Procedure-based Proposals Gain More Traction Than Exec Comp or Social Policy, Survey Says…

Shareholder Activist - Procedure-based Proposals Gain More Traction Than Exec Comp or Social Policy, Survey SaysShareholder proposals that focused on affecting procedures and by-laws have been far more likely to be adopted by US publicly traded companies than other types of investor submissions.

That is according to “Proxy Monitor 2011-A Report on Corporate Governance and Shareholder Activism” an insightful resource on the subject by James R. Copland, recently released by the Center for Legal Policy at the Manhattan Institute.

According to the report, “Overall, 35 percent of all shareholder proposals submitted to Fortune 150 companies from 2008 through 2011 related to process-based corporate-governance, 26 percent related to executive compensation, and 39 percent related to other social or policy goals.”

A shareholder submits a shareholder proposal to try and compel a public company to do something that the management may or may not have expressed interest in doing. Any shareholder who owns more than $2,000 in stock or 1% of the company is permitted to engage a shareholder proposal.

So how successful were the shareholder proposals submitted since 2008?

“In the study period, 21 percent of proposals related to general process-based corporate governance concerns passed, but only 7 percent of those on executive compensation succeeded,” the Proxy Monitor 2011 report stated. “None of the proposals related to social or policy goals, including proposals relating to corporations’ political spending, were supported by a majority of a company’s shareholders.”

For a corporate gadfly, this data is valuable. Overall, any shareholder proposal seems to face staunch opposition for success. However, if your proposal is related to amending process-based corporate governance, the hill seems a bit less steep to climb than for other types of proposals.

Here are the three major categories the data identified:

  1. Substance-based shareholder proposals relating to questions of executive compensation. These types of proposals seek to increase shareholder power over executive-compensation decisions, including overall pay packages, equity compensation, golden parachutes, or “golden coffins” (i.e., insurance-type payouts given to executives’ estates in the event of untimely death).
  2. Substance-based shareholder proposals related to social or policy goals unrelated to traditional agency cost concerns. These types of proposals have covered such topics as corporate environmental policies; corporate support for health-care reform; human rights, animal rights, and employment rights; and, increasingly, corporate political spending and lobbying.
  3. Process-based shareholder proposals relating to questions of corporate governance. These types of proposals seek to increase shareholder value by changing the power of shareholders relative to boards, either by modifying voting rules, insisting that all directors are elected annually, enabling shareholders to take action outside the annual meeting process, or separating the positions of chairman and chief executive officer.

If you have a genuine concern about an issue affecting the public company in which you own stock, you should not be deterred. While the likelihood of success is limited, even dismal in some instances, the proposal motion itself is not wasted.

If your proposal is responsible, sound, and fair and sincerely seeks to increase value (and not just antagonize management), you should stand up and speak up. Your idea may influence other shareholders, even prompt management to take action on its own.

Understanding the costs and the actual submission process should also weigh in your decision. This blog includes such information, though I encourage you to submit questions.

Ultimately, informed advocacy yields a much more successful brand of activism.

To contact Craig McGuire directly, please email

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