EY Center for Board Matters' "2020 Proxy Season Preview" - reflecting the firm's conversations with more than 60 institutional investors (62% asset managers, 18% public funds, and 15% labor funds) - shares investor views on the chief corporate strategy enablers and threats, board risk oversight, ESG risk assessment, and executive pay.
Investors' corporate governance priorities for the 2020 proxy season include:
- Top factors investors view as enabling strategy - Investors identified talent management, environmental issues/climate change, and corporate culture as the top factors most critical to their portfolio companies' strategic success in the next three to five years. Relatedly, respondents cited environmental issues/climate change, board diversity, and talent management as the top three engagement priorities for 2020.
A deeper dive on human capital revealed investors' focus specifically on workforce diversity, board oversight, and workforce compensation, as shown here:
- Top factors investors view as enabling strategy - Investors identified disruption/inability to innovate and compete, environmental issues/climate change, and cybersecurity/data privacy as the biggest threats to their portfolio companies' strategic success in the next three to five years.
- How investors are assessing board risk oversight - Investors most commonly identified these factors as important to their evaluation of the quality of the board's risk oversight: directors' display of relevant knowledge and awareness of risks most pertinent to the company's strategy; risk oversight structure & process; and robustness of the company's risk reporting inclusive of how the company assesses, monitors and mitigates risk. Most investors - when asked - said they have concerns about audit committees being overburdened with expanding risk oversight responsibilities.
- Challenges investors face in assessing ESG - Investors cited (by a large margin relative to other factors) the lack of standardization/perceived gaps in company reporting as the biggest challenge they face in assessing how companies are managing their E&S risks and opportunities.
- Top investor concerns around executive pay - The majority of investors cited a disconnect between pay and long-term value drivers, misalignment between pay and performance, and complexity of pay plans as consistent concerns in evaluating executive comp programs.
Each of these focal areas is accompanied in the report by further topical detail, elaboration on the polling data, and instructive key takeaways for the board. The report also captures key themes expressed by the investor respondents in a series of "Questions for the board to consider."
Access additional information & resources on our Proxy Season 2020 and other relevant topical pages. This post first appeared in the weekly Society Alert!