Results of the 2015 Proxy Season in Silicon Valley
A Comparison of Silicon Valley Public Companies and Other Large Bay Area Public Companies
This companion supplement to the Fenwick survey, Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies, provides insight into significant developments related to stockholder voting at annual meetings in the 2015 proxy season, among the technology and life sciences companies included in the Silicon Valley 150 Index (SV 150), as well as the public companies in other industries included in the Bay Area 25 Index (BA 25).
In the 2015 proxy season, most of the SV 150 and BA 25 companies held annual meetings that included voting for the election of directors, ratifying the selection of auditors of the company’s financial statements and voting on executive officer compensation (“say-on-pay”). Increasingly annual meetings also include voting on other matters, such as proposals in compensation, governance, policy and other general business issues.
Key Findings Include:
- The average size of the board slate up for election among the SV 150 was 5.7 directors (median = 6), compared to 8.8 directors among the BA 25 (median = 10). The most common number of directors being elected was 3 directors in the SV 150, with the number ranging from 1 to 15 (compared to a range of 3 to 16 directors among the BA 25, with 11 most common).
- In the vast majority of cases, the elections of directors were uncontested. There were 142 uncontested elections of directors in the SV 150 (and 24 in the BA 25), and only two SV 150 companies that had contested elections in the 2015 proxy season. None of the BA 25 companies had a contested election.
- In the SV 150, the median of the average percentage of votes for (as opposed to votes against or withheld) each company’s nominees was 97.7%, ranging from 72.8% on average up to 100% voted for the board-sponsored nominees (compared to a median of 99.0% and range of 97.9% to 99.9% in the BA 25). Approximately 13.5% of the SV 150 companies that had uncontested elections had an average of 20% or more of the vote against or withheld against their board-nominated candidates (compared to none in the BA 25).
- Since 2011, public companies have generally been required to hold a “say-on-pay” vote—a periodic non-binding vote on whether stockholders approve the compensation paid to the company’s named executive officers, as disclosed in the proxy statement.
- Of the 116 companies in the SV 150 that held say-on-pay votes at their annual meetings in the 2015 proxy season (in the BA 25), five companies in the SV 150 lost the vote (compared to none of the 21 companies in the BA 25 holding say-on-pay votes).
- Say-on-pay opposition reached 15% or more of votes cast (ignoring abstentions and broker non-votes) at 23% of SV 150 companies (compared to 10% of BA 25 companies). Within the SV 150, opposition reached 30% or more at 10 companies (of which eight had opposition of 40% or more, including the aforementioned five companies that lost the vote).
Other Proposals Voted On
- Generally, stockholders at larger companies were asked to vote on more matters than at smaller companies. The increased number of proposals at larger companies was due to the fact that no stockholder-sponsored proposals were voted on by stockholders outside of the top 50 companies in the SV 150 companies, as well as the fact that larger companies are significantly more likely to hold say-on-pay votes annually.
- In both SV 150 and BA 25 companies, company-sponsored proposals are spread across compensation (primarily say-on-pay and equity plan proposals), governance (primarily director elections) and other general business (primarily auditor approval), and are also significantly more likely to be passed than those sponsored by stockholders.
- Excluding the director elections, say-on-pay (and say-on-frequency) and auditor approval voting, stockholders at SV 150 companies voted on 95 company-sponsored proposals in the 2015 proxy season, primarily in compensation-related subjects, as well as some governance matters (compared to 21 such proposals at BA 25 companies, which were more evenly split between compensation-related and governance matters).
- Stockholder-sponsored proposals were more frequently focused on policy issues or governance matters and were also significantly less likely to be passed than those sponsored by companies, in both SV 150 and BA 25 companies.
- Excluding competing director slates, SV 150 company stockholders were asked to vote on 41 stockholder-sponsored proposals at annual meetings during the 2015 proxy season (compared to 21 such proposals voted on by stockholders of BA 25 companies). Within the SV 150, more than two-thirds of stockholder-sponsored proposals were voted upon at the top 15 companies.
- The most common topics for stockholder-sponsored proposals in the SV 150 were proxy access and environmental/sustainability, while the most common topic in the BA 25 was the requirement of companies to have an independent chair of the board.