Retail investors are also far less likely to vote their shares at just 28 percent, compared with 91 percent of those owned by institutional investors.

‘A new theme emerged over the last few proxy seasons that shows a divergence between how institutional and retail investors view certain topics, such as social and environmental proposals, political spending disclosure by companies, and even how much participants engage in proxy voting,’ comments Chuck Callan, senior vice president of regulatory affairs at Broadridge Financial Solutions and one of the report authors, in a press statement. ‘This divergence suggests companies would be wise to participate broadly with all shareholders.’

Even as the report highlights the gap in institutional and retail support for proxy access proposals, it also notes that the number of these proposals has dropped from 81 in 2015 to just 24 this year. This, the authors write, ‘is primarily due to the number of companies that have adopted proxy access – including 65 percent of S&P 500 companies. ‘Notably this past season, institutions opposed shareholder proposals that sought to lower existing thresholds or remove limits on the number of shareholders required to reach the ownership threshold.’

Another notable theme highlighted by the ProxyPulse report is that support for say-on-pay proposals at companies where the CEO pay ratio was disclosed was the same, on average, as it was at companies that were not required to disclose.

This year saw companies begin making mandatory CEO pay ratio disclosures – comparing the total compensation of their chief executive officer with that of their median employee – but average support for say-on-pay proposals this season stood at 89 percent. This figure is ‘generally consistent over a five-year period,’ say the researchers.