Boardroom recap: The 2022 proxy season

Looking back on the 2022 proxy season, the story on shareholder proposals stands out. Overall support for shareholder proposals fell for the first time in years, though pockets of strong support inside the areas of climate and human capital deserve attention. Support for say-on-pay also continued to fall, as investors appear to be taking a more critical posture.1 Finally, overall support for director elections also retreated.2 As boards undertake their annual governance reviews and make the decisions that will feature in the 2023 proxy statement, considering these results can lead to a smoother season next year.

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2022 Proxy season intro image

Shareholder proposals

After several years of being relatively stagnant, the number of shareholder proposals voted on has been growing since 2020. In 2022, the number of proposals that went to a vote at Russell 3000 companies increased significantly to 555, a 25% increase over last year. This jump reflects two trends. First, the number of proposals filed increased by approximately 17%. Second, the number of no-action requests granted by the SEC, which allow companies to exclude proposals from their proxy statement, dropped by 40%.

Part of the decline likely reflects the SEC staff’s change in approach to the ‘ordinary business’ and ‘economic relevance’ exceptions, announced in Staff Legal Bulletin 14L in November 2021.

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Executive compensation

As the 2022 proxy season wrapped up, record numbers of companies failed to receive majority support for say-on-pay. Average support at companies in the S&P 500 and Russell 3000 hit record lows since the vote was introduced 11 years ago, at 87% and 90% respectively. In the S&P 500, 21 companies failed their say-on-pay vote, with 207 companies receiving below 70% support. The number of failed votes at Russell 3000 companies hit 71.

The inclusion of ESG metrics in executive compensation has received tremendous attention recently as a new trend in corporate pay plans. Many compensation committees have made adjustments to their plan targets to include new goals, and are offering additional disclosure about how their compensation plans support the company’s ESG strategy.

Director elections

Director elections rarely receive significant attention if there isn’t a proxy fight or vote “no” campaign. However, overall support for director elections in the Russell 3000 has fallen below 95%.While that level is still extremely high, the vast majority of those elections are routine and small changes in the top line support can indicate significant changes in individual situations. The percentage of directors receiving 50-95% support has increased from 22% to 30% over the past five years, while the percentage failing to receive majority support has remained stable.

The drop-off in director support is being driven by a host of reasons. Common reasons for voting against directors include lack of board diversity, oversight failures, poor climate risk management disclosure, failed engagement activities, executive compensation issues, and overboarding.

Looking ahead to 2023

The drop in support for director elections and say-on-pay makes it clear that shareholders are scrutinizing board actions more than they have in the past. As directors look ahead to the 2023 proxy season they should ask the following questions:

  • Have we identified priority topics for shareholder engagement?
  • Should the topics be addressed by board members or management?
  • Can we address any potential issues with director elections proactively?

  • How are we addressing any proposals that were on our ballot this year?
  • If a proposal didn’t pass, are there actions we can take to reduce support in case it is refiled?
  • How would we respond to the shareholder proposal topics that are commonly receiving majority support?

  • Are we monitoring the overall alignment between pay and stock price performance?
  • How do our executive compensation plans reflect our ESG priorities?
  • If we use ESG metrics in our plans, how are they aligned with our core business strategy?

…read more in the report.

Unless otherwise noted, voting data on shareholder proposals and say-on-pay resolutions has been provided by Proxy Analytics.

Semler Brossy, 2022 Say on Pay & Proxy Results, July 2022

Semler Brossy, 2022 Say on Pay & Proxy Results, July 2022

Contact us

Maria Castañón Moats

Maria Castañón Moats

Leader, Governance Insights Center, PwC US

Paul DeNicola

Paul DeNicola

Principal, Governance Insights Center, PwC US

Matt DiGuiseppe

Matt DiGuiseppe

Managing Director, Governance Insights Center, PwC US