Risk & Compliance

Shareholder Engagement Disclosures Shot Up in 2018

Appeasing investors with shareholder engagement disclosures was a significant trend this year: Equilar report.
David McCannDecember 27, 2018

Are companies paying more attention to investor concerns? Indeed they are, at least by one measure.

The proportion of the largest U.S. companies that disclosed their shareholder engagement practices zoomed up in 2018, according to a new report from Equilar, a provider of corporate governance solutions.

Within the Equilar 100 — a sample of the largest U.S. companies by revenue — 59% of companies made such disclosures this year. That was 25% higher than the 2017 number.

The percentage of companies — both large and small — that practice some level of governance engagement with investors continues to increase, according to the report. However, increasing even more is the practice of companies actually discussing shareholder engagement practices in some form or another.

Another interesting finding from the report: shareholder proposals related to general shareholder rights increased by 56% at Equilar 500 companies from in 2018. While proposals pertaining to environmental, social, and governance (ESG) issues still represented the largest proposal category, there was a 30% decline in those types of proposals this year.

“Perhaps one reason for the decrease in the number of ESG-related shareholder proposals is a significant increase in negotiated withdrawals of submitted proposals,” said Lillian Tsu, a partner at law firm Hogan Lovells who provided commentary for the Equilar report.

That change was a result of increasing pressure on companies to support ESG-related issues, Tsu noted. She further explained, “It is likely that many withdrawals were the result of companies’ willingness to … take actions and make additional disclosures in order to appease shareholders on ESG-related demands.”

The research results were culled from a manual analysis of 2018 proxy statements by large-cap companies. Other key highlights include:

  • The number of failed “Say on Pay” votes by shareholders nearly doubled in 2018, and fewer than half of Say on Pay votes among Equilar 500 companies garnered 95% or greater approval.
  • The median CEO Pay Ratio at Equilar 500 companies was 168 to 1, while the mean (average) ratio was 271 to 1.
  • More than 500 directors in the Equilar 500 were within five years of their board’s mandatory retirement. Nearly 80% of all mandatory retirement ages were either 72 or 75.