Key Takeaways:
Shareholder proposal trends to anticipate continuing into 2023:
- Increasing shareholder proposals – made easier by prior years’ SEC regulations allowing more access for shareholders
- Certain commitments made by companies in previous periods (e.g., racial equity audits, DEI and other social aspects) likely to be scrutinized by shareholders, reflective of societal concerns
Individual directors expected to be held accountable on a variety of issues (e.g., lack of movement on commitments made previously, over boarding of directors, etc.) through ‘no’ votes for re-election
Prepare your investor engagement strategy on a “clear day” (advanced warning system before issues arise), based on stage and profile of company, to take in information from investors to inform the strategy
Establishing a robust board evaluation and refreshment process will allow companies to both satisfy changing needs of the company AND more easily “comply with or explain” via increasing disclosure expectations for how board composition is determined and why this composition makes sense for the company.
Beware of ESG “fatigue” - Don’t allow yourself to get side-tracked by confusion over timing/content of regulatory direction. Boards need to look critically at, and articulate, the material ESG factors impacting their companies and how these are managed with respect to ERM and strategy.