- While Canadian companies were subject to the lowest number of proxy contests (35) since 2017, as economic uncertainty may have paused activities, history has taught us that activism booms following periods of uncertainty.
- The year saw a drastic increase in environmental and social-related shareholder proposals, but the spike was not matched with similar sentiment as support waned in the face of greenwashing accusations, growing concerns that demands being placed on companies are overdone, and the rise of the so-called “anti-woke movement.”
- The introduction of universal proxy card in the U.S. lowers the threshold for activists to launch a proxy contest and is likely to give rise to activism and more personal battles for directors.
- Contact Kingsdale Advisors at [email protected] to book a board education session to discuss the issues that impact your board.
TORONTO–(BUSINESS WIRE)–Kingsdale Advisors, North America’s leading strategic shareholder advisory firm, today released its 2022 North American Proxy Season Review, an in-depth look at the biggest trends impacting boardrooms and directors. This year’s report delivers critical insights on shareholder activism and corporate governance issues, including how companies and boards may now face environmental and social activism from two separate and opposing sides, how directors of U.S. companies may fight more personal battles, and how winning a favourable recommendation from proxy advisors still may not be enough.
“Companies beware: shareholder activism is rapidly evolving and becoming more complex. Activists now target companies from all angles and management can no longer count on proxy advisors and institutional investors to automatically side with them,” said Wes Hall, Executive Chairman and Founder of Kingsdale Advisors. “In Canada, facing economic uncertainty, companies were subject to the lowest number of proxy contests in 2022 since 2017 – but history has taught us that activism booms following periods of uncertainty. In the U.S., regulatory changes and the introduction of the universal proxy card will add to an activist’s leverage – making shareholder engagement and good corporate governance more important than ever.”
Highlights from the 2022 North American Proxy Season Review:
Swaying Support from Proxy Advisors and Institutional Investors: While the overall numbers are still in their favour, 2022 saw one of the lowest levels of support for management in proxy fights from ISS and Glass Lewis in the past five years. In addition, institutional investors have become increasingly open to supporting activists and many now have more stringent policies than proxy advisors when it comes to issues concerning director overboarding, diversity, ESG and auditor tenure.
No Longer a Sure Thing; Increased Scrutiny on Auditors: A growing number of investors voted against company auditors this proxy season. While the vote is non-binding, it reflects shareholder sentiment and their possible concerns over auditor tenure, tendering practices and independence. Replacing an auditor is a costly and time-consuming process, and the unique landscape of the Canadian audit industry might pose challenges to regular auditor turnover.
Introduction of UPCs in the U.S.A.: With universal proxy cards (UPC), shareholders can pick and choose their preferred combination of director nominees from both management and activist slates, previously only available to in-person voting. This lowers the threshold for activists to launch a proxy contest and is likely to give activists more leverage for negotiation. UPCs also make it easier for activists to target individual directors, meaning far more personal battles.
Rising E&S Proposals, but Waning Support: The number of environmental and social-related shareholder proposals soared in 2022; however, the spike was not matched with the same sentiment as support waned in the face of greenwashing accusations and the rise of the so-called “anti-woke movement.” Progressive shareholder proposals often get the spotlight, but recently, so-called “anti-woke supporters” have pushed themselves onto the stage, meaning companies could face ESG activism from two separate and opposing sides. Despite the current dip in support, there is no sign that shareholder interest in ESG will end anytime soon.
Political and Social Issues Taking the (Financial) Spotlight: Traditionally, a company’s financial decisions have always been a focal point for shareholders, but recent U.S. events – in particular the January 2021 Capitol riot and the overturn of Roe v. Wade – have prompted shareholders to look more critically at the alignment (or lack thereof) of a company’s publicly stated values and their corporate spending.
“Companies need to continuously review their governance practices, understand their shareholders’ views and concerns, and focus on communication and engagement,” said Ian Robertson, Chief Executive Officer of Kingsdale Advisors. “A proxy fight can test even the most seasoned director. As North America’s most trusted strategic shareholder advisory firm, our team of industry experts helps companies gauge shareholder sentiment, identify potential vulnerabilities and deliver insights to the biggest issues that impact your board.”
Download Kingsdale’s 2022 North American Proxy Season Review.
About Kingsdale Advisors
With offices in Toronto and New York, Kingsdale Advisors is the leading advisor to public companies on all shareholder, governance, and transaction-related matters, having acted on the largest and highest profile proxy fights, transactions, and other special situations. Since 2003, public companies across North America have looked to the expertise of Kingsdale Advisors to secure the success of transactions or resolutions driven by shareholder votes. Kingsdale Advisors’ multidisciplinary team offers an array of specialized services focused on strategic and defensive advisory, governance advisory, compensation advisory, strategic communications, and voting analytics.
Contacts
Hyunjoo Kim
Vice President, Strategic Communications & Marketing
Kingsdale Advisors
Phone: 416-867-2357
Email: [email protected]
