Key Takeaway

Shareholder proposals that seek to promote ESG measures tend to gain significant attention. However, director elections tend to have a much greater impact on corporations. Thus, activist shareholders tend to focus on what matters and so should the public at large.

Disproportionate Focus on Shareholder Proposals

Controversy around proxy advisors and proxy voting has been centered on support for proposals that promote environmental, social, and governance (ESG) measures. ESG shareholder proposals often touch on hot-button issues such as climate change, DEI, abortion, racial equity, and gender pay gaps and thus often solicit attention from both sides of the aisle.

Criticism can most notably be seen in Congressional hearings, proposed laws, proposed regulations, and letters from state attorneys general. Criticism has been directed at proxy advisors and large asset managers for their support levels of ESG shareholder proposals.

However, the reality is that most shareholder proposals are precatory (non-binding) and often receive little support. Furthermore, and even more importantly, only 2% of proposals at S&P 500 companies in the past year were ESG shareholder proposals. Though investors use shareholder proposals to communicate concerns on specific topics, director elections are far more common.

The Current Framework: Directors Typically Receive High Support

Directors have historically been elected with wide margins, with support rates typically in the mid-90% range. In fact, between 2015 and 2024, an average of only 42 out of the tens of thousands of directors in the Russell 3000 failed to receive majority support from shareholders.
This is surprising considering investors’ dissatisfaction with returns, and dissatisfaction with the board’s risk management of ESG, AI, cybersecurity, and other concerns.

Additionally, board members themselves express dissatisfaction with their colleagues. A PWC 2025 survey of boards found that 55% of directors believe that at least one fellow board member should be replaced.

Instances of management-nominated directors receiving less than majority support are rare and generally limited to the following two scenarios: (i) hostile takeovers amid poor stock performance and (ii) extreme governance concerns. For example, the lead independent director of the Netflix board, Jay Hoag, received less than majority support at Netflix’s 2025 annual meeting. This was likely due to his poor attendance record (50%) at board meetings in the year prior.

Signaling Dissatisfaction via Director Elections

Though directors tend to be elected by wide margins, some investors choose to signal their dissatisfaction with the board via director elections. This dissatisfaction may be driven by a variety of factors.

Weak historical performance

One might consider if a company has significantly underperformed compared to their sector or the total market during a particular director’s tenure.

Ineffective oversight

Another consideration is whether directors are holding management accountable—for example, by replacing executives when necessary in cases of sustained underperformance or risky behavior.

ESG risks

Lastly, if an investor has concerns about the combined CEO/Chair structure, they may choose to withhold votes from the chair or lead independent director to send a signal that they do not support the leadership structure of the board. If an investor believes that environmental risks are not being properly addressed, investors may choose to vote against the chair of the board or other directors they believe should be responsible for addressing these risks but are failing to do so.

Conclusion

A board of directors has a duty to oversee management. When shareholders believe they are failing at this task, they may hold directors to account. The public might be better-served by paying more attention to these more common, more effective means to implement change at corporations.