Ernst & Young just published its 2011 Proxy Season Report that features highlights and implications for the coming year. E&Y found the top five proxy season results to be:

  1. Advisory votes on pay receive high support from shareholders in the first year of mandatory say-on-pay
  2. Director opposition votes decline
  3. Issue-shareholder engagement moves to a new level
  4. Trends continue for implementation of greater accountability measures at the board level and elimination of barriers for shareholders to push change
  5. Voting support demonstrates the growing value shareholders place on social and environmental issues

Overall the 2011 proxy season brought about significant changes to the governance landscape. Investors gained more rights through the Dodd-Frank Wall Street Reform and Consumer Protection Act. The ability to directly vote on executive pay practices and issue more frequent say-on-pay proposals provides investors with new avenues to express their opinions and views on executive pay. These new rights have also opened the door to better dialogue between issuers and shareholders.

These changes also imply that boards will feel increased pressure to keep up with trends and respond to results. Investors are expected to closely follow management responses to votes on say-on-pay proposals that receive strong support. Investors are more focused on the make-up of the board as well, with regard to gender, race and age. Boards will be challenged to defend their decisions on strategic objectives going forward, and analyze how executive compensation impacts long-term strategy and risk.

Two other interesting results from the 2011 Proxy Season include;

  1. Proposals to appoint an independent board chair received average support and has not increased much over the years and may indicate investors believe boards should have discretion over their formation.
  2. Proposals for diversity on boards has one of the fastest growth rates over the years and may indicate shareholders’ desire for more input on board makeup.

Support for corporate responsibility proposals also continues to grow.

To read the full proxy report please click here.