Below are key takeaways from ISS’ recently released 2023 United States Governance & Compensation Proxy Season Preview. The full report is available to institutional subscribers by logging into ProxyExchange then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.
- Continued improvement in racial and ethnic board diversity. Approximately 86 percent of Russell 3000 Index companies, excluding the S&P 500, and 99 percent of S&P 500 companies have at least one racially/ethnically diverse board member. Each figure is an incremental improvement over the prior year. Additionally, nearly all industry sectors showed increased racial/ethnic board diversity year-over-year.
- SPAC transactions on the wane. Further proposed SEC rules surrounding disclosures as well as the initial interpretation of new US tax laws appear to be making SPACs a less advantageous vehicle to access the capital markets. Many SPACs returned funds to shareholders through liquidation at the end of 2022 and the number of new SPACs to come public in 2023 has slowed dramatically.
- A record number of boards will be responding to low 2022 say-on-pay support. During the 2022 proxy season, a record number of companies had say-on-pay votes that failed or received significant shareholder opposition. These companies will be expected to demonstrate responsiveness through shareholder engagement efforts and actions taken to address shareholders’ concerns.
- New SEC “pay versus performance” disclosure requirements will be a focal point of the 2023 proxy season. In the second half of 2022, the SEC finalized the long-awaited pay versus performance rule under Dodd-Frank. Under the new rule, covered companies are required to provide new proxy statement disclosure which includes, among other things, the compensation “actually paid” to the CEO and the metrics the company believes are most important in determining pay. The SEC also recently finalized compensation clawback rules, which still need finalization by listing exchanges, though many companies have already adopted the heightened clawback standards.
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By: Robert Kalb, Jolene Dugan, Rachel Hedrick, David Kokell, Kevan Marvasti, Chris Scoular, Galen Spielman