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Companies disclosing more about board composition and investor engagement, report finds

More large companies are voluntarily enhancing their board composition presentations and disclosing investor engagement, said a 2018 proxy season review from Ernst & Young's Center for Board Matters.

Forty-six percent of S&P 500 companies provided a board skills matrix in their 2018 proxy statements (available as of July 9), up from 27% in 2017 and 11% in 2015, according to the proxy season report released Tuesday.

"While companies are required to disclose director qualifications (under rules that took effect in 2010), these graphic snapshots have evolved as a voluntary disclosure tool that enhances readability and visually highlights the board's strengths," the report said. "They highlight board diversity across skills, backgrounds and areas of expertise, in many cases mapping such skills to individual directors. The most successful of these explain how the skill categories connect to the company's strategy and risk oversight needs and clearly align with the information provided in the director biographies."

Additionally, as of July 9, 77% of S&P 500 companies engaging with shareholders on a range of topics within the past year, compared with 70% in 2017 and 56% in 2015.

Among the companies that disclosed their engagement efforts in their 2018 proxy statements, 45% said they made engagement-related changes (most often around executive compensation), compared with 46% in 2015.

The report also found rising corporate commitment to gender diversity in the boardroom, noting the percentage of S&P 500 companies with three or more female directors has risen to 49% so far in 2018, from 41% in 2017 and 35% in 2015.

Among S&P 1500 companies, the proportion of female directors rose to 21% in 2018, up from 19% last year. Historically, the proportion of female directors at S&P 1500 companies has risen one percentage point annually, the report noted.

Investors also are increasingly willing to oppose all-male boards, EY found.

"Opposition votes at all-male S&P 1500 boards have more than doubled since 2015, with those chairs receiving an average opposition vote of 15.2% this year vs. just 3.6% for the same role at boards that are 20% female," the report stated. "Similarly, votes against nominating/governance committee members and all other board members at all-male S&P 1500 boards, rose to 11.2% and 5.6%, respectively, compared with 3.3% and 2.3%, respectively, for their counterparts at boards comprised 20% of women."

At the same time, investors continue to show strong support for most executive compensation programs.

"Overall support for say-on-pay proposals continues to hover around 91% across nearly all companies, and the portion of proposals failing to receive 50% support remains at around 2%, the report stated. "Even looking at the 20 companies with the highest pay ratios so far, more than half secured support from 90% or more — including three of the companies among the top five highest ratios."

The report also found growing investor support for environmental and social proposals at Russell 3000 companies this year.

For 2018 meetings through June 30, the percentage of environmental and social proposals receiving 50% or more support rose to 6%, up from 3% or less over the past decade.

Nineteen percent of environmental and social proposals received at least 40% support in 2018, up from 12% last year, while 41% received at least 30% support, up from 29% in 2017.