2020 Proxy Season Focus: ESG Management and Board Accountability
October 20, 2020
2020 Proxy Season Focus: ESG Management and Board AccountabilityDownload Article
In the world of corporate governance and proxy voting, 2020 has been a remarkable year, not only because annual general meetings took place in the midst of a global pandemic that forced the abrupt transition to a virtual proxy season, but also because this year marked the beginning of the new decade at a time when companies and investors experience a major shift in how they engage on the topic of corporate governance. The scope of corporate governance activities is no longer limited to issues directly linked to routine meeting agenda items, such as director elections, shareholder rights, executive compensation, and audit quality. The definition of governance is expanding to include the management of environmental and social risks and opportunities.
Many investors begin to recognize ESG issues as part of their fiduciary responsibility, and several have committed to using their votes to hold boards and management teams accountable for the potential mismanagement or lack of oversight of material issues. Climate change, employee health and safety, data privacy, and human rights are only a few of the many factors where investor expectations are changing, requiring companies to demonstrate robust management systems, oversight mechanisms, and measurable performance in addressing potential risks and opportunities.
In this review of trends during the 2020 proxy season, we focus on key developments in proxy disclosures and director elections, trying to see behind the numbers to identify emerging patterns that reveal the forces driving investor and company behavior in this new era of corporate governance, where a holistic ESG approach is at the center of the discussion about investor stewardship and corporate accountability. Further, we outline the implications of the new expanded definition of corporate governance for the ongoing COVID-19 global crisis and economic shareholder activism.