Hedge funds become more active as pension funds shift gear on corporate governance and environmental proposals jump to record high
The number of shareholder resolutions sponsored by hedge funds grew this year to the highest level ever as the amount of cash on corporate balance sheets also increased, according to a study by the Conference Board and FactSet.
At the same time, the number of pension fund proposals related to corporate governance fell as companies intensified shareholder engagement and resolutions related to the environment and social issues soared to a record high, according to the study.
These changes are just a few of the trends highlighted by the Conference Board’s Proxy Voting Analytics study, which relies on data from 2,500 annual shareholder meetings at Russell 3000 companies held in the first half of the year.
‘There is a clear indication that investors are turning their attention to new issues,’ the authors write in the report, which details a series of turnarounds, trend changes and unexpected results in the 2014 proxy season.
‘It shows a fundamental shift in the types of resolutions submitted to a vote by shareholders, the sophistication developed by activist investors in the use of technology and social media to agitate for corporate change outside of the AGM, and the increased propensity of senior management to implement precatory shareholder proposals on corporate governance that have received the support of a majority of voting shares.’
The study shows shareholder proposal volume fell 2.3 percent on the Russell 3000 and 5.7 percent on the S&P 500, revealing an accelerated shift away from proposals at larger companies, the report states. It notes that the increased attention on smaller companies reflects their slower rate of adoption of shareholder-friendly measures.
The number of proposals submitted by hedge funds increased to 39 this year from 24 last year as the funds pressured companies to use excess cash to reward shareholders. Hedge funds also pushed for board representation and alternative value-maximization strategies.
Proposals on corporate governance by pension funds fell by 43 percent to 35 this year from 61 last year as pension funds increasingly found other means to engage companies on the issue and management made ‘new overtures to large institutional investors in recent years,’ the report adds.
Shareholder resolutions on environmental and social issues increased to a record 249 (43 percent of the total number of resolutions) among S&P 500 companies. The study says these issues are often proposed by individuals and received an average of only 19.5 percent of votes cast. The level of abstention in such votes is about 10.9 percent, compared with between 1 percent and 2.5 percent on other issues.
