ISS Governance 2024 Global Outlook Report Highlights Key Governance and Stewardship Trends for Institutional Investors

ROCKVILLE, Md. (March 4, 2024) – ISS Governance, a leading global provider of independent and objective shareholder meeting research and recommendations, multiple voting policy choices and end-to-end workflow solutions for institutional investors, and a unit of ISS STOXX, today announced the release of its annual global outlook report, Top Governance & Stewardship Issues in 2024, an in-depth analysis examining trends and key issues institutional investors are likely to face in 2024.

“This year’s main proxy seasons are taking place amid continuing uncertain global macroeconomic conditions,” said Georgina Marshall, Global Head of Research for ISS Governance. “Many companies and investors will face challenges through 2024 regarding key governance and stewardship issues on topics such as corporate risk management, climate change risks, executive compensation, human capital management, and shareholder activism.”

Key takeaways from the report include:

Activism and M&A

• U.S. activists had a busy year in 2023, but the number of contests that ultimately went all the way to a vote declined to 23 compared to 34 in 2022. Activist activity is expected to remain significant in 2024. In Canada, there was an increase in the number of proxy contests at Canadian companies in 2023, with seven contests that got to a shareholder vote compared to four in 2022.

Diversity

• Efforts to boost gender diversity levels in boardrooms and C-suites are continuing to register steady progress. In the U.S., just over 98 percent of the Russell 3000 and 100 percent of the S&P 500 now have at least one female director.
• Reported racial and ethnic board diversity continues to increase in the U.S. According to ISS data, as of the start of 2024, only two S&P 500 companies lacked at least one board member from a minority background. Across the Russell 3000 Index, only 12 percent of composite companies lacked this level of diversity, an improvement from approximately 14 percent at the start of 2023. Many investors and other observers will closely monitor whether these diversity increases continue their upward trajectory in 2024 or level off.
• The European Directive on gender diversity on boards was approved by the European Parliament in November 2022 and EU listed companies are now expected by June 2026 to have either at least 40 percent of their non-executive directors or at least 33 percent of all director positions (including both executive and non-executive directors) filled by “members of the underrepresented sex”. This regulatory development is expected to continue to boost gender diversity on European boards and C-suites through 2024 and beyond.

Compensation and Say on Pay

• Fewer U.S. companies will need to demonstrate responsiveness to 2023 low say-on-pay support . In the U.S., the percentage of companies with failed (meaning less than majority support) say-on-pay votes decreased from 3.2% in 2022 to 2% in 2023, representing the lowest say-on-pay failure rate since 2017.
• Following a significant 2023 spike in compensation-related shareholder proposals in the U.S., severance arrangements are expected to continue to be a focus for shareholder proponents. A sudden increase in U.S. compensation-related shareholder proposals in 2023 (up 76 percent on the equivalent number in 2022) came after a previous steady decline in these proposals since the introduction of the required say-on-pay vote. There was a wave of proposals in 2023 requesting companies seek shareholder approval of severance arrangements, and given that several of these received majority support it is expected that this topic will remain a focus into 2024.
• In Europe, 2024  is a remuneration policy cycle year where many European companies will resubmit their remuneration policies for shareholder approval as required under SRD II.
• In Asia, where executive compensation practices are often disclosed poorly and therefore cannot be assessed fully by shareholders, some limited improvements in disclosure are expected that may have a positive impact in 2024 and beyond.

Environmental & Social (E&S) topics

• The number of E&S-related shareholder proposals filed in the U.S. reached an all-time high in 2023, and that trend is expected to hold in 2024. In 2023 in the U.S. there were a record number of 643 E&S-related proposals filed. The high number of filings coupled with the SEC’s  policy change that has made it more difficult for companies to omit shareholder proposals, resulted in a record number of E&S proposals getting on ballot. The volume of proposals in 2024 is expected to be largely on par with the high watermark recorded in 2023.
• At the same time, support for E&S-related shareholder proposals in the U.S. dipped for the second consecutive year in 2023.  Overall U.S. vote results in 2023 showed that E&S shareholder proposals received 16 percent median shareholder support, down from 22 percent in 2022 and 29 percent in 2021. While in 2022 there were 37 E&S-related proposals in the U.S. that received majority support, that figure decreased to 8 in 2023, despite the fact that more proposals were voted on. It remains to be seen whether the declining support levels for E&S shareholder proposals in 2023 will continue in 2024.
• Climate change , DEI and political spending are expected to continue to be the most numerous E&S-related  shareholder proposal topics in 2024. Globally, the number of climate-related voting items has significantly increased since 2021, reaching over 300 in 2023. Most are shareholder proposals as the number of management-provided “say-on-climate” proposals went down in 2023 after a high in 2022. In the U.S., climate change, diversity, equity and inclusion (DEI) and political spending appear so far to be the dominant topics of E&S shareholder proposal filings for 2024.
• 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. Technology firms are likely to continue to receive high levels of shareholder proposals on these topics because they are at the heart of rapid changes in communications technology.

To download a copy of the full report, please click here.

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About ISS Governance
Founded in 1985 as Institutional Shareholder Services (ISS) Inc., ISS Governance is a leading global provider of independent and objective shareholder meeting research and recommendations, providing multiple voting policy choices as well as end-to-end workflow solutions for institutional investors. More than 1,600 clients worldwide utilize ISS Governance’s actionable expertise to help them make informed investment stewardship decisions, and to help them manage their voting responsibilities. Covering over 50,000 meetings annually, ISS Governance leverages its extensive global footprint, deep experience, high quality data and analysis, unified client support, and technology infrastructure to continuously evolve and extend its innovative suite of solutions to meet clients’ evolving portfolio, fiduciary, and stewardship requirements.

About ISS STOXX
ISS STOXX GmbH, through its group companies, is a leading provider of comprehensive and data-centric research and technology solutions that help capital market participants identify investment opportunities, detect qualitative and quantitative portfolio company risks, and meet evolving regulatory requirements. With roots dating back to 1985, we today deliver world-class benchmark and custom indices across asset classes and geographies and serve as a premier source of independent corporate governance, sustainability, cyber risk, and fund intelligence research, data, and related offerings. Our products and services give clients the scale and leverage they need to grow their business more effectively and efficiently. ISS STOXX, which is majority owned by Deutsche Börse Group, is comprised of more than 3,400 professionals operating across 33 global locations in 19 countries. Its approximately 6,400 clients include many of the world’s leading institutional investors who turn to ISS STOXX for its objective and varied offerings, as well as companies focused on ESG, cyber, and governance risk mitigation as a shareholder value enhancing measure. Clients rely on ISS STOXX’s expertise to help them make informed decisions to benefit their stakeholders.

Media Contact:
Corey Whipple
Communications Analyst
press@issgovernance.com