2020 proxy season hot topics and the impact of COVID-19

The effects on operations, disclosures, engagement, and shareholder proposals due to COVID-19 are likely to be more apparent in the months and years ahead.

While the immediate impact of COVID-19 on the 2020 proxy season was the rapid and unexpected shift to virtual annual meetings for U.S. companies, the effects on operations, disclosures, engagement, and shareholder proposals are likely to be more apparent in the months and years ahead.

“The impact next season will be profound,” said Pamela Marcogliese, partner, Freshfields U.S. LLP. Joining KPMG Board Leadership Center (BLC) Senior Advisor Stephen Brown on the BLC June webcast, Marcogliese said that she expects shareholder proposals related to human capital management (HCM) and other environmental and social (E&S) issues to continue to gain traction in the coming year, amplified by COVID-19 as well as the renewed focus in the U.S. on social justice issues as a result of the death of George Floyd.

2020 proxy season hot topics webcast replay

Shareholder proposals

While the number of filings was highest for governance proposals related to shareholder rights and board structure and composition this proxy season, support increased year over year for E&S proposals on issues including political activity/lobbying, climate change, and HCM. An analysis of Russell 3000 companies by Institutional Shareholder Services (ISS) found that, when compared to 2019, fewer E&S proposals went to a vote this year—with a higher share of proposals that did go to a vote receiving majority support. According to Marcogliese, many proponents were willing to withdraw their proposals after issuers committed to making progress on climate-related issues. 

Additionally, many large intuitional investors and asset managers have expressed support for the framework offered by the Task Force on Climate-related Financial Disclosures as well as material nonfinancial metrics from the Sustainability Accounting Standards Board.

ESG shareholder proposals

Shareholder proposal filings by category and subcategory January 1, 2020–June 1, 2020

Source: ISS, Freshfields, LLP


Support for E&S proposals continues to grow

Through May 10, 2020, ISS found that Russell 3000 companies with disclosed voting results, there were (a) fewer resolutions voted, (b) a larger share of resolutions received majority support, and (c) more resolutions were focused on E&S issues, compared to the same time in 2019.

2019, based on 177 shareholder proposals

2020, based on 140 shareholder proposals

Source: ISS, Freshfields, LLP


According to Marcogliese, the new and more informal U.S. Securities and Exchange Commission (SEC) process for responding to no-action relief requests this proxy season garnered less attention than was initially anticipated due to the focus on COVID-19. Still, the SEC formally by letter or informally concurred with 111 out of 208 issuer requests to remove shareholder proposals from the proxy, according to Freshfields.

Of 468 directors and C-level executives surveyed during the webcast, 27 percent said that they expect a more significant discussion of workplace diversity and pay equity in upcoming disclosures and proxy statements as a result of COVID-19 and other issues, while another 27 percent said that they expect a re-evaluation of risk factors and competitors.

Shareholder proposals related to HCM disclosure, including worker safety and well-being and talent retention, were already an increasing focal point of investors—and the impact of COVID-19 is expected to intensify scrutiny of company responsiveness to those issues. A proposed amendment to Regulation S-K that would require a principles-based discussion of material HCM-related measures or objectives could also prompt more voluntary disclosure.

Of directors and C-level executives surveyed during the webcast, a combined 61 percent said that they were “satisfied” (40 percent) or “very satisfied” (21 percent) with their companies’ disclosures related to HCM issues as a result of COVID-19.

Proposals calling for the separation of the chair and CEO roles resurface every proxy season but rarely receive majority support. In many cases, investor concerns about the board’s leadership structure may be satisfied by the appointment of a lead independent director. However, Brown noted that those proposals appear to “have become more targeted and more personal,” and may increase next year as a way for investors signal unhappiness with board accountability.

Brown also said that he expects greater scrutiny of executive compensation and long-term incentive packages in light of COVID-19. “It’s an area where investors are now extremely knowledgeable, given their experience with say-on-pay votes over the past several years.”

“It’s an interesting question for boards, and compensation committees in particular, as they balance incentive goals while being mindful of more difficult workforce decisions management had to make,” said Marcogliese.

Annual meetings

The quick pivot to virtual-only meetings by many U.S. companies wasn’t without challenges. Marcogliese noted challenges related to beneficial owners not being permitted to ask questions, technical difficulties related to registration and audio, insufficient time to ask questions, lack of identification of shareholders asking questions, and allegations of management cherry-picking questions.

While some companies will revert to in-person meetings when it is safe for people to gather, Marcogliese expects that companies that choose to continue with virtual meetings will be asked to focus on how to make them “as close as possible to in-person meetings in terms of participation, voting, and mechanics.”

Of directors and C-level executives surveyed, 33 percent said that they expect a return to in-person meetings, with optional virtual attendance, while another 33 percent  said that they expect a significant shift to virtual annual meetings exclusively. 

Upcoming shareholder engagement

“COVID-19 has crystalized issues around HCM for shareholders,” said Marcogliese. “It has been and will be top of mind in engagements throughout the year—health and safety, executive compensation, diversity, furloughs, and layoffs. It’s critical that, as a board, you take a step back and talk about what matters, what is important to the company, and especially focus on how the company communicates its actions.”

“Look at shareholder proposals and how they have been voted. This tells you something about your constituency,” said Brown. “Read what the trends are. And be aware of the views of other stakeholders who have become very active on issues such as the environment and health and safety. Their views are increasing in importance and relevance.”

Marcogliese says companies should have frameworks for approaching these issues heading into the next proxy season. “Think about them strategically, divorced from the specific issue at hand. Involve management and key constituencies in the discussion and ensure that board oversight is carried out,” she said. “Be proactive.”

2020 proxy season webcast survey results*

How satisfied are you that your company’s proxy and other disclosures communicate how the company is addressing human capital management issues—safety and well-being, talent retention—as a result of COVID-19?

In light of COVID-19 and other issues, what is the most significant change to proxy statements and other disclosures you expect in the coming year?


What is your expectation for how annual shareholder meetings will be conducted in the coming year? 

To what extent has the frequency of the audit committee’s communications with the external auditor changed as a result of COVID-19?**

*Of 468 board directors and C-level executives surveyed during the June 18, 2020, KPMG BLC webcast. Percentages may not equal 100 due to rounding.

** Of 158 audit committee members surveyed during the June 18, 2020, KPMG BLC webcast. 

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