Attorneys Outline ESG Activity and Top Takeaways by Big Three Asset Managers in 2021 Proxy Season

September 15, 2021
Corporate Compliance Insights

Bass, Berry & Sims attorneys Eric Knox, Sehrish Siddiqui and David Venturella authored an article published by Corporate Compliance Insights detailing activity from the Big Three asset managers (BlackRock, Vanguard and State Street) during the 2021 proxy season related to environmental, social and governance (ESG) matters. The article also outlined the top takeaways for public companies in the year ahead.

The proxy season beginning in July 2020 and ending in June 2021 reflected a significant shift in attitudes toward shareholder activism with respect to ESG, including diversity, equity and inclusion (DEI) matters. “Shareholders made their voices heard by proposing an all-time high number of ESG proposals, of which a record number received majority support or otherwise garnered significant support,” the attorneys said.

Proposals focused on diversity-related matters received significant support (e.g., board and executive diversity, disclosure of EEO-1 reports and calls for DEI reporting and racial equity), and the Big Three asset managers were at the forefront of this wave of support. “Unsurprisingly, the Big Three’s unequivocal and vocal views on diversity in corporate governance translated into unprecedented shareholder support for diversity-related proposals in 2021 and contributed to an uptick of about 5 percent from the previous high in average support for shareholder proposals generally,” the authors states, before detailing some headline-making ESG votes by the Big Three in the 2021 proxy season.

Looking forward, some top takeaways for the 2022 proxy season include:

  • Shareholder requests for increased or enhanced diversity-related board disclosure is likely to continue, although Nasdaq’s newly introduced board diversity rule may somewhat arrest the trend for Nasdaq-listed companies.
  • The Big Three and other asset managers will likely continue playing a pivotal role in the support of DEI proposals, especially at companies with poor track records of board diversity or at those who have made public commitments to increasing diversity and inclusion efforts but have failed thus far.
  • Companies should carefully consider whether to reach an agreement with the shareholder proponent in lieu of including such proposals in the company’s proxy, whether to not oppose or even whether to support the proposal.
  • Requests for board diversity will receive substantial support, and boards that fail to take proactive steps in this regard are expected to receive such proposals and even votes against nominating and corporate governance committees.

The full article, “The Big Three Remain Big on ESG, DEI – 2021 Proxy Season in Review,” was published by Corporate Compliance Insights on September 14 and is available online.