February 6, 2025
Equity Plan Proposals: Trends in the Russell 3000
According to this Pay Governance memo, over 700 companies in the Russell 3000 submitted equity plan proposals in 2024. Here are key trends to know if you’ll be submitting a proposal this year:
• Nearly 25% of Russell 3000 companies submitted an equity plan proposal in 2024. Shareholder support was strong, about 90% on average, and less than 1% of proposals failed to receive majority support (very similar to 2023 levels).
• It is most common for companies to return to shareholders every 2 to 3 years to seek equity plan approvals.
• Proxy advisor opposition to equity plan proposals typically results in lower shareholder support; however, the equity plan proposal failure rate increases very modestly (to a failure rate of less than 4%).
• Russell 3000 companies that received low shareholder support had median potential dilution of 20%, or double the median of the overall Russell 3000 potential dilution of 10%.
• Among the small sample of companies that failed to receive shareholder support over the last two years, approximately half were in the healthcare sector, and the majority of companies that failed had higher potential dilution levels compared to the median of their respective sector.
• There are several steps companies can take to navigate toward a successful shareholder vote outcome for an equity plan proposal, including analyzing the share reserve needs and relative potential dilution, understanding top shareholder voting policies and proxy advisor concerns, and clearly disclosing the shareholder-friendly features of the equity plan.
– Liz Dunshee