Proxy-Season Reflections: Private Dinner

Nominating and governance committee directors and members of NACD Northern California’s Black Directors Cohort gathered in San Francisco to reflect on the complexities and key lessons of the 2025 proxy season. This insightful discussion was led by Robyn Bew and Aaron Briggs, and graciously hosted by the EY team, Donoghue Clarke, Ibi Krukrubo, Phillip Mazzie, and Joe Muscat.

KEY TAKEAWAYS

SEC Leadership & Investor Engagement in 2025

• Under new leadership from Commissioner Paul Atkins, the US Securities and Exchange Commission is seen as shifting toward a more company-friendly posture.
• Revised SEC guidance requires investors holding 5 percent or more of a company’s shares to file a more detailed Schedule 13D—rather than the simpler 13G—if they appear to influence company decisions.
  • Groups of investors, even individuals acting in concert, may be treated as a single entity for the 5 percent threshold and subject to 13D filing requirements.
• In response, many institutional investors have scaled back active engagement and entered a “listening mode.”
• Companies are facing less transparency around investor voting priorities, making it harder to prepare for engagement.
• Disclosure materials are now more critical than ever, as they may be the primary or only opportunity to communicate decision rationale.
• Off-season engagement remains possible, but companies must take the lead, as investors are increasingly cautious about initiating contact.
• Boards should prepare for limited direct feedback, greater reliance on disclosures, and the need for tighter compliance in all shareholder interactions.

Say-on-Pay

• Average support for say-on-pay proposals has decreased in 2025, indicating growing shareholder scrutiny over executive compensation practices, especially as CEO pay has reached record highs.
• Factors contributing to decreased support include special equity grants, front-loaded awards, and disconnects between pay and performance, where executive compensation does not reflect company results.
• Boards need to clearly articulate the link between executive pay and company performance in proxy statements and ensure long-term performance is aligned with shareholder interests.
• Say-on-pay proposals with negative ISS recommendations received significantly lower support from investors, on average, compared to those with positive recommendations.

Shareholder Proposals Overview

• The total number of shareholder proposals decreased from over 900 in 2024 to fewer than 800 in 2025. Despite the reduction in proposals, average support remained steady.
• There was a notable decrease in environmental and social proposals compared to 2024, with a decline in average support as well.
• Governance-related proposals saw increased support, with average approval rising. Boards need to prioritize transparency and shareholder rights.
• Proposals to declassify boards received strong backing.

Board Structure, Oversight, and Tenure

• There is no federal requirement for director retirement age in the United States, but many companies voluntarily adopt policies.
• ISS has shifted away from focusing on retirement age policies, instead emphasizing the quality of board evaluations and average board tenure over individual tenure.
• Glass Lewis generally raises concerns when a director has served for over 10 years, particularly if they continue to be labeled “independent.”
• Long tenure can undermine perceived independence. Some institutional investors and proxy advisors flag directors with over 10 years on a board as potentially non-independent, especially if they’re not rotated or re-evaluated regularly.
• Evaluations must go beyond box-checking independence. Boards need to assess strategic contribution and value, engagement, and whether directors are appropriately challenging management. This contribution is difficult to quantify, making performance reviews and board dynamics critically important.
• Boards should ensure that each member contributes meaningfully, and board chairs and nominating and governance committee chairs must ensure they initiate difficult conversations when a director is no longer effective. They should encourage a culture of board refreshment when needed.
• Both ISS and Glass Lewis flag overboarding as a governance risk, as it can affect attendance, preparedness, or performance.
• The best boards use evaluations as strategic tools to assess composition and performance, rather than treating them as a check-the-box exercise.

Activism and Proxy Advisors

• Many activist-investor challenges are ending in settlements rather than going to a proxy contest, with the activist often securing board seats without public battles.
• Institutional investors and proxy advisors sometimes influence board composition during these settlements, leading to quicker resolutions.
• The SEC’s universal proxy rule has made partial board changes more common, as shareholders can now vote for a mix of nominees, facilitating more nuanced outcomes.
• Glass Lewis has changed its approach to shareholder recommendations, particularly on political or contentious issues.
• Some institutional investors are now offering voting choice programs that allow their investors to vote on certain policies.

Corporate Language Shift

• Mentions of “DEI” in S&P 500 companies’ filings have decreased significantly in the 2025 proxy season to date, reflecting a broader trend of companies moving away from the acronym in public disclosures. Attendee comments were consistent with research from Gravity Research, which reported that SEC filings that included the acronym “DEI” decreased 98 percent from 2024 to 2025.

AI and Upskilling for the Future

• Boards have been increasingly recognizing the need for artificial intelligence and cybersecurity knowledge in recent years, as well as manufacturing and supply chain literacy.
• Most directors mentioned a preference to smaller, more agile boards with more well-rounded skills and reliance on external counsel for specific expertise.
• Boards should request management to develop clear AI strategies, especially focused on:
  • Cost savings and business optimization
  • Competitive positioning
  • Responsible use and risk mitigation
• AI is not yet a natural part of most board agendas, so it needs to be intentionally added as a recurring discussion topic. Board questions to management should include:
  • What is our AI strategy?
  • Do we have the right oversight structure?
  • What is the return on investment of our AI investments?
  • How does AI impact our workforce and human capital strategy?
  • Is our board and executive team knowledgeable enough to lead on this?
  • How are our marketing strategies evolving with generative AI? How is the company positioning itself on platforms like ChatGPT and Claude to increase visibility (similar to an SEO strategy for Google)?
• Boards must ensure their companies have AI usage policies to prevent leaks of intellectual property, customer data, or trade secrets.
• Clear disclosure in the proxy statement about AI oversight is increasingly expected—to date, most US large-cap companies who disclose AI responsibilities for a specific committee have cited the audit committee.
• Some boards with stand-alone technology or risk committees house AI oversight responsibilities there.
  More public companies are voluntarily disclosing oversight responsibility and relevant board experience related to AI.
• Activists and investors are using AI tools to comb through filings and identify red flags. Companies should expect more granular questions and challenges.
• Boards and management teams should practice prompt engineering and simulate how activists may use generative AI tools to surface vulnerabilities in governance, strategy, or disclosure. Directors can also use AI prompts to help prepare for board meetings, such as summarizing competitors’ earnings call transcripts or other verifiable public information.

Thank you to our generous partner for making this event possible.