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A new report by The Conference Board forecasts that the 2023 proxy season is likely to be even more challenging than in previous years.

The study, released earlier this week, identified several factors that are expected to contribute to a tumultuous spring when companies hold their annual shareholder meetings. The Conference Board said companies can expect:

  • A higher volume of shareholder proposals
  • An increase in Environmental, Social and Governance (ESG) related proposals
  • More votes against directors on governance practices
  • Less support for company “say-on-pay” shareholder votes regarding compensation for top executives
  • A rise in shareholder activism due to the current economic environment and the implementation of the Security and Exchange Commission’s universal proxy rule

The 2023 proxy season insights were based on a review of management and shareholder proposals at Russell 3000 companies in 2021 and 2022, as well as discussions with U.S. public companies and institutional investors with over $20 trillion in assets under management.

The report notes that although there was record support for shareholder proposals on environmental and social (E&S) topics in the 2021 proxy season, average support for E&S shareholder proposals declined in 2022 compared with 2021. At the same time, opposition to directors and negative votes on say-on-pay proposals increased.

“This signals a trend that is expected to continue into 2023: more friction between companies and investors in traditional areas of corporate governance and executive compensation than in E&S areas,” the report said. “Investors will continue to use their votes on director elections and say-on-pay to express their concerns about governance and problematic pay packages but will likely seek common ground on many E&S issues.”

Climate-related proposals are likely to continue to be a dominant theme in 2023, but the report predicted a growing number of proposals on other types of environmental and social topics.

“Look for growing levels of shareholder proposals on issues such as biodiversity, plastic pollution, and deforestation,” the study said. “On social topics, expect to see shareholder proposals focusing on corporate political spending through third-party groups and on workers’ rights, particularly at companies where there is a perceived disconnect between the company’s commitments and actions on freedom of association.”

The Conference Board produced the study with the ESG analytics firm, ESGAUGE, in collaboration with Russell Reynolds Associates and Rutgers University’s Center for Corporate Law and Governance.