Kingsdale Advisors Releases the Definitive 2023 Proxy Season Review, Signaling a Pivotal Shift in Activism
Kingsdale Advisors, North America's leading strategic investor advisory firm, has unveiled its 2023 Proxy Season Review titled "Change Is Here" in recognition of the fact that emerging trends Kingsdale has warned about are now taking their toll on Canadian boards. The report reveals concerning developments that directors need to be mindful of: annual meetings are no longer routine, with growing opposition to even the most fundamental proposals. Activism is now being driven by previously friendly, long-term faces, and activists are increasingly agnostic to sector and market cap. Of most concern should be the fact that activists are reshaping the voting landscape leveraging technology and speed to efficiently engage with investors and tip the balance in their favor, while issuers lag behind.
As we predicted at the beginning of the year, activism surged following a period of market uncertainty and turmoil, and no industry was immune. The 2023 proxy season turned out to be a banner year for activism with a record-breaking 69 proxy contests in Canada ? a staggering 97% increase from the previous year. It also marked the first time since 2017 that activists scored more wins than management.
"In our 20 years in business, we have never seen a year quite like this. A record number of proxy fights spanning all industries and market caps should be a wake-up call to boards and management. Coupled with a decrease in director votes at annual meetings and a record number of auditor votes being hit, warning signs should be flashing for all directors. As they gear up for 2024, a reassessment of historic investor engagement and governance strategies is imperative to navigate the new proxy season unscathed," said Wes Hall, Executive Chairman and Founder of Kingsdale Advisor.
Key Highlights:
- Soft Votes Across the Board: Individual directors are increasingly being targeted and support levels are dropping. In addition, there is an increase in opposition to Say-on-Pay proposals in Canada, with the lowest average investor support since 2019 (90.9%), as well as a decrease in support for auditors.
- Voting System is Becoming More Opaque: The introduction of pass-through voting in 2022 has shifted voting power from asset managers to their underlying clients, exemplified by the "Big Three" (BlackRock, State Street Global Advisors and Vanguard) and more fund managers are looking to do the same. The consequence is it is increasingly difficult for a company to not only identify who voted against a proposal but, more importantly, the "why".
- ISS and Glass Lewis No Longer the Sole Voices in Determining Vote Outcome: Institutional investors are adopting their own, often stricter, policies than Institutional Shareholder Services Inc. ("ISS") and Glass, Lewis & Co LLC ("GL") benchmark polices for standard AGM resolutions which negatively impacted voting results across the board. Previously boards have staked their vote success on support from the two advisors but now broader evaluation lens is required.
- Activists Are Winning Friends and Influencing People: Top 100 global fund managers are now more than ever open to supporting activists' agendas. They supported activists, at least partially, approximately 57% of the time.
"From investor behaviour to institutional voting policies, to an increasing lack of transparency in the voting system, the world according to shareholders is changing rapidly. We have seen a direct correlation between boards that acknowledge and adapt to these changes and their voting success," said Ian Robertson, Chief Executive Officer of Kingsdale Advisor. "We expect the issues we have identified this year will persist and potentially worsen in 2024. The good news is that by making informed decisions today, directors can proactively steer clear of these challenges and secure their long-term success."
Download your copy of Kingsdale's 2023 Proxy Season Review.
About Kingsdale Advisors
With offices in Toronto, Calgary and New York, Kingsdale Advisors is the leading advisor to public companies on all shareholder, governance, and transaction-related matters, having acted on the largest and highest profile proxy fights, transactions, and other special situations. For 20 years, public companies across North America have looked to the expertise of Kingsdale Advisors to secure the success of transactions or resolutions driven by shareholder votes. Recognized as the leading Proxy Solicitor in Canada and Top 5 Proxy Solicitors globally, Kingsdale Advisors boasts a multidisciplinary team offering an array of specialized services focused on strategic and defensive advisory, governance advisory, compensation advisory, strategic communications, and voting analytics.
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