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II. Developments in Corporate Governance and Shareholder Activism
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listen-only call to explain its current strategic vision in detail? On January 19, 2016, Icahn posted another letter on his website, in which he continued to push for structural changes at AIG, and suggested he was waiting to see what the call on the 26th will hold. Regardless of the answer, we believe Mr. Icahn will find it harder to influence affairs at AIG than at his previous non-insurance targets.
B. Shareholder Proposals in 2015
The number of shareholder proposals in the 2015 proxy season was higher than in 2014, reversing a trend that had spanned several years. According to information compiled by Georgeson Inc., the number of shareholder proposals received by companies in the S&P 1500 increased by 5.5% overall. The number of proposals actually voted on increased even more dramatically, by approximately 34%, to 333 proposals. Proxy access proposals, which are further discussed in Section II.C below, were the main reason for the increase, with 72 coming to a vote in 2015 compared to 13 in 2014.
As in the past, shareholder proposals fall into two broad categories: those relating to corporate governance, and those relating to social or political goals. In the former category are proposals to require companies to have a board chairman independent from the chief executive officer, the most common governance proposal after proxy access. In 2015, 58 such proposals came to a vote, comparable to the 59 such proposals that were voted on in 2014. Of these, only two proposals received more than a majority of the votes cast, and none received the vote of a majority of the outstanding shares. These proposals overall received an average of 30% of the vote, lower than in 2014 but continuing to show the importance of this issue to a range of institutional investors. As in prior years, shareholder proposals to eliminate classified boards, adopt majority voting for directors and eliminate supermajority voting provisions were more successful. These are the only
types of proposals that routinely receive a majority of votes cast. However, the number of such proposals was lower than last year, likely reflecting the extent to which these governance changes have already been adopted by the S&P 1500, or perhaps reflecting activist focus on other issues, particularly proxy access. Proposals on majority voting for directors declined to only seven in 2015, compared to 24 in 2014. The level of support for such proposals at companies that had not adopted any form of majority voting was higher in 2015 than in 2014, at 76% as compared to 66%. However, at companies that had already implemented some form of majority voting (typically, retaining a plurality vote standard for election, but adopting a majority vote policy that calls for directors to submit a resignation if they fail to receive a majority of the vote), these proposals received less than a majority of votes cast. This is consistent with the results in past years (other than, notably, 2014); in general, such proposals routinely fail at companies that have adopted such “majority voting lite” protections.
Social or environmental proposals remained popular in 2015. Typical examples include proposals to require issuers to make disclosures about political contributions or about sustainability. The level of favorable votes for proposals about political contributions was up slightly in 2015, to 24% from 20% in 2014. At least one proponent of greater transparency in respect to political contributions, the New York State Common Retirement Fund (“NYSCRF”), adopted a new strategy in 2015 for dealing with companies that are reluctant to accede to its proposal and disclose greater information about contributions. NYSCRF made a DGCL Section 220 books and records demand on Oracle Corp. to force it to make public information about political contributions it made in 2015. Oracle resisted, and in October 2015 NYSCRF filed suit in Delaware Chancery Court for inspection of the relevant books and records. This sort of adjunct litigation in support of a social proposal continues to be rare, but could increase if NYSCRF is successful in that case.
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review