Holding company directors to account over ESG

Morningstar finds an increase in shareholder dissent over director elections

Lindsey Stewart, director of investment stewardship research, Morningstar


Lindsey Stewart, director of investment stewardship research, Morningstar

There is plenty of evidence that governance is the glue that holds ESG together. Asset managers are emphasising the key role governance plays in ESG as a means of holding company directors to account for their performance on sustainability outcomes as well as financial ones.

Recent proxy voting results on director elections bear this out. Morningstar’s US proxy voting database tracked more than 71,000 director elections in the last three proxy voting years (that is, the last three 12-month periods ending in June). The absolute number of director elections increased 10% from 2020 to 2022 to almost 25,000.

However, there was a 23% increase in the number of director election votes in which more than 5% of shareholders withheld their support. Director elections are seen as routine voting matters. Median levels of support withheld sit at around 2%, so 5% can be interpreted as noteworthy shareholder dissent.

Overall, the proportion of director votes with more than 5% shareholder dissent increased from 30% to 34% from 2020 to 2022.

Read the full data dive in ESG Clarity’s September 2022 digital magazine.

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