2019 Proxy Season Survey

Summary of Study

Bottom Line: In this annual survey of public companies' experience with proxy advisory firms, respondents said it was difficult to engage constructively with proxy advisory firms, they are increasingly concerned about proxy advisory firms' conflicts of interest, and that a significant percentage of their shares are voted in line with proxy advisory recommendations. Proxy advisory firms should focus their attention on fiduciary duty, shareholder value, freedom from conflict, portfolio manager discretion, and compliance.

One issue of increasing interest to policymakers is the outsize role that proxy advisory firms play in corporate governance and the challenges these firms pose to businesses that are already public or considering an IPO. This is the fifth year that Nasdaq and the U.S. Chamber of Commerce have conducted a survey to examine the experiences public companies had with proxy advisory firms during the most recent proxy season.

Findings include:

  • 87% had a proxy advisory firm make a recommendation on an issue included in their proxy statements, a level that is 5% lower than in 2017 and 2018.
  • 80% carefully monitored proxy advisory firm recommendations for accuracy or reliance on outdated information, lower than in 2018 (83%) and 2017 (91%).
  • 39% believed that proxy advisory firms carefully researched and took into account all relevant aspects of a particular issue on which the firms provided advice, the same number as in 2018.
  • 17% formally requested that proxy advisory firms provide them with a preview of vote recommendations, down from 21% in 2018 and 30% in 2017. For companies that did request a preview, proxy advisory firms provided them only 39% of the time, down 5% from 2018.
  • 30% asked proxy advisory firms for opportunities to provide input both before and after the firms’ recommendations were finalized of companies made such requests, down from 38% in 2018 and 51% in 2017.
  • 21% pursued meeting opportunities in 2019, down from 29% in 2018 and 52% in 2017.
  • For companies that asked for a meeting, their request was denied 60% of the time, a number that continues to grow from 2018 (57%) and 2017 (38%).
  • When companies encountered a vote recommendation they believed was based on inaccurate or stale data, they alerted the proxy advisory firm, portfolio managers, and/or SEC staff 41% of the time, a 5% decrease from 2018
  • 29% advised proxy advisory firms and their clients of recommendations that did not advance the best economic interest of shareholders, a 10% decrease from 2018.
  • 19% identified significant conflicts of interest, up from 10% in 2018.

Proxy advisory firms must focus their attention on five overarching principles:

  • Fiduciary duty
  • Shareholder value
  • Freedom from conflict
  • Portfolio manager discretion
  • Compliance

Read the full study here