Corporate Governance Outlook 2022

Each year, leading governance and executive compensation firm Equilar analyzes the proxy statements and voting results of the 500 largest US companies by revenues to identify five-year proxy voting and disclosure trends, along with proxy disclosure examples from the largest 100 such companies. To provide context and analysis, the report includes extensive commentary from DFIN's Director of Corporate Governance Services, Ron Schneider, as well as from law firm Orrick.

The past two years have been marked both by COVID and its impacts on companies and their performance, as well as on their workforces, customers and supply chains. Also over this period, investor (and other stakeholder) scrutiny of company ESG, sustainability and human capital (HCM) practices – and their oversight – have been intensifying. It's fair to say that these ESG/sustainability considerations have risen to equal prominence alongside traditional annual proxy focus on boards (and their diversity and qualifications), and executive compensation (and its alignment with the business strategy and relevant measures of performance).

The report's Key Findings include:

• Social and environmental issues remain the most common shareholder proposal type. After reaching a peak of 183 in 2017, the number of social and environmental-focused proposals has since fluctuated, falling to 139 in 2021.
• Say on Pay failures increase in prevalence. Say on Pay failures more than doubled since 2017, as 3.4% of Equilar 500 companies failed Say on Pay in 2021.
• Shareholder engagement disclosures continue steady rise. The percentage of Equilar 100 companies mentioning or disclosing topics or processes related to shareholder engagement rose to 93.9% in 2021, a 3.2% increase from 2020.
• ESG disclosures become the standard. The percentage of Equilar 100 companies disclosing or mentioning ESG-related policies rose from 10.3% in 2017 to 81.8% in 2021, highlighting the increased scrutiny surrounding ESG issues in recent years.
• Companies are slowly linking ESG targets to executive annual incentives. During 2021, 21.5% of Equilar 500 companies elected to tie executive bonuses to an ESG-related performance metric.