US firms more open to engage with investors-study

By Martha Graybow

NEW YORK, Oct 2 (Reuters) - U.S. corporations and investor activists appear to be finding more common ground, leading to a much larger number of shareholder proposals being withdrawn this year than in 2006, a new study has found.

The study, released on Tuesday by RiskMetrics Group's ISS Governance Services unit, reviewed the results of corporate ballot initiatives on topics including executive pay, director elections and social and environmental matters.

Overall, shareholders withdrew 306, or nearly 27 percent, of the 1,l45 proposals submitted to companies as of mid-September that were tracked by RiskMetrics, according to the study.

That compares with 189 withdrawn resolutions, or nearly 20 percent, of the 947 proposals that were tracked in the same period last year, RiskMetrics said.

"In many cases the board sat down with the proponents of these issues to see if there was a workable solution that was satisfactory to all parties," said RiskMetrics special counsel Patrick McGurn. "Both sides are giving up something here, and the result is that they are able to reach the point where the proposals get withdrawn."

That doesn't mean, however, that the trend is likely to continue, McGurn said.

He said that hot topics next year are likely to include more non-binding shareholder votes on executive pay and whether shareholders can nominate a board director -- two issues where many companies and investor activists remain far apart.

Companies often try to engage with shareholders who submit resolutions in hopes that the proposals can be resolved without a shareholder vote and a potentially embarrassing showdown at the annual meeting.

Withdrawals were as high as 55 percent on the issue of majority voting for corporate board members this year, up sharply from 24 percent in 2006 and 23 percent in 2005.

More companies have bowed to investor calls to adopt majority voting, meaning that directors can't be reelected unless a majority of votes are cast for them.

Thirty-eight percent of proposals to require companies to fully disclose their political contributions have been withdrawn so far this year, compared with 19 percent in 2006 and 17 percent in 2005.

Still, many more shareholder resolutions found their way onto corporate ballots this year.

As of Sept. 15, the study found, 656 investor proposals had appeared on 2007 corporate ballots, up from 581 at the same time in 2006, according to the data, which cover about 4,500 companies.

The report found that executive pay proposals drew the most attention. Forty proposals requesting an annual advisory vote on executive compensation were voted on and averaged about 42 percent support from shareholders, compared with an average of 40 percent at seven firms last year. (Reporting by Martha Graybow)