Despite some high-profile meetings and controversies, it appears that U.S. shareholders were generally more supportive across the board in the 2024 proxy season, with significant declines in the number of failed directors and say-on-pay proposals, and an increase in the number of majority-supported shareholder proposals. compared to 2023.

Glass Lewis’ 2024 U.S. Proxy Season Review offers detailed analysis of the issues that drove shareholder voting this year, including in-depth analysis of notable AGMs at companies like Exxon Mobil and Tesla, along with comprehensive charts and tables illustrating shareholder voting outcomes, Glass Lewis benchmark recommendations, and the current landscape in board composition, governance and disclosure, compensation levels, and more.

This excerpt shares some of the headline trends and developments we observed for the U.S. market this proxy season. Glass Lewis clients can access the full review via the content libraries on Viewpoint and Governance Hub.

Market/Regulatory

  • A February decision by the Delaware Court of Chancery called into question the validity of stockholder agreements and other corporate agreements that limit or restrict the board of directors and their authority, which have become a more common market practice among issuers.
    • The decision, in Palm Beach Firefighters’ Pension vs. Moelis & Co., held that the governance rights provided to founder, chair and CEO Kenneth Moelis pursuant to a stockholder agreement with Moelis were invalid under Section 141 (a) of the Delaware General Corporation Law (DGCL) because they substantially limited the board’s ability to carry out its duties.
    • In response, the Council of the Corporation Law Section of the Delaware State Bar Association approved amendments to the DGCL. The amendments, introduced in Senate Bill 313, were passed by the Delaware House of Representatives on June 20, 2024. The amendments arguably reverse the effects of the Moelis decision by reaffirming that shareholder agreements can restrict the actions of a Delaware company, pending approval from either the board of directors or the company’s shareholders, as applicable.
  • In March 2024, the U.S. Securities and Exchange Commission (SEC) adopted new disclosure rules requiring registrants to provide information on climate-related risks that materially impact, or have the potential to materially impact, the registrant’s business strategy, results of operations, or financial condition. Following legal challenges to the rules, The SEC issued a stay order on April 4.
    • Under the pending new rules, registrants should describe the board and management’s role in overseeing and assessing climate-related risk and should disclose the financial impact of severe weather and other natural conditions in their annual reports and registration statements.
    • Large accelerated filers and accelerated filers are required to disclose material scope 1 and scope 2 greenhouse gas (GHG) emissions in their annual reports and registration statements.
  • In June, the U.S. Supreme Court ruling in Loper Bright Enterprises v. Raimondo overturned the forty-year-old Chevron USA v. National Resources Defense Council decision, negating the federal judiciary’s practice of deferring to agencies’ reasonable interpretations of ambiguous federal laws.
    • The overturning of the Chevron decision provides the opportunity for regulated industries to challenge the SEC and other agencies’ authority in the implementation of federal law; and creates uncertainty around the SEC’s recent rulemaking agenda, particularly with respect to its cybersecurity and climate disclosure rules.
  • Post-proxy season, in August the Nasdaq stock exchange proposed rule changes intended to reduce the number of companies with shares trading below $1 on its marketplace.
    • The rule changes are a response to the large number of post-SPAC/IPO companies that went public during the pandemic period, which have been prone to substandard stock performance.
    • Nasdaq currently offers two 180-day grace periods for companies that fall below the $1 per share minimum threshold to regain compliance, after which companies may delay delisting by appealing with Nasdaq for an exemption.
    • The proposed changes would disallow companies from delaying delisting through an appeal, and instead would move them to the over-the-counter (OTC) market while waiting for appeal. Additionally, companies with shares under $1 within a year following a reverse-stock-split would automatically receive a delisting notice from Nasdaq.

Board and Governance Oversight

  • The number of directors in our coverage failing to receive majority shareholder support dropped to a three-year low of 69 directors in 2024, representing a decrease of approximately 26% from 2023. However, the number of failed directors at companies in the Russell 3000 index remained the same, with 39 directors failing to receive majority support in 2023 and 2024. These figures may indicate that a greater number of smaller companies are taking steps to improve their governance practices, thus receiving less shareholder opposition.
    • Nonetheless, plurality voting standards remain commonplace at many U.S. companies. While some companies have modified their plurality standard to require that majority-opposed directors must resign, many of these resignations are rejected and only a limited number of directors leave their board positions.
  • Negative director recommendations based on audit and financial statement concerns were largely consistent with 69 occurrences in 2024 compared to 70 last year. Notably, audit concerns remain approximately 2.5x higher than in the 2022 proxy season.
    • Of these 69 adverse recommendations, 34 were related to financial restatements and 35 were related to material weaknesses in internal controls over financial reporting, representing an 88% increase and a 33% decrease, respectively, over the previous year. This may suggest that the audit committees overseeing material weaknesses, while fewer than last year, still lack the range of audit and financial expertise to avoid financial restatements. Companies that went public following the SPAC and IPO boom have been particularly prone to audit-related issues.
    • The expanding remit of audit committee oversight may be an additional factor that has contributed to this trend of increased audit concerns, as these committees are increasingly tasked with new risk oversight duties, such as cybersecurity.
  • Board skills disclosure continued to improve and become more common amongst companies, with approximately two-thirds (67%) of Russell 1000 companies disclosing a board skills matrix, a notable 16% increase from last year.
    • Based on Glass Lewis’ comprehensive director skills assessment, senior executive experience is the most common skill among directors (held by approximately 73% of directors) for companies within the S&P 100.
    • Among new directors in the S&P 100, more emphasis appears to be placed on core industry expertise, in addition to experience in financial/audit & risk and in international sales and markets, suggesting that companies are considering a wider pool of candidates to identify directors that can help improve board oversight in specific areas.

Compensation

  • Higher support rates from shareholders illustrate the relatively quiet 2024 season. After years of being above 60, the number of total say-on-pay failures went down to 37, while the number of S&P 500s that failed their say-on-pay was more than halved from the previous year.
    • However, in terms of low support, figures are staying fairly consistent year-over-year with 227 companies getting support between 50% and 75% in 2024 compared to 239 in 2023. Meanwhile, shareholder dissent caused 13 failed equity plan proposals in 2024. This is down from the prior year but still unusually high versus longer historical trends.
  • Insufficient response to shareholder dissent grew to be the second most popular driver for an against recommendation from Glass Lewis.
    • Despite the years in which the advisory vote on executive compensation has been part of the lexicon in U.S. corporate governance, there are still companies that pay little heed to shareholders’ display of disapproval. These are joined by companies who seem to believe any change to their pay programs demonstrates adequate response to the drivers of higher disapproval. For instance, companies such as Transdigm reported the adoption of a basic clawback policy as part of their attempt to address shareholder feedback while ignoring the 2023 recoupment policy mandated by NYSE and Nasdaq listing requirements.
  • The proxy season for executive compensation consisted largely of micro-trends. One in particular drew media attention through coverage of Disney and Dollar General’s meetings – boomerang CEOs. In these displays of poor succession planning outcomes, the previously departed CEO is forced to replace his own, sometimes hand-picked, replacement while more permanent leadership is found.
    • In 2024, there were 13 instances of boomerang CEOs compared to five in 2023. Twelve had say-on-pay votes in 2024, but eight of them received favorable recommendations. All passed their say-on-pay votes, and of these, only two received less than 75% support (Lindblad Expeditions and Dollar General).
    • While not ideal, these transitions are generally less costly than transitions in which an outsider is tapped due to absence of “make-whole” sign-on awards as the former CEO does not need to forfeit awards in order to come back to the company they previously led.

Shareholder Proposals

  • Both the number of shareholder proposals and overall support for these proposals was broadly consistent with the previous year.
    • This marks a shift – in each of the past two years, proposal volumes had spiked and average support had dropped, following changes at the SEC in late 2021 that effectively allowed companies to exclude fewer proposals.
  • Despite average support for shareholder proposals remaining consistent between 2023 and 2024, there was a significant rise in the number of majority-supported shareholder proposals (up 57%).
    • Over nine-in-ten of majority-supported proposals focused on governance issues, and over three-quarters of these governance proposals dealt with a single topic: eliminating a supermajority vote standard.
  • The number of anti-ESG proposals continues to rise, but shareholder support for these proposals remains low.
    • Specifically, only three of the 94 anti-ESG proposals that were submitted in 2024 received above 10% support, and anti-ESG proposals represented over 80% of the proposals that received under 3% support in the first half of this year.

Looking for more?

For a comprehensive discussion of U.S. proxy voting and governance trends, watch our 2024 U.S. – ESG Proxy Season Review Webinar. To access the webinar on demand, please click here or visit our webinar library.