Array of shareholder proposals on tap for 2024: ISS

Canadian companies will face an array of shareholder proposals during the upcoming proxy season, finds ISS Governance.

ISS observed that the 2024 proxy season will take place amid global economic uncertainty, ongoing geopolitical conflicts, widespread elections and a tricky monetary policy environment.

“Companies and investors will have to continue to grapple with these economic uncertainties and their impacts on key governance and stewardship issues such as corporate risk management, climate change risks, executive compensation, human capital management and M&A, as well as board oversight and accountability, through 2024 and beyond,” ISS said in a report.

In Canada, a variety of shareholder proposals will be submitted by Quebec-based advocacy group MÉDAC, including new proposals regarding in-person annual meetings, linking incentive compensation to ESG objectives, and more detailed disclosure of compensation ratios and tax havens, ISS reported.

“Repeat shareholder proposals will include those related to say-on-climate, auditors and a circular economy,” it said, adding that there have also been proposals submitted by The Accountability Board, the BC General Employees’ Union, and the Shareholder Association for Research & Education, among others.

Additionally, the report said companies with low levels of shareholder support for say-on-pay resolutions in 2023 are expected to “include robust responses in their 2024 proxy statements.”

There were four failed say-on-pay votes in 2023, it noted, and 23 companies received less than 80% support from shareholders, up from 20 companies in 2022, ISS said.

“Median CEO pay at S&P/TSX Composite Index companies declined slightly on a year-over-year basis in 2023, driven primarily by a reduction in median annual bonus and option grants, offset by an increase in median base salary,” the report said.

In 2023, there was also an increase in proxy contests involving Canadian companies, the report noted, with seven that went to shareholder votes last year, compared to four in 2022.

“The targeted companies had a median market capitalization of $48 million, a significant rise from the $4.3 million seen in the previous year,” the report said.

And, while junior resource companies remain targets for activism, there also were contests in the tech and health care sectors, ISS said.

U.S. activists were also busy in 2023, the report said, with activity expected to remain significant in 2024.

Shareholder proposals in the U.S. are likely to include measures requiring companies to seek shareholder approval for severance arrangements, along with proposals on a variety of environmental and social topics.

“The volume of proposals in 2024 is expected to be largely on par with the high watermark recorded in 2023,” ISS said. “In the U.S., climate change, diversity, equity and inclusion, and political spending appear so far to be the dominant topics of E&S shareholder proposal filings for 2024.”

The tech sector in particular is expected to see proposals related to concerns about its role in society.

“Rapid technology development, the rise of misinformation, and the ubiquitous nature of social media continue to generate concern among some shareholder proponents about fairness, censorship and about what can be believed,” ISS said.