Josh Black

VP of Editorial, Diligent

What companies need to know about shareholder priorities

With the 2024 proxy season now firmly behind us, public companies and their advisors are already deep into engagement season.

Engagement season is an opportunity for companies to understand the concerns of their investors and explain how they are responding in a bid to win increased support at future meetings. It begins with the disclosure of voting records from the past proxy season, allowing companies to understand which shareholders they have to win over.

Diligent Market Intelligence helps companies, advisors, and investors understand the voting, governance and compensation landscape to manage shareholder engagements, and its annual Investor Stewardship report highlights key trends that are shaping the way investors interact with public companies.

Here’s a summary of the crucial lessons from the 2024 version of the report:

1. Increased scrutiny of governance: Investors are intensifying their focus on corporate governance. This is evident from their growing support for shareholder proposals and targeted voting practices, particularly against chairs of nomination and governance committees – the board role that receives the lowest level of average support. This trend underscores a shift towards greater director accountability and protections for shareholders in corporate governance structures.
2. Transparency in voting: For the first time, most significant hedge funds are disclosing their votes on compensation matters, marking a significant step towards transparency in a key reform by the Securities and Exchange Commission (SEC). This development gives companies a clearer insight into which investors are supportive of their strategic decisions and allows for a better understanding of the shareholder base. Investor relations teams that have access to and use the data will have a competitive advantage over their peers.
3. Rising compensation and support: As executive compensation reaches a record high, investor support is also increasing. This is attributed to a reduction in one-time awards and a stronger alignment between pay and performance. Improved engagement and disclosure practices are also playing a crucial role in garnering investor backing.
4. Shareholder engagement as risk mitigation: Engaging with shareholders is increasingly recognized as a critical strategy for risk mitigation. Active dialogue between companies and their shareholders can lead to more informed votes and reduce risk by addressing systemic challenges and the disruption that comes from negative vote outcomes.
5. Keep calm and maintain environmental and social oversight: Investors continue to prioritize transparency and oversight concerning environmental and social issues, even as support for shareholder proposals on these topics appears to be on the decline. That decline is because shareholder proposals have become increasingly prescriptive, according to large investors – and the SEC’s higher rate of no-action relief reflects this ongoing concern. Regulatory frameworks governing climate, supply chain, and human capital disclosures should continue to divert engagements away from shareholder proposals and onto more universal approaches, although companies have also got better at negotiating with proponents to withdraw resolutions in return for signs of progress.

As the landscape of investor stewardship evolves, staying informed and prepared is more crucial than ever. Diligent Market Intelligence offers a range of tools for benchmarking, investor engagement, and activism preparedness, including the most comprehensive global voting records.

For those looking to deepen their understanding and enhance their strategies in investor stewardship, downloading the full 2024 report from Diligent Market Intelligence is highly recommended.