The 2023 proxy season comprised many continued themes from past proxy seasons, building on trends in governance, environmental and social issues, anti-ESG issues, and activism matters.
The Freshfields’ corporate governance and compensation teams reviewed trends and developments for the 2023 proxy season, summarizing the key takeaways and guidance across the following core areas: board, committee and director trends; diversity at the leadership and workforce levels, environmental and social proposals and trends; anti-ESG legislation and proposals; governance proposals; updates to SEC rules, including proposed rules; activism; executive compensation; institutional investor updates; and proxy advisory firm updates.
High-level takeaways are outlined below, and the full report can be found here. We hope this serves as a helpful resource to navigate evolving investor and stakeholder expectations and regulation as companies begin to prepare for the engagement season and the 2024 proxy season.
- The number of shareholder proposals in 2023 set new records: E&S proposals received by Russell 3000 companies increased by 52% since 2021, and the number of proposals that went to a vote increased by 125%. Companies are also increasingly receiving multiple proposals, with some companies receiving shareholder proposals in the double digits.
- Fewer shareholder proposals are receiving majority support – only a small fraction of environmental and social proposals received greater than majority support this season, while average support levels for most types of shareholder proposals have tapered or dropped. Resubmitted proposals are no longer seeing year-over-year increases in levels of support – some are beginning to decrease.
- Proposal topics continue to follow cultural trends, with increased attention on workers’ rights, human rights, reproductive rights and healthcare access, environmental considerations and political contributions in 2023.
- Climate change proposals made up a quarter of all E&S proposals, with a number of proposals focused on adopting greenhouse gas emission targets in line with goals set by the Paris Agreement goal of maintaining global temperature rise at 1.5°C, but average support for these proposals is down year-over-year.
- Anti-ESG trends have impacted the 2023 proxy season and the governance landscape in general. In the proxy season, anti-ESG proposals and “masked” purpose-ESG proposals have proliferated, while anti-ESG investing and legislation trends continue to impact both companies and investors.
- Activism was a quiet roar - settlements increased, hundreds of companies amended their advance notice bylaws in the wake of universal proxy rule effectiveness, but universal proxy did not unleash a bevy of public campaigns.
- Management proposals to amend company charters to extend exculpation to officers after a change in Delaware law in 2022 received high levels of support from investors and proxy advisory firms.
- Investors continue to adapt to the changing corporate and regulatory landscape, and an increasingly number of investors continue to explore and expand pass-through voting initiatives that are likely to impact future proxy seasons.
