Public companies dealt with a high number of shareholder proposals this proxy season but few that went to a vote passed and fewer than a handful of hot-button E&S proposals received a majority vote, a Freshfields analysis shows. 

There were 945 proposals submitted since the beginning of the year, through mid-June, with the bulk of those concentrated in just under 300 companies. Amazon was the strongest magnet for activist shareholders, attracting 18 proposals, compared to a typical 2-3 proposals each among S&P 500 companies. 

Of the 945 proposals, only 53 received majority support, and all but a handful of those were bread-and-butter governance related. The rest either didn’t reach majority support or they never made it to a vote, either because they were omitted after having been granted a no-action request by the Securities and Exchange Commission, were withdrawn by the shareholders making the proposal or otherwise not included on the proxy. Some are still pending a vote.

In a noteworthy trend, among the governance proposals were more than 40 that sought to address so-called zombie directors. These are directors that are on a board despite not having received a majority of shareholder votes. In the typical proposal, these directors would be required to submit their resignation and the board would be on the hook to accept it unless a compelling reason is provided that they not. If such a reason is provided, the director would have to re-submit their resignation if they don't receive majority support at the next election. That resignation would automatically be accepted after 30 days.

None of the zombie director proposals passed, though. About a quarter of them went to a vote and they only received on average 16% support. The rest were either omitted or were withdrawn. Some are pending. 

The report didn’t go into what lies behind the increase in zombie directors but as a general matter, companies that use a plurality-based voting standard tend to be susceptible to having them and it’s possible the SEC’s adoption of universal proxy cards in 2022 is playing a role as well. Under that change, shareholders can vote for a mix of directors on a single card rather than vote for separate slates of candidates on competing cards. 

Bad climate for E&S proposals

Of the 945 proposals tracked by Freshfields, 633 went to a vote and of those only 53 received majority support. The rest were either withdrawn, omitted (with the SEC granting a no-action request) or otherwise not presented. A few dozen are pending. 

Proposals that related in some matter to the environment, like wanting the company to have a climate transition plan, or to social issues, like taking a stand on reproductive rights, fared poorly. Only three such proposals received a majority vote in favor.  

Of 189 proposals related to the environment, two received majority support, both of them asking fast food companies — Wingstop and Jack in the Box — to adopt greenhouse gas emission standards. Of the remaining proposals, 90 failed to receive a majority vote (27% support was the average) and 55 were withdrawn. Another 20 were omitted from the vote, 12 weren’t included in the proxy for other reasons and the rest are pending. 

Social-issue proposals fared even more poorly. Of 395 proposals, only one received a majority vote. That proposal was for DexCom, a glucose measurement provider for diabetics. Activists wanted it to issue a report on its political contributions. The proposal squeaked by with 51.9% support.  

“Environmental and social proposals continue to receive low levels of shareholder support,” the Freshfields attorneys said in a summary of the findings. 

Of the 395 social proposals, 250 received less than a majority vote, 51 were withdrawn, 35 were omitted, 37 weren’t included in the proxy and 21 are pending. 

Among the issues activist investors wanted but failed to get addressed include concerns about animal rights, artificial intelligence, child welfare and indigenous rights. 

Companies saw a lot of anti-ESG proposals as well, although they didn’t fare any better. The typical level of support for those that went to a vote was 23%. 

Most of these tried to require companies to report on whether their DEI initiatives are resulting in illegal discrimination or are costing the company money, including because of lawsuits they cause.

“Although support for [these anti-ESG] proposals remains minuscule, proponents and proposals are increasing,” the summary says.