Results of the 2017 Proxy Season in Silicon Valley and Large Companies Nationwide
A Comparison of Silicon Valley 150 Companies and the Large Public Companies of the Standard & Poor's 100
This companion supplement to the Fenwick survey, “Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies,” covers trends in stockholder voting at annual meetings in the 2017 proxy season among the technology and life sciences companies included in the Silicon Valley 150 Index (SV 150) and the public companies included in the Standard & Poor’s 100 Index (S&P 100).
In the 2017 proxy season, 138 of the SV 150 companies and all 100 of the S&P 100 companies held annual meetings that included voting for the election of directors, ratifying the selection of auditors of the company’s financial statements and voting on executive officer compensation (“say-on-pay”).
Annual meetings also increasingly include voting on one or more of a variety of proposals that may have been put forth by the company’s board of directors or by a stockholder that has met the requirements of the company’s bylaws and applicable federal securities regulations.
Key Findings Include:
Annual Meeting Participation
An average of approximately 89% of shares of SV 150 companies was represented in person or by proxy at company annual meetings during the 2017 proxy season, similar to 2016. However, in addition to the approximately 11% not represented, an additional 12% were represented via proxy by brokers who did not receive instructions on voting for the bulk of matters for which broker discretionary voting is not permitted. This compares to 13% not represented and 14% broker non-votes in the S&P 100 in the same period.
The ranges of representation and voting, though, were somewhat broader in the SV 150 than the S&P 100 (e.g., 50.3% – 98.9% voting in the SV 150, compared to 70% – 94% voting in the S&P 100).
In the vast majority of cases, the elections of directors continue to be uncontested. Unlike 2016, when there were no contested elections in the SV 150 (and none in the S&P 100), one of the SV 150 companies and one of the S&P 100 companies had a contested election at its annual meeting in the 2017 proxy season. Cypress Semiconductor’s board slate competed with a slate of two candidates, both of which were ultimately elected (Cypress entered into an 11th hour settlement and two directors resigned when the outcome of the voting was clear). General Motors handily defeated a competing slate of three candidates.
There was a greater average level of opposition in the S&P 100, as say-on-pay opposition reached 15% or more of votes cast (ignoring abstentions and broker non-votes) at 21% of SV 150 companies (compared to 19% of S&P 100 companies). Within the SV 150, opposition reached 30% or more at seven companies (of which six had opposition of 40% or more, including three companies where opposition exceeded 50%). In the SV 150, 12 companies had opposition of 30% or more in 2016, and 10 companies had such say-on-pay opposition in 2015.
Other Proposals Voted On
The increased number of proposals in the S&P 100 was a function of the fact that stockholder proposals are mainly a large company phenomenon (only four stockholder-sponsored proposals were voted on by stockholders outside of the top 50 companies in the SV 150 companies), as well as the fact that larger companies are significantly more likely to hold say‑on‑pay votes annually.
In the SV 150, company proposals were mostly compensation-related (primarily equity plan approvals) (87%); governance (12%); and other (1%). This is compared to the S&P 100, where compensation-related proposals (primarily equity plan approvals also) were 78% governance‑related were 16% and other proposals were 6%.
There were many more stockholder-sponsored proposals in the S&P 100 compared to the SV 150.
SV 150 stockholder proposals were evenly split between governance- and policy-related topics, with no policy-related proposals being passed and only five of 20 governance proposals passed. In comparison, S&P 100 policy-related proposals comprised 56% of stockholder proposals—where the three proposals of 115 policy-related that passed were environment/sustainability topics—and 34% governance‑related topics (of which, only three of 70 passed).
The SV 150 had two stockholder proposals to eliminate dual-class stock structure voting, both of which failed, while the S&P 100 had four such stockholder proposals that also failed.
SV 150 stockholder proposals in 2017, however, saw a shift toward policy issues and fewer governance topics compared to 2016.
In the SV 150, there was an increase in political/lobbying activities proposals (from two to six over the past three years), and Israel/Palestine/Holy Land (from one to three over the last three years), plus an emergence of charitable contributions, along with a decline in environmental/sustainability and human rights and animal testing/welfare.