A Report on Corporate Governance and Shareholder Activism

Recent trends in corporate governance at large, publicly traded companies in the United States include increased shareholder power relative to that of boards. This trend in part involves—and in part has been driven by—activism on the part of shareholders who introduce proposals on companies’ annual-meeting proxy ballots. This report looks at the 2014 proxy season by analyzing data from the ProxyMonitor.org database and finds:

• Shareholder support for shareholder proposals is down. In 2014, only 4 percent of shareholder proposals were supported by a majority of voting shareholders, down from 7 percent in 2013. The percentage of shareholder proposals to win majority support in 2014 was below that of any previous year in the ProxyMonitor.org database, which dates back to 2006. Among Fortune 250 companies, only ten proposals have won majority support to date this year, and only seven over opposition from the company’s board of directors.


• A small group of shareholders continues to dominate the shareholder-proposal process. In 2014, one-third of all shareholder proposals were sponsored by just three individuals and their family members: John Chevedden, the father-son team of William and Kenneth Steiner, and the husband-wife team of James McRitchie and Myra Young. Twenty-eight percent of all 2014 shareholder proposals were sponsored by investors with an express social, religious, or public-policy orientation, a majority of which were “social investing” funds organized around various principles beyond share-price maximization. Twenty-four percent of all 2014 shareholder proposals were sponsored by labor-affiliated investors; labor-sponsored shareholder proposals were less common in 2014 than in 2013, chiefly because of less activity on the part of private multiemployer plans such as the AFL-CIO.


• Almost half of all shareholder proposals in 2014 involved social or policy concerns, though shareholders continued to reject these proposals. Forty-eight percent of 2014 shareholder proposals involved social or policy concerns. One hundred and thirty-five of 136 shareholder proposals involving social or policy concerns in 2014 failed to win the support of a majority of shareholders, the exception being a proposal for a corporate resolution on animal welfare that the company’s board supported. From 2006 through 2014, among 1,141 shareholder proposals at Fortune 250 companies that involved social or policy concerns, not a single proposal has won the support of a majority of shareholders over board opposition.


• Shareholder proposals involving corporate political spending or lobbying were again the most regularly introduced class of proposal in 2014, but they continue to be rejected by most shareholders. Twenty-two percent of all 2014 shareholder proposals involved these topics, but 80 percent of shareholders, on average, voted against them, in line with earlier years. Among 329 such proposals introduced at Fortune 250 companies from 2006 through 2014, not a single one has received the support of a majority of voting shareholders over board opposition.


• Labor-affiliated investors’ shareholder activism in 2014 has centered on corporate political spending or lobbying and may be related to support for Republicans among company executives and PACs. The 43 Fortune 250 companies facing shareholder proposals sponsored by labor-affiliated investors in 2014 were twice as likely to orient their political efforts to support Republicans than was the average Fortune 250 company. A majority of shareholder proposals sponsored by labor-affiliated investors in 2014 have involved corporate political spending or lobbying, and only one company targeted by these proposals gave more money to Democrats than Republicans. On average, executives and PACs at companies facing at least one politics-related shareholder proposal sponsored by a labor-affiliated investor sent 67 percent of their dollars to support the GOP, versus 59 percent for all companies in the Fortune 250.


• The leading proxy advisory firm Institutional Shareholder Services (ISS) continues to be much more likely to support shareholder proposals than the median investor. ISS policy is “generally for” separating a company’s chairman and CEO roles, establishing cumulative-voting rules in director elections that empower minority shareholder blocks, and increasing disclosure of corporate political spending—ideas that have been supported by a majority of shareholders between 0 and 4 percent of the time. Whether new SEC rules governing proxy advisors and a new owner for ISS will change these patterns over time will be interesting to watch in 2015. 

Even more so than in recent years, the 2014 proxy season suggests that the shareholder-proposal process may not be serving the ordinary investor’s interests. Almost half of all shareholder proposals this year involved social or policy issues; but no such proposal has received majority support at a large company over board opposition. The shareholder-proposal process is costly to the corporation: in 2014, Fortune 250 companies facing a shareholder proposal filed an SEC petition seeking to exclude the proposal 46 percent of the time. Small investors, holding only $2,000 of company stock, can impose these costs on all other investors in corporations with market capitalizations in the billions of dollars. These costs can recur year after year under the SEC’s loose resubmission rules, at least assuming that ISS can be persuaded to support the proposal. The SEC’s current rules governing the shareholder-proposal process are thus inconsistent with the agency’s stated goals of efficiency, competition, and capital formation.