Innisfree’s Crozier, Wolf and Kovacs publish in Harvard Law School Forum on Corporate Governance: “2024 Proxy Season Trends: Zenith or Nadir?”

March 28th, 2024 01:27 PM Eastern Standard Time

2024 Proxy Season Trends: Zenith or Nadir?

By Arthur B. Crozier, Executive Chair, Gabrielle E. Wolf, Director, and Jonathan L. Kovacs, Director

Innisfree M&A Incorporated

The 2023 proxy season represented a notable departure from recent trends in prior proxy seasons, particularly with respect to proxy fights and voting on environmental and social (E&S) proposals.  This article examines if those trends are likely to continue in 2024 and the possible impacts of recent judicial and regulatory developments on the ability of typical participants (issuers, activists, ESG and anti-ESG crusaders and other shareholder proponents) and unfamiliar or returning entrants (unions and trade associations) to gain access to the corporate governance machinery.

  1. Will Proxy Fights Come Roaring Back in 2024?

Many observers have noted that proxy contests in 2023 were relatively muted compared to prior years at companies with larger market caps, in no large part due to the new voting regime implemented by the universal proxy card (UPC) rules. Now with the 2023 proxy season behind us we can begin to better consider whether proxy contests will return to pre-2023 levels.

In 2023, there were 17 proxy contests that went to a vote, compared to 14 contests in 2022, 23 contests in 2021, and 19 contests in 2020. As with any small sample size, any conclusions to be drawn from a single proxy season should be taken with a mountain of salt, especially one where contests were conducted under new rules leading to uncertainties significantly impacting the behavior of all relevant constituencies. However, notwithstanding that caveat, the 2023 results indicate that the larger a company’s market cap, the more likely a dissident was to: (1) win support from the major proxy advisory firms (ISS and Glass Lewis); (2) win support from the “Big Three” index funds (Vanguard, BlackRock, and State Street); and (3) ultimately win at least one board seat.

Of the 17 2023 proxy contests, eight were at companies with a market cap <$250M (“Small Cap”), five at market caps between $250M-$999M (“Mid Cap”), and only four at market caps >$1B (“Large Cap”). In 2023, ISS recommended for all management nominees in 71.4% of Small Cap, 60.0% of Mid Cap, and 25.0% of Large Cap contests.  Similarly, Glass Lewis recommended for all management nominees in 62.5% of Small Cap, 40.0% of Mid Cap, and 25.0% of Large Cap contests. Notably, the rate of ISS and Glass Lewis recommendations in favor of management at Large Caps (25.0% and 25.0%, respectively) was significantly lower than in the 2020-2022 period (52.6% and 83.3%, respectively).

Similar patterns emerged in the Big Three’s voting behavior. In 2023, Vanguard voted “For” all management nominees in 100% of Small Cap, 60.0% of Mid Cap, and 25.0% of Large Cap contests. BlackRock matched Vanguard’s voting record for Small Cap and Mid Cap contests, but voted “For” all management nominees in 50% of Large Cap contests. State Street voted “For” all management nominees in 100% of Small Cap, 80.0% of Mid Cap, and 25.0% of Large Cap contests. Although the Big Three’s voting support for all of management’s nominees at Small Cap and Mid Cap contests in 2023 did not vary significantly from their 2020-2022 support levels, their management support levels at Large Caps dropped dramatically: Vanguard – 25.0% in 2023 vs. 77.8% in 2020-2022; BlackRock – 50.0% in 2023 vs. 83.3% in 2020-2022; State Street – 25.0% in 2023 vs. 88.2% in 2020-2022.

Final voting results reflected these trends as well.  The rate of management clean sweeps at Large Cap contests in 2023 (25.0%) significantly decreased compared to 2020-2022 (68.4%), whereas for Small Cap and Mid Cap contests the rate of management clean sweeps in 2023 (83.3% and 60.0%, respectively) increased compared to 2020-2022 (50.0% and 54.4%, respectively).

ISS / Glass Lewis Recommendations in Proxy Contests:

Market Cap <$250M $250M-$999M >$1B
ISS Recommendation for All Management Nominees 71.4% 60.0% 25.0%
Glass Lewis Recommendation for All Management Nominees 62.5% 40.0% 25.0%
Market Cap <$250M $250M-$999M >$1B
ISS Recommendation for Management Card 72.2% 50.0% 52.6%
Glass Lewis Recommendation for Management Card 66.7% 25.0% 83.3%


“Big Three” Voting Results in Proxy Contests:

Market Cap <$250M $250M-$999M >$1B
Vanguard Votes for All Management Nominees 100% 60.0% 25.0%
BlackRock Votes for All Management Nominees 100% 60.0% 50.0%
State Street Votes for All Management Nominees 100% 80.0% 25.0%
Market Cap <$250M $250M-$999M >$1B
Vanguard Votes on Management Card 70.0% 50.0% 77.8%
BlackRock Votes on Management Card 66.7% 50.0% 83.3%
State Street Votes on Management Card 83.3% 62.5% 88.2%


Final Voting Results in Proxy Contests:

Market Cap <$250M $250M-$999M >$1B
Management Clean Sweep % 83.3% 60.0% 25.0%
Dissident Partial Win % 0.0% 40.0% 25.0%
Dissident Clean Sweep % 13.7% 0.0% 50.0%
Market Cap <$250M $250M-$999M >$1B
Management Clean Sweep % 50.0% 54.5% 68.4%
Dissident Partial Win % 7.7% 9.1% 10.5%
Dissident Clean Sweep % 42.3% 36.4% 21.1%


* Only includes contests prior to September 1, 2022, the date on which the UPC rules went into effect.

Source: FactSet, Diligent

Notwithstanding the small number of Large Cap contests in 2023, two dynamics arising from the effectiveness of the UPC rules presage significant, activist-friendly trends in Large Cap contests: proxy advisory firms increased their rate of support for at least one dissident nominee; and, more significant, the Big Three were more likely to support at least one dissident nominee while still supporting some management nominees.  Prior to required use of UPCs in 2023, voting by the Big Three on management’s proxy card, even if for less than all of management’s nominees, was often outcome determinative. These dynamics build upon the other factors that can favor Large Cap activists, as opposed to Small and Mid Cap activists. Large Cap activists tend to be more experienced, more well-capitalized, and have the wherewithal to recruit stronger director candidates. This is not surprising since higher market cap companies typically present a greater opportunity for a larger return on investment due to the potential value of their underlying assets.

As of the date of this article there are several high-profile Large Cap proxy contests, including The Walt Disney Company (the Trian Group) and Norfolk Southern Corporation (Ancora) involving well known, experienced activists. Given the trends observed in 2023, we expect that activists will be emboldened to wage campaigns at other Large Caps in 2024.

  1. UPC as a Mechanism for Special Interest Campaigns

In addition, another Large Cap, Starbucks Corporation, is in a proxy contest with a coalition of labor unions that could prove to be an example of a much-discussed UPC tactic in 2023 that did not in fact then occur: the use of UPC to further low cost, special interest campaigns. These labor unions, the Strategic Organizing Center, and the Service Employees International Union, with combined disclosed beneficial ownership of 161.62478 Starbucks shares, are seeking the election of three nominees to Starbucks’ eleven-member Board.  Their platform alleges that Starbucks’ response to union organizing efforts threatens shareholder value.

This campaign presages a new tactic in labor unions’ long-standing use of “corporate campaigns” to further their organizing efforts at targeted companies.  Corporate campaigns are typically long-term, multi-pronged efforts designed to cause enough disruption, distraction, and expense at the targeted company to pressure corporations to accede to union demands.  “Victory” at any individual tactic, such as the election of a dissident nominee, is not necessary or even the point.

There was a great deal of speculation in 2023 that special interest shareholders, especially environmental proponents, would escalate from submitting shareholder proposals to waging UPC director contests.  The supposed benefit was greater notoriety for their cause at little additional cost.  The difficulties in recruiting well-qualified, well-rounded nominees strong enough to attract significant shareholder support and the higher-than-anticipated costs of running an effective UPC director contest (probably more than the value of their investment) likely caused interested shareholders to abandon such efforts.

Such difficulties, however, are not applicable to a labor union engaged in a corporate campaign.  As noted above, an electoral victory is not necessarily the goal – disruption and distraction are.  In addition, UPC director contest costs are not necessarily insurmountable for labor unions.  The Strategic Organizing Center has estimated its costs for the Starbucks campaign at $3 million, significantly more than the approximately $16,000 value of their Starbucks shares, but also significantly less than the $25 million Trian has estimated as its expenses in the Disney proxy contest.

As of the date of this article it is too early to determine how much support the Strategic Organizing Center will obtain in its proxy contest. We would not be surprised, however, if other labor unions employ UPC director contests as part of corporate campaigns at other publicly traded issuers.

  • Heightened Scrutiny of Board Actions That Impacted Contested Elections

In the wake of the effectiveness of the UPC rules, several 2023 events have highlighted that board actions, particularly actions in connection with advance notice bylaws, will bring heighted scrutiny from the courts, proxy advisory firms and shareholders and could impact contested elections.

A recent White & Case study found that between April 22, 2022, and June 1, 2023, 200 companies in the S&P 500 updated their bylaws, often to account for the new UPC regime. According to this White & Case study, common updates included requiring nominating stockholders to comply, state an intent to comply, or provide reasonable evidence of compliance with certain UPC rule requirements and requiring greater disclosure with respect to the nominating stockholder and their nominees, among others, and potential conflicts of interest. Since these bylaws can potentially allow boards to exclude dissident nominees from the ballot, it is unsurprising that some nominating stockholders sued to prevent their enforcement.

Perhaps the most prominent example from the 2023 proxy season was Politan Capital Management’s suit to prevent enforcement of a Masimo Corporation bylaw that required, among other things, all nominating stockholders to disclose its limited partners, understandings between such limited partners and their family members, and plans to nominate directors at other companies over the preceding 36 months and the next 12 months. Masimo ultimately rescinded these bylaws prior to the election, but the fallout from their prior adoption proved detrimental. Indeed, each of ISS and Glass Lewis cited the adoption of these advance notice bylaws as evidence of the need for governance reforms in their respective recommendations for all Politan nominees. Vanguard, which ultimately voted in favor of all Politan nominees, also cited the adoption of these bylaws as an example of poor corporate governance practices.

A few months later, in Kellner v. AIM ImmunoTech (Del. Ch. Dec. 28, 2023), the Delaware Chancery Court invalidated several of AIM ImmunoTech’s advance notice bylaws, holding that the following advance notice bylaws were either “overbroad,” “unworkable,” “ambiguous,” and/or so “imprecise” as to no longer be reasonably tailored to the threat posed:

  1. Stockholder Associated Persons: Disclosure of all arrangements, agreements or understandings (AAUs) of “Stockholder Associated Persons” (SAPs), defined to include:
    1. any person acting in concert with such holder with respect to the stockholder proposal or the corporation;
    2. any person controlling, controlled by, or under common control with such Holder or any of their respective affiliates and associates, or a person acting in concert therewith with respect to the stockholder proposal or the corporation; and
    3. any member of the immediate family of such holder or an affiliate or associate of such Holder;
  2. Consultants and Advisors: Disclosure of AAUs between a nominating stockholder or an SAP and any stockholder nominee “regarding consulting, investment advice, or a previous nomination for a publicly traded company within the last ten years”;
  3. Known Supporters: Disclosure of known supporters beyond providers of financial support or meaningful assistance; and
  4. Ownership: Disclosure of all ownership in the corporation’s stock (including beneficial, synthetic, derivative, and short positions) by the nominating stockholder and SAPs, with respect to which the Vice Chancellor noted that the provision “with its 1,099 words and 13 subparts. . . [was] indecipherable.”

While the Chancery Court ultimately determined that the company could exclude the nominating stockholder’s nominees due to disclosure deficiencies in the stockholder’s nomination notice, it also invalidated the above advance notice provisions, which could be prevalent in the advance notice bylaws of other public companies.

The AIM ImmunoTech case was litigated against the backdrop of a clarified judicial standard when evaluating board actions that could impact contested elections. In Coster v. UIP Cos., Inc. (Del. June 28, 2023), the Delaware Supreme Court held that the proper standard when reviewing board actions that could infringe on the shareholder franchise in a contested election is a modified version of the Unocal intermediate scrutiny applied in M&A transactions and hostile takeovers. First, the board must prove it reasonably perceived a “real and not pretextual” threat “to an important corporate interest or to the achievement of a significant corporate benefit.” When analyzing this prong, not only must the board’s motivations “be proper and not selfish or disloyal,” but the Court also stressed that “the threat cannot be justified on the grounds that the board knows what is best in the interest of stockholders.” Second, the board’s response must be “reasonable in relation to the threat posed” and “not preclusive or coercive to the stockholder franchise.” Applying this standard, the Delaware Supreme Court ultimately upheld a dilutive stock issuance that was decisive in breaking a deadlocked stockholder vote to avoid a potential custodian appointment. But as the AIM ImmunoTech case illustrated, boards should expect that this intermediate standard has teeth to invalidate board actions that improperly infringe on the shareholder franchise.

In view of these developments, companies would be wise to review their advance notice bylaws with counsel on a clear day to determine whether any should be tailored to avoid potential invalidation. More significantly, if a contested election does arise, boards should understand the detrimental reputational impact overbroad advance notice bylaws can have and understand that any actions that appear to improperly interfere with the stockholder franchise can seriously harm its effort to win support from proxy advisors and shareholders alike.

  1. Issuers Use More Aggressive Tactics in Seeking to Exclude E&S Proposals

Following a high-water mark in 2021, average support for shareholder proposals related to E&S issues decreased in the two years since.  Only two environmental proposals passed in the 2023 proxy season, compared to 14 that passed in 2022.  Similarly, only five social/political proposals succeeded in 2023, down from 21 in 2022.  Factors contributing to this downward trend include: the Securities and Exchange Commission’s (SEC) no-action posture; ideologically driven proponents less willing to negotiate withdrawals; increasing granularity and prescriptiveness in proposals; issuers’ improved disclosures and engagement on material issues; reduced proxy advisor support; political pressure on investors; and the emergence of anti-ESG activism, coupled with an increase in unpopular anti-E&S proposals.

Decreasing support for E&S proposals are likely to further entrench issuer resistance to shareholder proponents in the 2024 proxy season and beyond.  With fewer proposals passing for the past two years, incentives are greater for issuers to refuse to settle and let shareholder proposals go to a vote.  Following several years of the SEC’s hands-off approach to no-action requests, resulting in less no-action relief to omit shareholder proposals from issuers’ proxy cards, some issuers are litigating in state and federal court to exclude shareholder proposals.

Indeed, in January, Exxon Mobil Corporation bypassed the SEC’s no-action process entirely and filed suit in a Texas federal district court to prevent the presentation of a shareholder proposal calling for the company to further accelerate medium-term reductions targets for Scopes 1, 2 and 3 GHG emissions at its 2024 annual meeting.  The same proposal went to a vote (and failed) at Exxon’s 2022 and 2023 annual meetings, so the company’s reaction to the 2024 proposal represents a clear shift in strategy.  Despite the proponents’ subsequent withdrawal of their proposal, Exxon refused to drop its suit (but withdrew its request for an expedited hearing) and sought reimbursement for its attorneys’ fees in litigating the case.

Continued downward trends in voting support for E&S proposals in 2024 could further embolden issuers and other interested parties to take similarly aggressive action in the future.  In fact, during the 2023 proxy season, a shareholder proponent and trade association brought the validity of the entire Rule 14a-8 regime under legal scrutiny.  In late 2022, the National Center for Public Policy Research (the “NCPPR”), an anti-ESG proponent, submitted a shareholder proposal for The Kroger Co.’s 2023 annual meeting.  The proposal called for Kroger to issue a report outlining potential risks associated with the issuer’s omission of prohibitions against discrimination based on an employee’s “viewpoint” and “ideology” from its equal employment opportunity policy.  (The NCPPR alleged that employees with conservative beliefs face discrimination at Kroger, citing examples of the company’s removing patriotic items from its product offerings and publishing “allyship” staff training guides).  Kroger sought and obtained no-action relief from the SEC, excluding the proposal as pertaining to the issuer’s ordinary business operations under Rule 14a-8(i)(7).   Unlike Exxon, the NCPPR initially used conventional channels to appeal the SEC’s decision, requesting that the SEC reconsider.  Following the SEC’s refusal, the NCPPR filed a lawsuit against the SEC in the Fifth Circuit, seeking declaratory and injunctive relief on the basis that Kroger’s omission of the proposal from its 2023 proxy statement violated the Exchange Act.  In May 2023, the court permitted the National Association of Manufacturers (the “NAM”), a trade association, to intervene in the case.  NAM agreed with Kroger that the issuer should not be required to include the NCPPR’s proposal in its proxy materials; in fact, NAM argued that federal securities laws and the First Amendment do not permit the SEC to use Rule 14a-8 to compel issuers to include in their proxy statements any proposals that would force the issuer to speak about contentious political or social issues (e.g., abortion, climate change, diversity, gun control and immigration) that are “unrelated to its core business or the creation of shareholder value.”  NAM is effectively challenging whether the SEC has authority to require issuers to include shareholder proposals in their proxy statements, threatening the basis of the Rule 14a-8 regime entirely.  In September 2023, the SEC argued that the entire lawsuit should be moot, as Kroger included the NCPPR’s proposal in its 2023 proxy statement.  (The proposal received support from only 1.9% of votes cast).  The SEC, issuers and shareholder proponents all are undoubtedly eagerly anticipating the court’s judgment in this ongoing case.

We expect continued resistance to E&S proposals by issuers in the 2024 proxy season via traditional channels.  We also anticipate issuers and other interested parties to advance non-traditional legal attacks on the SEC’s 14a-8 regime in the courts.

  1. Will Enhanced N-PX Reporting Requirements Result in Lower Say on Pay Votes and Less Share Lending?

2024 will be the first proxy season conducted after the effectiveness of the SEC’s latest amendments to Form N-PX.  In November 2022, the SEC adopted amendments (1) to update the Form N-PX proxy vote reporting requirements by Investment Company Act mutual funds, ETFs, and other registered management investment companies (funds) to standardize reported information and (2) to require all Form 13F filers to disclose their Say-on-Pay votes annually.  Prior to these amendments, only funds, not all 13F filers, were required to file Form N-PX.  Under the amendments, non-fund 13F filers will be required to report only their Say on Pay votes.

In addition to other Form N-PX enhancements, the amendments require Form N-PX to be reported in an XML structured data format, making it more accessible and streamlined than the currently filed HTLM or ASCII formats.  The amendments also require funds to categorize proxy votes using 14 standardized categories (e.g., director elections, shareholder rights and defenses, corporate governance, DE&I, environment or climate, human rights or human capital/workforce, and other social issues), which will enable investors and other interested parties (more on this later!) more easily to search and tabulate a fund’s voting record across topics.  We suspect that shareholders, including ESG and anti-ESG crusaders alike, will more easily understand fund voting priorities using this readily accessible data.

In addition, the required public disclosure of Say on Pay votes by non-funds will provide far greater exposure of those investors’ decisions on a topic of great interest to most shareholders.  It remains to be seen if that exposure will cause those investors to alter their customary voting practices.

The amendments also require Company Act funds to disclose the number of shares voted, as well as the number of shares loaned as of the record date but not recalled and, therefore, not voted by the fund. This new disclosure will provide important information about funds’ lending behavior and how such behavior affects the magnitude of their proxy voting.  This new disclosure will shed light on an oft-overlooked proxy truth – that index funds in particular often vote only a fraction of the shares they beneficially own because of share lending on the record date.  Funds’ prospectuses clearly disclose that they may loan shares for a fee, and their lending activity can be determined by proxy solicitors through analysis of a fund’s custodial holdings. The new N-PX lending disclosures will increase visibility of lending practices to casual proxy observers.  While Fidelity, T. Rowe and Capital Group, for example, all disclose that they may lend shares for a fee, we suspect that abstract disclosures in a prospectus are less impactful than a public filing showing that (hypothetical) ESG-Focused Fund X only voted 70% of the shares it held on proposals falling into one or more of the SEC’s new standardized ESG categories.  Investors who want to see their funds exercising their full voting power may be less than thrilled to find that the fund actually lent out 30% of the shares it held.  (Ironically, this data might be helpful to funds under pressure from anti-ESG activists – “we only voted 70% of our shares in favor of DE&I proposals anyway!”)  Moreover, the fact that index funds, in particular, who market themselves as protectors of long-term shareholder value, are loaning shares and allowing short sellers to bet against, and put downward pressure on, an issuer’s share price may seem to its customers antithetical to pursuing long-term shareholder value.

In our experience, index funds are loathe to recall lent shares even when notified in advance of a record date unless the agenda item has a clear economic consequence (e.g., a merger proposal or an equity plan amendment that, if unsuccessful, would force an issuer to pay its employees in cash). Even in those circumstances it is usually very hard to persuade those funds to recall lent shares. Perhaps the looming enhanced N-PX disclosures won’t be enough to force index funds to recall additional lent shares in the 2024 proxy season, but if shareholders see that their index funds aren’t voting a substantial number of their held shares and instead lent them to short sellers who sought to profit from share price decreases, there could be pressure to do so in 2025.

  1. Conclusion


In the 2024 proxy season, we expect to see further expanded uses of the proxy system by participants to assert their preferred corporate policies and visions for issuers. This expansion has been largely due to new regulations and court decisions that have expanded access to issuers’ corporate governance machinery and funds’ voting records.  Such expanded access, however, could trigger a backlash through litigation and other means.  As a result, the 2024 proxy season may be seen as the zenith, or nadir, of the current proxy regime. 

About Innisfree

Founded in 1997, Innisfree M&A Incorporated (New York), along with its wholly-owned subsidiary Lake Isle M&A Incorporated (London), is a high-stakes shareholder engagement firm, delivering shareholder intelligence, strategic advice and proxy solicitation services to the world’s leading corporations and investors when it matters most. Its integrated approach and unsurpassed analytics–ActiveIQ™–set Innisfree apart as the firm of choice. Innisfree provides expert advice on a wide range of matters, including shareholder activism, executive compensation proposals, corporate governance issues and investor relations.

With an experienced professional staff in New York, London, Pittsburgh and Richmond, VA, Innisfree has represented hundreds of clients in over 20 countries.


Innisfree M&A Incorporated
Arthur B. Crozier, 212-750-5833

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