2024 United States Proxy Season Preview: Governance & Compensation

Below are key takeaways from ISS’ recently released 2024 United States Governance & Compensation Proxy Season Preview. The full report is available to institutional subscribers by logging into ProxyExchange then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.

• In the U.S., many remaining SPACs turn ‘zombie’. Regulatory pressures and overall negative market sentiment have caused SPACs to be a less attractive option for private companies to reach the capital market. Hundreds of SPACs remain searching for a merger partner, with some repeatedly requesting shareholder approval to extend the maximum length of time to complete a transaction. High levels of redemptions of shares held by public investors mean that most remaining SPAC shares are held by the sponsor, and leave little money in the trust account for use by the post-merger company.
• Delaware companies continue to amend their charters to limit the liability of executives. Although shareholders have generally voted in favor of officer exculpation proposals, nearly one in five such proposals failed to receive the requisite level of support in 2023.
• Universal proxy cards have had limited impact to date. Contrary to predictions, UPC has not led to a surge in contested elections or meaningfully impacted dissidents’ success rate thus far. However, the largest contest of the UPC era is set to come in 2024.
• Fewer U.S. boards will need to demonstrate robust say-on-pay responsiveness. Last year’s higher say-on-pay support levels overall means that fewer boards will need to demonstrate robust responsiveness to low vote results. Core pay-for-performance areas are expected to remain in focus, such as the proportion of performance-conditioned pay, goal rigor, clarity of disclosure, and one-time awards.
• Investor appetite for line-item disclosure of non-GAAP metric reconciliation. In a recent ISS Global Benchmark Policy Survey, a majority of investors responded that line-item reconciliation of non-GAAP adjustments to incentive plan performance metrics should be disclosed. Many investors may be closely scrutinizing non-standard metric adjustments during the 2024 U.S. proxy season.
• Clawback rule in effect for 2024 U.S. proxy season. The SEC approved clawback listing standards proposed by the NYSE and Nasdaq, and covered issuers had until December 1, 2023, to adopt a compliant clawback policy. Many of the largest US companies have already adopted compliant policies, although the rules also create new disclosure obligations.

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