As market participants prepare for the 2025 proxy voting season, which runs from early spring through late summer, the proxy adviser firm Institutional Shareholder Services, in a March report, predicted that boards will have to deal with increasingly conflicting demands from stakeholders and even more oversight responsibilities than they already had.
In line with the U.S. government on the heels of Republicans’ November 2024 election win, proposals against environmental, social and governance factors are increasing, as is pushback against diversity, equity and inclusion initiatives.
Still, many of these anti-ESG and anti-DEI proposals are failing. Goldman Sachs shareholders recently defeated a proposal to slash the company’s diversity, equity and inclusion-linked executive pay metrics, with only 2% of shares voting in favor.
Another change is that new guidance from the Securities and Exchange Commission in Staff Legal Bulletin No. 14M (CF) has made it easier for boards to block shareholder proposals on the basis of micromanagement and other factors.
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“Every week seems to bring a new development, from changes in how investors view certain topics to SEC rules and guidance,” wrote Jun Frank, managing director and global head of compensation and governance advisory at ISS, in the report. “Boards are being pulled in many, sometimes contradicting, directions, and must carefully navigate a myriad of legal, compliance, climate, social, political, and technological risks.”
Institutional Shareholder Services is part of ISS STOXX, which owns CIO.
Will ESG, DEI Take a Backseat?
In 2020, only 13 counter-ESG proposals were submitted by shareholders, accounting for 1.5% of all submitted proposals. In 2024, that figure rose to more than 100. ISS is currently tracking at least 62 counter-ESG proposals for the 2025 proxy season and expects 150 for the full year, which would account for 14.7% of all submitted proposals, according to ISS voting analytics data.
Environmental proposals have nearly doubled since 2020, though, with 17.3% of all shareholder proposals expected to focus on this topic in 2025, up from 9.9% in 2020. Governance and compensation are still a large topic of shareholder proposals, although that topic declined to 40.4% in 2025 from 53.7% in 2020.
Diversity, equity and inclusion policies will also be under scrutiny from investor groups. The number of companies using DEI metrics to determine the pay of senior executives has increased significantly over the past few years, but as these initiatives come under scrutiny, adoption has decelerated, with ISS expecting more companies to eliminate these metrics this proxy season.
Of companies in the S&P 500 Index, 10% applied DEI metrics in executive compensation in 2021, rising to 41% in 2023 and staying flat in 2024. According to the report. Of companies in the Russell 3000 Index (excluding the S&P 1500), only 1% of companies used DEI metrics to determine executive compensation in 2021, rising to 6% in both 2023 and 2024.
“Faced with increased shareholder scrutiny, companies may scale back on disclosure around DEI metrics in their 2025 proxy statement or start to modify or eliminate DEI metrics,” the ISS report stated.
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Tags: anti-ESG, board diversity, DE&I, Diversity, ESG, Institutional Shareholder Services, ISS, ISS STOXX, Proxy season, proxy voting
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