Proxy access has emerged as the dominant issue, and one of the most contentious, so far this corporate annual meeting season, taking the air out of a lot of other typically high-profile proposals.
“Proxy access is really the 800-pound gorilla for this proxy season,” said Patrick McGurn, special counsel, Institutional Shareholder Services Inc., Rockville, Md. “It's actually surprising access has had an impact on the broader list of topics this season.”
Perennial issues like classified boards have dropped in terms of number of proposals “as more of the activists' attention has flowed over to access,“ he added.
Proxy access gives shareholders a greater voice in nominating corporate directors by enabling them to use corporate proxy materials to nominate candidates, said Robert McCormick, chief policy officer for Glass Lewis & Co., San Francisco.
Lacking regulatory support for access, “I figured there would be a big push to private ordering (that is, shareholders filing proposals) to push companies in this direction,” Mr. McCormick said. “I was actually surprised it took a (few) years to see this many” proxy access proposals.
“There is a pretty good chance many of these will get majority support,” he said.
So far, 96 companies have been targeted with access proposals, a record number. In 2014, 25 were filed, the largest number at that time.
The New York City Retirement Systems is the leading player on access proposals, representing five pension funds whose combined assets total $160 billion. It filed access proposals at 75 companies, including Exxon Mobil Corp., Chevron Corp. and Exelon Corp.
Among money managers, BlackRock Inc. generally embraces proxy access, said Zachary Oleksiuk, director and head of the Americas corporate governance and responsibility investment team, New York, at a Feb. 12 meeting of the Securities and Exchange Commission's Investor Advisory Committee.
“We believe proxy access is a shareholder right,” Mr. Oleksiuk said. “It is fundamental to ensuring director accountability. The proxy access mechanism should provide shareholders with a reasonable opportunity to use this right.”
“Our inclination is to support shareholder and management proposals in line with the now vacated SEC proxy access rule,” invalidated in 2011 by the U.S. Court of Appeals in Washington, Mr. Oleksiuk said. That rule had set an eligibility standard enabling shareholders, or a group of shareholders owning a combined 3% of a company's stock for three years, to nominate up to 25% of the directors of the board.
That standard is the same as what the NYC funds proposed in their access resolutions.
“We anticipate generally opposing management proposals at an ownership threshold higher than this (standard), or that demonstrably impose undue administrative burdens on shareholder use of proxy access,” Mr. Oleksiuk said.
One high-profile target, Apple Inc., faces an access proposal at its March 10 annual meeting. Apple opposes the proposal.
Glass Lewis, while it generally supports proxy access, opposes the Apple proposal, noting in an analysis, “given the company's increasing responsiveness to shareholders (evidenced by its recent adoption of majority voting and share repurchase activity) and its positive financial performance, we do not believe that adoption of this proposal is necessary at this time.”
ISS, in a report, supported the proposal, calling the proposed eligibility requirements robust, while also safeguarding against abuses in the nominating process.