Stewardship Principles

Shaping US practice through shareholder resolutions

Record numbers of shareholder resolutions in 2022 have once again demonstrated their important role in the shaping of sustainability and governance practices in the US. Allianz Global Investors recognises its role in the development by having a strong – and regularly evolving – voting policy aligned with themes it deems important.

Key takeaways
  • The use of shareholder proposals in the US is growing – and AllianzGI is strengthening the link between the themes it deems important and engagement and research activity
  • But voting on shareholder resolutions alone should not define the boundary of stewardship reach and, on some occasions, AllianzGI sought to extend its message via director elections.
  • For 2023, AllianzGI will continue to monitor emerging themes to inform its voting, while strengthening the link between voting, engagement, and sustainability research.

The role of shareholder resolutions

Institutional investors help drive changes in practice

In the US, shareholder resolutions have played a significant role in shaping corporate practice around governance and sustainability matters. Most resolutions are filed by smaller shareholders, often non-governmental organisations and individuals,1 yet require broader shareholder support. Therefore, institutional investors hold an influential role and responsibility – and AllianzGI has a strong track record for voting on shareholder resolutions.

An example is the current high prevalence of proxy access,2 which is available in some form at over two-thirds of S&P 500 companies. Although the number of resolutions filed requesting the adoption of proxy access fell from 51 in 2016 to 9 last year (and 8 year-to-date), the successful promotion of this topic has meant proxy access has become mainstream practice. Any resolutions now tend to focus on amendments instead of adoptions.

Something similar has happened on resolutions for diversity reporting following a successful run of shareholder resolutions last year. While the number of these resolutions fell from 17 last year to only 7 this year, the proportion of companies releasing their EEO-1 report3 rose from 4% in September 2020 to 11% in September 2021.4 We believe these figures will continue to rise. These public disclosures go beyond the legal requirement to file the form with the Equal Employment Opportunity Commission.

These examples illustrate that when there is genuine momentum and wide support for shareholder resolutions, they are driving changes in practice and that shareholder resolutions reflect a dynamically evolving agenda. This evolution extends beyond a simple count of resolutions on a certain topic.

Record number of resolutions point to sustainability focus
In 2022 a record number of resolutions were filed and voted on (see Exhibit 1). The rising number of shareholder resolutions appear to reflect the greater focus on sustainability topics and a changing regulatory environment, especially as set by the Securities and Exchange Commission (SEC). In recent years, rule changes made it much easier for filers to initiate resolutions and more difficult for the companies to challenge them via a “no-action” request to the SEC to exclude shareholder proposals.5 Recently, as a postscript to this year’s voting season, the SEC has proposed several amendments to narrow certain exclusions of shareholder proposals.6
Exhibit 1: shareholder proposal outcomes

Source: Sustainable Investments Institute (Si2). Data as at 1 July, 2022.

Allianz Global Investors’ approach

We expect companies to deliver on sustainability

Our approach to proxy voting is laid out in the AllianzGI Global Corporate Governance Guidelines.7 We expect companies to incorporate sustainability in their strategy, addressing material environmental and social topics. Our voting decisions on shareholder resolutions are based on an overall assessment of the relevant resolution theme.8

Our guidelines are reviewed annually and published, so we can signal our expectations on relevant topics and focus themes – this helps inform and possibly influence potential filers and companies. In addition, we publish our voting record for transparency on how we act on our policies.9

Typically, we support longer-term focused resolutions, with a particular focus on corporate practice and transparency. We tend not to support resolutions that are too granular, overly restrictive, likely to impose an unreasonable administrative burden or where we believe a company has already demonstrated reasonable progress.

AllianzGI’s voting record in the first half of 2022:

AllianzGI supported 90% of the 20 resolutions related to greenhouse gas emissions.

And 63% of the 24 resolutions related to improved climate change reporting.

Source: Allianz Global Investors Global Proxy Voting Overview. Data as at 30 June, 2022.

Improving action on climate change is a key focus

This year’s data suggests that the level of support for environmental and social (E&S) resolutions has been mixed. The number of resolutions receiving majority support has risen, yet, on average, the level of support has lowered (see Exhibit 2). Another trend has been the rising number of resolutions not voted on or withdrawn. This typically happened when a shareholder filed a proposal but, following an engagement process, decided to withdraw the proposal and it was ultimately not put to any vote. While this means there is no voting record for these cases, it may indicate a rising willingness to engage by the company and recognition that the withdrawn resolution would likely have received a high level of support.

We maintained our strong support for climate-related resolutions in 2022. In the first half of 2022, we supported 90% of the 20 resolutions related to greenhouse gas emissions and 63% of the 24 resolutions related to improved climate change reporting. Although this is a slight decline from the 93% support of 15 resolutions in 2021, this reflects our decline to support resolutions where the company’s current trajectory was already sufficiently aligned with our expectations. We did not support some overly detailed and administratively burdensome resolutions. For example, we generally did not support resolutions for a complete stop of any funding of fossil fuels , instead focusing on efforts to align a decarbonisation strategy with a science-based target.

AllianzGI’s voting record in the first half of 2022:

AllianzGI supported 94% of the 17 resolutions on human rights risk assessment.

And 96% of the 27 resolutions related to lobbying disclosure.

Source: Allianz Global Investors Global Proxy Voting Overview. Data as at 30 June, 2022.

Exhibit 2: the number of shareholder proposals for environmental and social (E&S) resolutions rose in 2022, but the average level of support for them fell

Source: PwC Boardroom recap: The 2022 proxy season. Data as at August, 2022

Support for human rights and transparency reforms

We are highly focused on the social performance of our investee companies, especially in the wake of the impact of the Covid-19 pandemic,10 and reflected this in our voting. We supported 16 of 17 resolutions requesting human rights risk assessments and all 4 resolutions for improving human rights standards and policies. Other focus areas were the practices, especially transparency, on political contributions and lobbying. We supported all 18 resolutions related to charitable contributions disclosure and all, but one, of the 27 resolutions related to lobbying disclosure. Lastly, we supported all six resolutions calling for Equal Employment Opportunity (EEO) reporting.

Holding directors to account and ensuring appropriate governance for key topics is integral to our approach. We view this as an avenue of escalation for deficiencies in environmental and social challenges. When a company faces sustained employee-related controversies, including when our engagement leads us to conclude that this follows a failure of governance, we will consider voting against members of the board committee responsible for the areas of remuneration and human capital. We view failure to respond to multiple-year low levels of support for the advisory vote on pay is a red flag for ineffective board governance.

AllianzGI’s focus is on voting and engagement

AllianzGI believes shareholder resolutions will continue to play an important role in shaping company practice and governance, albeit specific resolution requests will likely evolve. As such, we continue to monitor these trends to ensure we can play an active role in our stewardship. 

To achieve this, we are tightening the link between our thematic approach to engagement and our voting. We have seen some resolutions, notably climate, that are more nuanced, requiring deeper research to ensure our approach is appropriate. The tight interaction with sustainability research is integral to supporting this.

We are unconcerned by the rising number of resolutions being settled following engagement (and not voted on), since it reflects the power of high-quality engagement and active filers of resolutions. However, we caution that the effectiveness of this route is highly dependent on evolving and fluctuating regulation. An example is the various SEC guidance and rule amendments over the past year or so, which in our view have impacted the number of resolutions filed and the willingness of companies to engage. Therefore, at least for now, AllianzGI will continue to focus on voting and engagement to communicate our views rather than on actual filing of resolutions.

Download the pdf version

1. Source: Nili Y. and Kastiel K., The Giant Shadow of Corporate Gadflies, 94 Southern California Law Review 569 (2021) Univ. of Wisconsin Legal Studies Research Paper No. 1523.
2. Source: The ability of a group of long-term shareholders to nominate board candidates.
3. Source: Federally mandated annual report, requiring companies with at least 100 employees to provide information on gender, race and ethnicity by job categories.
4. Source: Figures published by www.justcapital.com
5. Source: Shareholder Proposals: Staff Legal Bulletin No. 14L (CF), U.S. Securities and Exchange Commission, 3 November 2021
6. Source: Press release 2022-121: SEC Proposes Amendments to Shareholder Proposal Rule, U.S. Securities and Exchange Commission, 13 July 2022
7. Source: Allianz Global Investors Global Corporate Governance Guidelines, available www.allianzgi.com
8. Source: AllianzGI Sustainability and Stewardship Report 2021
9. Source: Allianz Global Investors Global Proxy Voting Overview
10. Source: See: Unlocking the “S” in capitalism

  • Disclaimer
    Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of futureperformance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any securityand shall not be deemed an offer to sell or a solicitation of an offer to buyany security.

    The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

    This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.

    This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, aninvestment adviser registered with the U.S. Securities and ExchangeCommission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment companyin Germany, authorized by the GermanBundesanstaltfürFinanzdienstleistungsaufsicht(BaFin); Allianz Global Investors (Schweiz) AG; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed bythe Hong Kong Securities and Futures Commission; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No.199907169Z];in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau(Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments FirmsAssociation; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset ManagementIndonesia licensed by Indonesia Financial Services Authority (OJK).

    2554310

Recent insights

We expect biodiversity to be a major theme for investors in 2023, after the recent COP 27 formally acknowledged the link between the climate and biodiversity crises – as underscored by severe weather events this year. We hope that the upcoming COP 15 – a conference dedicated to biodiversity – will agree a global biodiversity framework for the coming decade that will live up to high expectations.

Discover more

Watch our November update on global capital markets with Gregor Hirt, CIO of Multi Asset at Allianz Global Investors. Learn more about Gregor's view on the market developments of recent months, the capital market outlook for the coming months, and how this affects positioning in the multi-asset context.

Discover more

The traditional approach to increasing yields in agriculture relies on seeking incremental gains via refining existing processes and making more efficient use of capital; for instance, by way of improving fertilizers and pest control, or using bigger and better machinery.

Discover more