the dbriefs governance, risk & compliance series presents: 2015 proxy season highlights and...

The Dbriefs Governance, Risk & Compliance series presents:

2015 proxy season highlights and other corporate governance developments

Tom Ball, Senior Managing Director, Morrow & Co. LLCMaureen Bujno, Director, Deloitte LLPRobert Lamm, Senior Advisor to Deloitte LLP

July 30, 2015

Copyright © 2015 Deloitte Development LLC. All rights reserved.

Agenda

2015 proxy season highlights

2016 proxy season outlook

Other topics impacting the governance landscape

Board and management considerations

Question and answer


Increasing board efficiency and effectiveness

Governance framework

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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Poll question #1

My company is classified as:

• Public

• Private

• Nonprofit

• Governmental

• Not applicable


2015 proxy season highlightsSummary of shareholder proposal results by category

Corporate Governanace

Executive Compensation

Environmental & Social

251

47

125

87

0

0

Source: Institutional Shareholder Services (ISS)Note: Data is as of July 16, 2015

Corporate Governanace

Executive Compensation

Environmental & Social

Voted on

Passed

Total proposals = 423

Voted on

Voted on


Pro-rata Vesting of Equity Awards

Claw-back of Payments under Restatements

Stock Retention/Holding Period

21

15

11

Report on Lobbying Payments and Policy

Report on Political Contributions

Report on Methane Emissions

Report on Sustainability

Report on Financial Risks of Climate Change

Prohibit Political Spending

Policy and Report on Board Diversity

Report on Human Rights Risk Assessment Process

30

26

23

19

11

8

4

4

Summary of shareholder proposal results by category


Proxy Access

Independent Chair

Written Consent

Special Meetings

Supermajority Vote

Recapitalization Stock Plan

Majority Vote Director Elections

Declassify Board

Amend Bylaws

84

62

36

21

11

11

11

11

4

Corporate Governance Executive Compensation Environmental, Political, and Social




• Proxy access• Require independent board chairman• Provide right to act by written consent• Report on political spending/lobbying

Most common shareholder proposals


Poll question #2

Did your organization receive any shareholder proposals during the 2015 proxy season?

• Yes

• No

• No (my company is not public)

• Don’t know / Not applicable


Corporate governance – shareholder proposals2015 proxy season highlights

Shareholder Proposal Number of proposals voted on in 2015

Number that passed

Average Support

Number of proposals voted on in 2014

Number that passed

Average Support

Proxy Access 84 49 54.60% 17 5 33.80%

Require Independent Board Chairman 62 2 29.05% 59 3 31.14%

Provide Right to Act by Written Consent 36 2 39.41% 28 0 38.40%

Amend Bylaws - Call Special Meetings 21 4 42.39% 13 4 41.58%

Reduce Supermajority Vote Requirement 11 7 59.83% 12 8 67.27%

Approve Recapitalization Plan for all Stock to Have One-vote per Share

11 1 33.60% 10 0 25.82%

Require a Majority Vote for the Election of Directors 11 8 64.40% 28 16 58.21%

Declassify the Board of Directors 11 11 78.05% 17 15 82.49%

Amend Vote Requirement to Amend Bylaws 4 3 68.90% 0 0 0%



Corporate governance – shareholder proposals2015 proxy season highlights

Proxy access• What is it?• Proposals put forth by management vs. investors

− Most shareholder proposals were 3% / 3-year

− Management proposals were split – 3% and 5% thresholds

− Levels of support; outcome

• Proposal sponsors− New York City Comptroller Boardroom Accountability Project

◦ Filed 75 resolutions based on three areas: climate change, board diversity and CEO pay

− Pension funds, individuals, others


Executive compensation – shareholder proposals2015 proxy season highlights



Number that passed

Average Support


Number that passed

Average Support

Pro-rata Vesting of Equity Awards 21 0 32.31% 23 4 35.90%

Clawback of Payments under Restatements 15 0 28.42% 3 0 28.70%

Stock Retention/Holding Period 11 0 23.33% 27 0 22.22%

• Many executive compensation-related proposals were put forth by individuals

• Proposals related to CEO-median employee pay ratio appear to have been withdrawn; a few were deemed excludable by the SEC on the basis of Rule 14a-8(i)(7)1

- Rule 14a-8(i)(7) provides that a proposal is excludable when the proposal deals with a matter relating to the company’s ordinary business operations

1Source: Gibson, Dunn & Crutcher LLP


Environmental, political & social – shareholder proposals2015 proxy season highlights



Number that passed

Average Support


Number that passed

Average Support

Report on Lobbying Payments and Policy 30 0 25.40% 38 0 25.88%

Report on Political Contributions 26 0 33.33% 45 1 30.24%

Report on Methane Emissions Management and Reduction Targets

23 0 22.70% 20 0 24.57%

Report on Sustainability 19 0 30.90% 11 0 29.97%

Report on Financial Risks of Climate Change 11 0 21.66% 9 0 22.07%

Prohibit Political Spending/Shareholder Approval of Political Spending

8 0 13.30% 14 0 7.75%

Adopt Policy and Report on Board Diversity 4 0 15.05% 2 0 25.10%

Report on Human Rights Risk Assessment Process 4 0 9.25% 8 0 24.62%


Environmental, political & social – shareholder proposals2015 proxy season highlights

Report on lobbying payments and policy and report on political contributions

• Many investors seek reports that include lobbying payments (federal and state), payments to trade associations used to lobby, political contributions, and payments to tax-exempt organizations that write and endorse model legislation

• Push for SEC to adopt rule requiring political expenditure disclosure by all public companies; petition has received record level support

Environmental and sustainability reporting

• Increased Catholic investor activity

− Pope Francis’s encyclical; a call to action on global warming

− Catholic groups submitted 12 environmental related proposals at the largest 250 U.S. companies. Proposals called for reports on sustainability and climate-change risk, creation of targets for greenhouse-gas emissions, appointing directors with environmental expertise, etc.


Poll question #3

Which of the following do you believe will be the most significant hot topic in the 2016 proxy season?

• Pay ratio disclosure

• Proxy access and rules for electing directors

• Environmental and sustainability reporting

• Leadership structure

• Board diversity policies



What could next year hold?2016 proxy season outlook

A continued focus on:

• Shareholder activism• Proxy access

−Board composition – consideration to tenure, board diversity, refreshment practices, and skills/expertise

• Proxy disclosure enhancements• Environmental and social issues• Majority voting


Other topics that may impact the governance landscape

• Shareholder engagement and shareholder activism− Potential for increased focus on retail investors (case-by-case)

• Asset managers send letters to CEOs, shareholders• Board diversity

− Thirty Percent Coalition’s “Adopt a Company” campaign regarding companies with no female board directors; filed 25 board diversity resolutions for 2015

− Proponents seek corporate commitments to gender diversity and progress reports on board composition changes

• Bylaw and charter provisions – impact on shareholder rights


• SEC activity− Mary Jo White’s viewpoint on shareholder engagement

− Concept release on audit committee disclosure requirements

− Dodd-Frank implementation pending◦ Pay ratio

◦ Pay-for-performance

◦ Clawback policies

◦ Hedging policies

Other topics that may impact the governance landscape


Board and management considerations

• Conduct a vulnerability assessment of company and board practices in light of shareholder interests and consider a response plan for shareholder proposals

• Understand mix of shareholder base and consider respective approach for outreach

• Review policies and criteria related to board selection, including diversity

• Assess current levels of disclosures and opportunities for enhancement

• Be aware of any voting policy changes put forth by proxy advisory firms

• Prepare for Dodd-Frank requirements effective 2016, 2017


Poll question #4

Overall, what level of impact do you think engaging with shareholders has on mitigating proposals being submitted?

• High impact

• Moderate impact

• Low impact


Question and answer

Join us August 27 at 2 PM ET as our Governance, Risk & Compliance series presents:

When risk drives performance: Leveraging the extended enterprise for operational excellence


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Tom BallSenior Managing DirectorMorrow & Co. [email protected]

Maureen BujnoDirectorCenter for Corporate GovernanceDeloitte [email protected]

Robert B. LammSenior Advisor to Deloitte LLPCenter for Corporate [email protected]

Contact info


This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.

About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a detailed description of DTTL and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

About Morrow & Co., LLCMorrow & Co., LLC is a world leader in security-holder services and the advisor of choice for more than 750 publicly-traded companies worldwide, mutual funds, and well-known activists looking to reach and influence shareholders. We believe our depth of knowledge and practical experience are what sets us apart from our competitors. This is an outgrowth of the stability and longevity of our organization – with more than four decades in the business, and a seasoned senior management team. This foundation, coupled with our unique understanding of the investment community and a disciplined approach to research and strategic analysis, is at the core of our broad range of fully-integrated services.

Copyright © 2015 Deloitte Development LLC. All rights reserved.36 USC 220506Member of Deloitte Touche Tohmatsu Limited

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