DE&I, ESG proposals trends and regulatory changes take center stage at Governance Intelligence briefing
How is the proxy season evolving? During a recent Governance Intelligence briefing on Lessons from the 2025 Proxy Season – held in partnership with BetaNXT – Amanda Thrash, senior counsel and assistant corporate secretary at The Williams Companies, said that DE&I issues were still of central importance to investors in 2025.
‘You had large institutional investors like State Street and proxy advisors like Glass Lewis both stating that they would vote against or recommend voting against directors on boards in companies that were not 30 percent gender diverse,’ she said.
Similarly, Nasdaq had enacted board diversity disclosure rules that required companies listed on its exchange to annually publicly disclose director level diversity data in a matrix format.
Then, in December 2024, a shift occurred: the Fifth Circuit Court of Appeals struck down the Nasdaq board diversity disclosure rules, while the next month the US President issued two executive orders around DEI programs in particular, practices that were deemed to be ‘illegal discrimination’.
‘This sent a lot of companies to take a look at their DEI initiatives and practices to make sure they were in compliance with the executive orders or de-risking anything that could be challenged,’ said Thrash.
This was followed in February by ISS announcing that it will no longer consider gender, race and ethnic diversity factors when recommending whether a director should be elected.
‘Companies took a variety of strategies in response to the changes. Some dropped the mention of diversity or significantly scaled back their disclosures,’ Thrash explained.
‘Others made changes to their compensation programs that were focused on achieving certain diversity metrics. But I think it’s fair to say it helped all companies take a fresh look at their DEI practices.’
Laura Franconi, head of issuer and broker solutions at BetaNXT, said that the data collected from the Russell 3000 also illustrated this change in direction.
‘When we looked across all US proposals for the past 2025 proxy season, we did see that DEI language decreased in proposals by about 30 percent. However, Harvard Law just published today that there was only a slight decrease across the Russell 3000 group in DE&I submissions and proposals going to vote,’ she explained. ‘So that’s an interesting contrast.’
Despite the change in language, the number of proposals stayed about the same year-on-year, down in part to the timeframe that Thrash previously mentioned.
‘Workforce diversity and DE&I proposals did see a decline in investor support in 2025 compared to 2024 and overall, there were more proponent submissions done for DE&I but a lot of them were actually withdrawn prior to the actual meetings,’ she added.
Switching gears to an adjacent topic, the panelists noted that other ESG issues in shareholder proposals have also shifted. Jeffrey Taylor, vice president, chief SEC counsel and secretary at American Water Works Company, said he had observed fewer environmental and social proposals.
‘I think there’s been a stronger focus on corporate governance. We’ve seen a decrease in the average support for the E and S proposals, while the governance shareholder proposals, I think the support tends to be pretty high,’ he said.Open configuration options
Typical proposals from the 2025 proxy season tackled separating the chair and CEO roles, majority voting, the right to call a special meeting and declassified boards, Taylor said, adding that ‘it’s good to see a reinvigoration on the shareholder side in good corporate governance’.
On the Staff Legal Bulletin No. 14M legislation that was announced in February, Taylor expects ‘the stronger impact of that in the next proxy season’ as most companies with advanced notice bylaws were required to receive proposals in the latter part of last year.
According to Franconi, the prevalence of environmental and social proposals filed at Russell 3000 companies decreased by about 20 percent, compared to governance proposals which stayed consistent year over year.
Another legislative factor was the updates to Schedule 13D and 13G filing rules, under which shareholders who own more than 5 percent of a class of voting equity securities and issuer, including as a group, have to make a disclosure about that beneficial ownership on schedule 13D.
However, if the shareholders meet certain exceptions, including the expectation that they do not intend to influence control of the company, then they can be eligible for to file a 13G instead, which is a shorter form with fewer disclosures and more flexible deadlines.
‘Going into the 2025 proxy season, I think the feeling was that investors could engage with issuers on ESG and DEI issues without losing their status as a 13G filer,’ explained Thrash.
‘What came out in the new guidance from the SEC however was that they expanded the nature and the scope of the activities that would make an investor have to file a 13D as a more active investor.’
All of these changes come under the stewardship of new SEC chair Paul Atkins and his influence at the regulator is what Taylor describes as a pendulum swing.
‘What have we seen so far to indicate a swing in pendulum? Well, in addition to the reworking of the of the shareholder proposal rule with SLB 14 M, in March the SEC voted to end its defense of the SEC climate rule,’ he added.
In Taylor’s words, it cannot be ‘oversold as to how huge this is’ with the SEC having spent large amounts of time, energy and effort to come up with a proposed rule and then a final rule.
In addition, the SEC withdrew amendments that it had proposed back in 2022 talking about rule 14a-8, were they proposed a series of reforms to a number of the implementation, duplication and resubmission exceptions.
‘I think that rule would have, would have like increased shareholder proposal activity,’ Taylor said. ‘I think it is a good sign that the SEC wishes to take a holistic approach and review these practices. I think it’s also helpful that they’re looking to align those rules with what companies are doing. There will be more to come in this space.’
To watch the full briefing ‘Lessons from the 2025 Proxy Season’ on demand, click here.
