Shareholders have shown increasingly strong support for leadership of corporations in voting in favor of directors, while at the same time they have firmly embraced proxy access, enabling them to rebel by nominating their own members to corporate boards, a study by Ernst & Young LLP's Center for Board Matters found.
Shareholder opposition to the elections of board nominees has fallen almost steadily since 2009.
In 2015, through June 10, only 3.5% of some 15,500 nominees received opposition votes of more than 20%. That is down from 4.1% for the full year of 2014, 4.7% in 2013, 5.3% in 2012, 5.1% in 2011, 8% in 2010 and 9.8% in 2009, the farthest back the EY data go.
Boards generally consider that 20% opposition a threshold for concern, said Jamie Smith, San Francisco-based assistant director of the center, which offers thought leadership on corporate governance for corporations and institutional investors and doesn't serve any clients.
“That's the level boards are likely to want to better understand what's driving that opposition and reaching out to shareholders,” Ms. Smith said in an interview.
“Boards have gotten a lot smarter about ... a lot of factors that currently drive investor votes against directors,” Ms. Smith said, explaining the increasing shareholder support for directors.
“I think boards have cleaned up” matters of shareholder concern about “directors who don't attend 75% of meetings, or directors who are overboarded,” meaning they spread their abilities too thin by serving on many boards, she said.
“So there aren't going to be as many votes against directors for things like that.”
“Corporate performance — however investors define it — plays into whether directors are supported or not.” In 2014, the Standard & Poor's 500's total return was 13.69%.