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II. Developments in Corporate Governance and Shareholder Activism
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For insurance holding companies, proxy access raises additional issues not present for many other types of issuers. Insurance holding company laws require persons who are presumed to have “control” of an insurer to file change of control approval filings or to effectively “disclaim” control before acquiring the rights that create a presumption of control. Although whether control actually exists is a question of facts and circumstances, having a representative on the board of directors of an insurance holding company is a significant fact for many insurance regulators. Insurers moving towards proxy access would be well-advised to require that any nominee have obtained all necessary regulatory approvals for board service.
Finally, despite adoption of proxy access by a few companies to date, we are not aware of any issuers that have actually had a candidate proposed to be included in the issuer’s proxy statement. This will undoubtedly be the next frontier in proxy access.
D. Say-on-Pay and Director Elections
As in the three prior years, in 2015 shareholders once again overwhelmingly voted in favor of executive compensation in companies’ annual “say-on-pay” votes. Even at companies that received a negative recommendation on the topic from Institutional Shareholder Services (“ISS”), votes in favor averaged 65%. Adverse recommendations by ISS and Glass, Lewis & Co. (“Glass Lewis”), the two largest proxy advisory firms, once again greatly outnumbered failed
votes. In the U.K., “mandatory say-on-pay” came into force in 2014. Listed issuers have since been required to submit their pay policies for vote by shareholders at their Annual General Meetings, and further may not pay any amounts outside the parameters of the adopted policies. None of the 26 FTSE 100 companies that submitted a remuneration policy for approval (which must be done every three years, or sooner if the company needs to change the policy, or fails to obtain shareholder approval of its annual remuneration report) failed to get less than the majority support for its policy at its 2015 AGM; in fact, only one company failed to get at least 90% support. In addition, only one FTSE 100 company failed to receive approval of its remuneration report, an annual event for UK-listed issuers, despite a number of negative recommendations from ISS and Glass Lewis.
In addition, the number of directors who received more than a majority of “no” or “abstain” votes with respect to their election in 2015 was equal to 2014, according to Georgeson. 27 directors fit into that category in each of 2014 and 2015. As in 2014, more than half of these directors in 2015 serve at just three companies. Such votes often result in so-called “zombie directors” when the candidates’ boards of directors do not accept resignations from the board offered by the directors whose support from shareholders was lacking. However, this is not always the case; three directors of bedding maker Tempur Sealy International stepped down in 2015 after a very successful “vote no” campaign run by activist H Partners.
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review