Scott M. Stringer
More than two-thirds of companies that received proxy access proposals filed by the New York City Pension Funds have agreed to implement the proposal, giving a boost to the campaign to give investors a voice in the boardrooms of corporate America, says Comptroller Scott M. Stringer.
The surge in negotiated agreements marks a sea change from 2015, when 66 of the 75 companies that received the City’s Pension Funds’ proxy access proposals took the resolution to a vote, the majority of which passed.
“The rapid uptake of proxy access following more than a decade of corporate resistance is the result of an extraordinary chain of events set in motion by the Boardroom Accountability Project,” Stringer, the New York City comptroller, says.
“Today, companies across the market are enacting meaningful proxy access at an astonishing rate and that’s welcome news for investors. Now, more than ever, shareowners are focused on having the right people in the boardroom to drive long-term, sustainable value. Proxy access gives investors a seat at the table and a voice in the process of how corporate directors are chosen.”
Begun in fall 2014, the Boardroom Accountability Project is a nationwide campaign, supported by a coalition of investors with more than $1 trillion in assets under management, to give shareowners the right to nominate directors at U.S. companies using the corporate ballot. At the time, only six companies had bylaws that provided shareowners with meaningful proxy access.
In 2015, proxy access proposals filed by the New York City Pension Funds averaged 56 percent support. Many companies have subsequently adopted the reform and to date, more than 210 corporations have enacted meaningful proxy access bylaws.
For the 2016 proxy season, the New York City Pension Funds filed proxy access proposals at 72 companies to allow a group of shareowners that collectively own at least three percent of the company for three years or more to nominate up to 25 percent of a board in any given year.
The list includes 36 companies from the 2015 focus list which had not yet enacted (or agreed to enact) viable proxy access and 36 new companies, including the funds’ largest portfolio companies, coal-intensive utilities, firms with few women and minority directors, and companies with excessive CEO pay.
To date, 50 of these 72 companies have agreed to enact the proposal and additional companies may enact the proposal in the coming weeks. The City’s Pension Funds anticipate that up to twenty remaining proposals will be voted upon in this year’s upcoming proxy season, which kicks off with the annual meetings of Noble Energy, Inc. and PACCAR Inc. on April 26, 2016. The remaining two proposals are moot.
Notable votes in the coming months include Netflix, where the board failed to enact proxy access despite a 71% vote in favor of the City Pension Funds’ proxy access proposal in 2015; Chipotle, where the proposal received 49.9% support in 2015 despite a competing proposal from management; and ExxonMobil, where the proposal received 49.4% support in 2015, the highest-ever support for a shareowner proposal at that company.
In addition, binding votes will be held at Cabot Oil & Gas as well as Noble Energy to amend overly restrictive proxy access bylaws put in place by those companies in 2015.
In 2016, the New York City Pension Funds are once again partnering with the California Public Employees’ Retirement System (CalPERS) to conduct exempt solicitations in support of the proxy access proposals (example: exempt solicitation for Chipotle).
As part of this effort, the two systems, which have $433 billion in combined assets, are sending joint letters to shareowners of each company urging them to support the proposals; the letters are filed with the U.S. Securities and Exchange Commission.
In a July 2015 study, economic researchers at the U.S. Securities and Exchange Commission analyzed the public launch of the Boardroom Accountability Project and found a 0.5 percent average increase in shareowner value at the 75 targeted firms.
The findings are consistent with the 2014 CFA Institute study that found that proxy access on a market-wide basis would “benefit both the markets and corporate boardrooms, with little cost or disruption” and could raise overall US market capitalization by as much as one percent, or $140.3 billion.
“Investors need boards that are truly diverse in background and experience, equipped to address risks related to climate change, and willing to rein in excessive CEO pay, and proxy access gives them the tools to make that a reality. We expect strong showings at our votes this coming proxy season as momentum grows for the boardroom accountability movement,” Stringer said.