How often do directors fail to receive majority support when they stand for reelection? The answer is not often. According to a recent report,however, director "against/withhold" votes are on the rise even though they remain rare. In 2019, 478 directors failed to receive majority support--a small number, but up 38% from 2015. Likewise, the number of directors failing to receive at least 70% support for reelection increased 45% from 2015 to 2019. Overall average shareholder support for directors last year was 95% (votes cast). Thus, it is rare for directors to receive less than 70% support, but this data reveals that in recent years institutional investors have become more willing to vote "against" directors in uncontested elections.
Key take-aways from the Proxy Pulse report, which is a joint initiative of Broadridge and PWC that covered 4,059 public company annual meetings in 2019, include:
Overall shareholder support in director elections in 2019 was 95%
o This is consistent with prior years, and a decline of 1% from 2018
The number of directors failing to receive majority support:
o Increased 38% from 2015 to 2019
o Increased 15% from 2018 to 2019
o Has increased in all but one of the last four years
o Remains low in absolute numbers (478 directors in 2019)
The number of directors failing to receive at least 70% support:
o Increased 45% from 2015 to 2019
o Increased 23% from 2018 to 2019
o Remains low in absolute numbers (1,726 directors in 2019)
Institutional shareholders are driving against/withhold votes:
o Directors who failed to receive majority support last year received average support of 30% from institutional investors, compared with 77% support from retail shareholders
The failure of directors to be reelected with significant support (90+%) is unusual, but proxy advisory firm guidelines and customary voting policies of institutional investors are likely contributing to more "against/withhold" votes.