Investors Unable to Vote on 23% of Shareholder Proposals at US Companies

Nearly 25% of shareholder proposals at US companies have been stopped by regulators during the current proxy season, according to a study by shareholder engagement firm Georgeson. The number of successful ‘no action’ requests granted to large public companies has already surpassed last year’s total by 40%.

The ‘no action’ process is meant to provide listed companies with assurance that the Securities and Exchange Commission (SEC) will not penalize them for refusing to allow shareholders to vote on a proposal during their annual meetings. This relief is granted when issuers can prove that the request is not appropriate.

Earlier this year, in a move to diminish the influence of shareholders and activists on management decisions, the SEC updated its guidance to make it easier for companies to obtain no-action relief. Georgeson’s analysis of the ongoing proxy season reveals that, due in part to this change, 23% (197) of all proposals put forward since July 2024 have been successfully blocked.

Comparatively, between July 2023 and June 2024, only 14% (141) of proposals faced the same fate. The study also highlights that the number of shareholder requests has decreased for the first time in five years, with 852 proposals compared to 1,000 in the full 2024 proxy season and 947 in 2023. Interestingly, a small group of 10 proponents were responsible for 67% of all submissions.

Requests that oppose Environmental, Social, and Governance (ESG) initiatives have reached a peak of 131 this season, an increase of nearly 40% from 2023, although they lack significant shareholder support. Environmental and social proposals that managed to bypass the ‘no action’ process faced dwindling backing for the third consecutive year, averaging 18% as opposed to 20% in the last proxy season.

Out of 139 environmental proposals, 40 made it to the ballot, but none were approved. Socially-focused submissions dropped by 33%, while diversity-related proposals less than halved compared to previous periods. On the other hand, governance-related proposals have seen stronger support, rising to 37% from 35% in the previous year, noted Georgeson.

Interestingly, shareholder satisfaction with executive remuneration packages increased to 95.6% this year, up from 94.8% last year, indicating contentment with board performance. These findings shed light on the shifting landscape of shareholder proposals and the evolving dynamics between investors and companies during proxy seasons.