What to Expect From Proxy-Voting Initiatives in 2025

It’s proxy-voting season, when shareholders get to vote on issues affecting a company’s risks and its place in the world. You can read a primer about proxy voting here.

This year, the current US presidential administration has been critical of environmental, social, and governance approaches to investing and other financial matters. One battleground is corporate diversity, equity, and inclusion measures. Supporters regard DEI measures as a way to strengthen a company’s human capital management practices as the workforce grows more diverse. Detractors see them as discriminatory and contrary to a merit-based system. Says Jackie Cook of Morningstar Sustainalytics, “Defining DEI in terms of the competitive advantage is the challenge for companies this year.”

At the same time, you’ll see a renewed focus on corporate governance and its broad appeal to shareholders. We asked two Morningstar Sustainalytics experts, Cook and Lindsey Stewart, to share their views about what to expect from the proxy season in 2025. Cook oversees the ESG Voting Policy Advisory Group. Stewart is director of stewardship research and policy. These are condensed, edited excerpts from our conversation.

DEI and Proxy Season

Leslie Norton: What kinds of proposals are you seeing this proxy season?

Jackie Cook: We’re already seeing a shift in the mix of proposals. We’ll probably see fewer proposals directly addressing climate measures, targets, transition plans, etc. There is quite a push and pull over diversity, equity, and inclusion themes, or DEI. I think responsible artificial intelligence will be a key theme on corporate proxy ballots as well. But it’s very early days.

We’re definitely seeing a growing focus on corporate governance measures—staples from a decade ago, including proposals around simple majority voting measures and the like, that cement shareholders’ ownership rights. These did quite well in 2024, and I think we’ll see more emphasis on shareholder rights this year.

Nature grew as a proxy-ballot feature in 2024. This is a more diverse topic than climate, where you might see resolutions addressing plastic packaging, water stewardship, and biodiversity and deforestation.

Norton: Please tell us more about the DEI resolutions this proxy season.

Cook: This year, DEI is prominent in shareholder resolution filing activity. Already five shareholder resolutions requesting disclosure of workplace DEI efforts or risks have been voted since the start of the year. Four of these were filed by groups opposing workplace diversity efforts. For example, Costco COST shareholders voted against a proposal asking the board to report on the risks of the company maintaining its current DEI goals. Costco management pushed back against the proposal and said the DEI program is key to their corporate strategy and business advantage.

Lindsey Stewart: We’ve already got a snapshot of investor views of DEI at the handful of shareholder meetings that have already taken place. Based on voting results at Apple AAPL, Costco, and Deere DE, it appears that only a handful of shareholders want to wind back DEI but many are clearly still seeking relevant information on this element of human capital management. That conversation doesn’t appear to be over.

With the executive order and related measures against DEI programs by the current administration, institutional investors are still focusing on maintaining cognitive diversity on boards to deliver better decisions. It will be interesting to see how investors measure and evaluate these efforts if they’re not allowed to consider what you may call explicit diversity factors in the way they’ve done in recent years.

Cook: Defining DEI in terms of the competitive advantage delivered by human capital management practices that provide for inclusive and meritocratic workplaces is the challenge for companies this year.

Support Falls for Anti-ESG Proxy-Voting Proposals

Norton: Lindsey, what do you expect for 2025?

Stewart: In 2024, we started to see a slowdown in the overall number of resolutions filed by shareholders that favor ESG goals in the 2024 proxy year. And most of the growth in resolutions was actually accounted for by anti-ESG shareholder resolutions from a group of filers that argue that companies’ sustainability initiatives harm the company. From what I’ve seen in no-action requests and other places, that trend will continue. The anti-ESG proponents don’t appear to have been discouraged by their total lack of success at the corporate proxy ballot box. Shareholder support for resolutions by anti-ESG proponents averaged only 2.6% last year. Judging by recent results on anti-DEI resolutions at Costco, Apple, and Deere, all opposed by 98% of shareholders, it looks like that low support isn’t about to improve.

We’re seeing less voting activity on environmental issues, particularly climate issues, compared with earlier years. This time last year, the SEC rule on climate disclosure was about to be finalized. Now it looks dead. So investors will need to ask companies a lot of questions one to one, to get the information they need regarding exposure to climate risk. I think socially focused proposals will continue to represent most resolutions that we’re seeing in 2025 as we’ve seen in previous years.

Support for Environmental, Social Proxy-Voting Proposals Peaked in 2021

Norton: What kind of support will these proposals get?

Stewart: We’ve seen a pullback in support for environmental and social resolutions at US firms consistently, after a peak in 2021. We expect that to continue, particularly with the pressure from the current administration on all things ESG at the moment. That’s leaving a widening gap between the intentions of US asset managers and European asset managers with regard to sustainability. In recent research, I noticed that the voting decisions of US sustainable funds were starting to diverge from their parent firm’s decisions for conventional funds. They tended to track the trends that conventional funds had displayed over these 2022 and 2023 proxy years. But in 2024, conventional funds supported fewer resolutions, but sustainable funds’ support stayed steady. If that gap widens, it really does mean it’s up to investors to make critical decisions on the level of intention that they expect to see in terms of proxy voting and engagement in the funds that they select.

Norton: Proxy voting is very public, but so-called engagement, the private conversations that investors have with companies, goes on all year. What’s happening with engagement this year?

Cook: Engagement will continue to be an important part of investors’ active ownership strategy. Proxy support for shareholder resolutions addressing specific issues can provide a focus point for engagements. Lower support can make it more difficult to persuade companies to act on specific issues. However, maintaining constructive dialogue with a company is part of a broader stewardship strategy.

Stewart: That’s certainly true. Things are getting more complicated, though. The SEC recently implemented more extensive disclosure requirements for large shareholders engaging on ESG issues. This prompted the two largest asset managers, BlackRock BLK and Vanguard, to pause engagements briefly while they considered their next steps. Both firms have since restarted their engagement meetings, but it certainly shows that there is a lot more to think about this year when it comes to maintaining dialogue between investors and companies.

Proxy-Voting Differences in US, Europe

Norton: Any other differences between the European and US proxy ballots this year?

Cook: They are difficult to compare. In Europe, different proxy rules apply from market to market. For instance, it’s easier for shareholders to file resolutions at Nordic companies, more difficult in other markets. Overall, far fewer shareholder resolutions are voted at European companies. However, European company proxy ballots are more likely to seek shareholder approval for climate plans and sustainability reports.

Stewart: European shareholder resolutions also tend to be binding on management, certainly here in the UK, whereas the proposals in the US are advisory. So there’s much more consequence to supporting shareholder resolutions. The few that come up get lower support on average, because they’re not always aligned with what asset managers or other institutional investors want from their engagement

Cook: For example, last year, Swiss companies’ proxy ballots contained a resolution to approve their corporate sustainability reports, as required by Swiss regulation. Last year, that was mostly interpreted by companies to be advisory. This year, I think the general interpretation will be that the result is binding. That binding nature is something shareholders consider when voting on the resolution. Generally, shareholders are less inclined to vote against management on binding resolutions.

Stewart: It has consequences for other votes, too. If you cast a binding vote against the sustainability report, what does that say about your opinion of the audit committee members of the board, or other reporting by the company? It can get very complicated very quickly.

The Appeal of Corporate Governance in Proxy-Voting Proposals

Norton: Jackie, you expect corporate governance to be more prominent this year. Why?

Cook: Corporate governance has broader appeal across the spectrum of investor views on environmental, social, and governance issues. So, in a way, it sidesteps the ESG debate, because good governance measures are really about keeping management accountable. This has appeal from a shareholder primacy perspective as well as from a more stakeholder-friendly view on corporate responsibility. We saw a lot of voting momentum on certain corporate governance-related resolutions last year.

Norton: What types of corporate governance resolutions should we expect?

Cook: The one that dominated last proxy season was a request for simple majority voting provisions to be written into corporate bylaws. These ask that company bylaw requirements for supermajority shareholder support for an issue to pass be replaced by a standard requiring a simple majority vote support. Resolutions that impact corporate governance arrangements are often required by company bylaws to be supported by the affirmative vote of as much as 80% of outstanding shares. In practice, not even 80% of outstanding shares are typically voted! So this can limit shareholders’ ability to change governance arrangements at a company, but it can also limit management’s ability to adopt shareholder-friendly governance changes. Forty-odd such resolutions voted in 2024, receiving average support of around 75%.

There is also broad support for measures that address unequal shareholder voting rights—for example, asking companies to collapse multiple share classes into a single class of shares with one vote per share. At Tyson Foods’ TSN shareholder meeting earlier in February, a proposal asked the company to report vote outcomes by share class to give more transparency into voting support, given the super voting rights that are exercised by the company’s insiders. That resolution got an estimated 56% support of the noninsider vote.

Norton: Any other governance issues?

Cook: I think there’ll be significant focus on compensation practices at US companies, especially with the market doing as well as it did last year. We have more pay-related data this year because we have a third year of pay versus performance disclosures. There will be more attention to “say-on-pay” resolutions because 13F institutional investment managers are now required to file their say-on-pay votes. [Say-on-pay votes give shareholders a voice if they think executive compensation is excessive.]

Norton: Lindsey, what kinds of environmental and social proposals succeed in this climate?

Stewart: For climate proposals, reporting on scope 1 and 2 emissions and oversight arrangements for climate risk tend to get good levels of support. Several proposals dealing with that issue had a degree of success at restaurant companies last year. What gets less support generally is where proponents ask for specific courses of action, such as cessation of financing lines. On the social side, again, requests for transparency and better disclosure of what are clearly financially material issues regarding the workforce or labor rights have been met with a degree of success. But there’s not always a broad market opinion that certain social issues are financially material.

Norton: The SEC has new guidance around shareholder proposals. What does it mean for investors?

Stewart: The SEC has made changes to the rules surrounding shareholder resolutions and investor engagement with companies. They’ve restored restrictions on the kinds of shareholder proposals that can be filed at US companies, last seen in 2021. Alongside the additional disclosure requirements for large shareholders I mentioned earlier, asset managers will have to pick through exactly how they respond to that.

Big Tech, Tesla to Attract Shareholder Proxy-Voting Proposals

Norton: Let’s turn to specific companies that will attract attention in this year’s proxy season.

Stewart: Big Tech gets more than its fair share of resolutions: Amazon.com AMZN, Meta META, Alphabet GOOG tend to be a lightning rod for a wide range of social issues and new artificial-intelligence-focused resolutions. Issues specific to that sector, such as online safety, data center locations, human rights pop up fairly regularly. In finance, sustainability-conscious investors are focused on the transition to net zero and will be asking for clear disclosure around metrics that enable them to evaluate the speed and quality of transition and the level of oversight that boards are providing in those areas.

Cook: Tesla TSLA has gotten a lot of interest this year, according to the company’s petitions to the SEC for no-action relief, mostly from individual retail shareholders. This will be an interesting ballot to watch given the CEO’s political profile and Tesla’s prominent weighting in the stock market. A 2023 shareholder resolution asking the company to provide a public report on key-person risk and succession planning received low support at the time.

Norton: Any notable proponents to watch out for this year?

Stewart: The New York City Comptroller continues to extend his focus on clean energy financing ratios, meaning the proportion of financing, lending, underwriting at banks and insurers that is directed toward clean energy projects compared with conventional energy projects. They think that’s an important indicator of the direction of travel toward net zero transition, for whatever enthusiasm there remains of that in the market.

Cook: Retail investors like John Chevedden and James McRitchie as well as union pension funds, like United Brotherhood of Carpenters, have played an important role in the resurgence of corporate governance on the proxy ballot.

Also, a handful of proponents are prolific filers of anti-ESG resolutions. As Lindsey pointed out, they don’t get a lot of support, but that doesn’t deter them from filing resolutions.

Norton: Now that the SEC has paused its climate disclosure rule, will there be an increase in requests for more climate disclosure from US companies?

Stewart: It’s probably too late to affect this proxy season. But even if there is no SEC climate rule to deal with, European Union rules around corporate sustainability reporting will catch a lot of US companies that operate in Europe. There’s also the fact that a lot of the larger US asset managers have openly advocated for climate disclosure in their voting and corporate governance policies. So, unless that wording changes over the next year, I’d expect them to keep the pressure on US companies to disclose financial material risks regarding climate. Part of that is disclosure about emissions. California also requires large companies doing business in the state to start reporting emissions data next year.

Norton: Why are these issues material for investors?

Cook: It feels like it’s stating the obvious, but a sustainably run company is more resilient to many of the extended value chain impacts and shocks that we can expect from a changing climate, from shifting demographics, from geopolitical uncertainties. Strategies that take into account environmental, social, and governance risks and opportunities, not just with respect to the company’s own operations but also across its value chain, just make for more resilient business, which is what most investors want.