In the 2021 proxy season, 143 of the technology and life sciences companies included in the Fenwick – Bloomberg Law Silicon Valley 150 List (SV 150) and 99 of the companies in the Standard & Poor’s 100 (S&P 100) held annual meetings that typically included voting for the election of directors, ratifying the selection of auditors of the company’s financial statements and voting on executive officer compensation (“say-on-pay”).
Annual meetings will often also include voting on one or more of a variety of proposals that may have been put forth by the company’s board of directors or by a stockholder that has met the requirements of the company’s bylaws and applicable federal securities regulations.
This post summarizes significant developments relating to stockholder voting at annual meetings in the 2021 proxy season among the SV 150 and S&P 100. [1]
Significant Findings
SV 150 companies saw less support for their executive compensation proposals in 2021. Seven SV 150 companies failed their say-on-pay vote compared to just four in the 2020 proxy season. At the same time, more stockholder proposals passed at SV 150 companies during the period, with average support reaching 30.4% compared to 25.5% in 2020. These results may portend more stockholder activism in the future as stockholders, regulators and other stakeholders focus their attention on how companies address more ESG-related policy issues.
Among the other key findings are:
Director Elections
- After two years of no contested elections in either the SV 150 or the S&P 100, in the 2021 proxy season, there was a contested election in each. In the SV 150, hedge fund Starboard Value unsuccessfully challenged three Box Inc. directors at its annual meeting. In the S&P 100, activist hedge fund Engine No. 1 submitted a competing slate of four directors at Exxon Mobil’s June 2021 meeting, three of whom were elected by stockholders.
- There were 143 uncontested elections of directors in the SV 150 (and 98 in the S&P 100). Since they were uncontested, election of the board-nominated candidates was generally not in doubt, subject only to any applicable majority voting policy.
- In the 2021 proxy season, all but eight directors in the SV 150 and two directors in the S&P 100 received more “for” votes than “against” or “withheld” in uncontested elections (compared to four in the SV 150 and one in the S&P 100 in 2020).
Say-on-Pay
- Opposition to named executive officer compensation reached 15% or more of votes cast (ignoring abstentions and broker non-votes) at 21.3% of SV 150 companies (compared to 20.8% of S&P 100 companies). Within those SV 150 companies with relatively lower levels of support, opposition reached 20% or more at 25 companies and 30% or more at 14 companies (of which 11 had opposition of 40% or more, including seven companies where opposition exceeded 50%). This opposition for SV 150 companies represents an increase compared to 2020 during which opposition reached 20% or more at 19 companies and 30% or more at 11 companies.
Auditor Ratification
- A total of 143 companies in the SV 150 and 98 companies (out of 99) of the S&P 100 that held annual meetings in the 2021 proxy season included auditor ratification among the matters being voted upon by stockholders.
- Among SV 150 companies, only 6.3% had 5% or more shares that voted against or abstained with respect to auditor ratification (0.7% of companies had 10% or more that voted against/abstained).
Other Proposals Voted On
- Setting aside director elections, say-on-pay (as well as say-on-frequency) and auditor approval voting, stockholders at SV 150 companies were asked to vote on 102 proposals, while stockholders at S&P 100 companies voted on 266 proposals. The difference is primarily driven by the fact that stockholder proposals are primarily a large company phenomenon. There were only nine such proposals voted on by stockholders outside of the top 50 companies in the SV 150.
Company Proposals
- Excluding director elections, say-on-pay (as well as say-on-frequency) and auditor approval voting, stockholders at SV 150 companies voted on 50 company-sponsored proposals in the 2021 proxy season, primarily in compensation-related subjects, as well as some governance matters (compared to 62 such proposals at S&P 100 companies).
Stockholder Proposals
- The stockholder-sponsored proposals voted on in the SV 150 generally focused on governance matters or policy issues (this was also true in the S&P 100).
- The average support for stockholder-sponsored proposals was approximately 30.4% at the SV 150 companies (compared to approximately 32% at S&P 100 companies).
- The most common topics for stockholder-sponsored proposals in the SV 150 were shareholder ability to act by written consent (nine proposals, of which two succeeded) and independent chair activities (six proposals, none of which were successful).
- The most common such topic in the S&P 100 was regarding ability to act by written consent (28 proposals, of which one succeeded).
Annual Meeting Participation
- An average of approximately 86.8% of shares of SV 150 companies were represented in person or by proxy at company annual meetings during the 2021 proxy season. However, in addition to the approximately 13.1% not represented, approximately 10.3% of eligible shares were represented via proxy by brokers who did not receive instructions on voting for the bulk of matters for which broker discretionary voting is not permitted. This compares to 15.4% not represented and 10.8% broker non-votes in the S&P 100 in the same period.
- The ranges of representation and voting, though, were somewhat broader in the SV 150 than the S&P 100 (e.g., 35% – 98.8% voting in the SV 150, compared to 46.2% – 94% voting in the S&P 100).
In a number of instances, the report also presents data showing comparison of the top 15, top 50, middle 50 and bottom 50 companies of the SV 150 (in terms of revenue), [2] allowing for a more carefully tailored view of the activity and results as they are impacted by company size or scale, as well as more relevant comparison to peers (i.e., the S&P 100 compared to their peers in the top 15 of the SV 150).
The complete publication is available here.
Endnotes
[1] To be included in the data set for a particular “proxy season,” the definitive proxy statement for a company’s annual meeting generally must have been filed by the company with the Securities and Exchange Commission by June 30 of that year (i.e., the proxy statements included in the 2021 proxy season survey were generally filed with the SEC from July 1, 2020 through June 30, 2021 for the 2021 proxy season), irrespective of when the annual meeting was actually held (the annual meetings were usually held about two months following the filing of the proxy statement).
[2] The top 15, top 50, middle 50 and bottom 50 companies of the SV 150 include companies with revenue in the following respective ranges: $21.3B or more; $2.7B or more; $762M but less than $2.6B; and $265M but less than $694M. The respective average market capitalizations of these groups are $424.7B, $171.7B, $15.8B and $8.1B.
