2023’s Proxy Season and Annual Report Guide

February 16, 2023Analysis

In some ways, the 2023 proxy season might be met with a sigh of relief as some extraneous factors impacting United States capital markets—such as the COVID-19 pandemic and ongoing Russo-Ukrainian conflict—have stabilized in terms of their increased effect. In that same vein, some changes that may have once been viewed as “trends” in disclosure are very much here to stay. 2022 was the year environmental, social, and governance disclosure (“ESG”) made itself a household name in the world of public disclosure, showing that its sticking power stretched far beyond its original rise in 2020 and permeated considerations across topic areas. Meanwhile, attention has also shifted to substantive procedural changes enacted during 2022, such as the universal proxy card. The following guide includes:

  • A summary and review of the 2022 proxy season;
  • Highlights of new and anticipated changes to the 2023 proxy season, as governance and pay versus performance changes were accompanied by procedural changes in proxy card and annual report structure and dissemination; and
  • Guidance on how to implement changes and analysis on ongoing company and management considerations during the 2023 drafting process.

2022—A Year in Review

The past few years have seen a trend toward increased permissibility by the Securities and Exchange Commission (the “SEC”) of including shareholder proposals for a vote at annual or special meetings, for example, by amending the ownership requirements included under Rule 14a-8(b)(3).[1] As a result, the number of shareholder proposals reaching a vote continued to increase significantly in 2022, up nearly 40% in the first half of 2022 over the first half of 2021.[2]

Global events also led to shifts in disclosure as 2022 unfolded. Though the year started out dominated by market focus on COVID-19, attention quickly shifted to supply chain impacts, an unfolding conflict between Ukraine and Russia that sparked cybersecurity concerns in the United States, a mid-term election cycle, and more. Filers responded through updates to risk factors, as applicable, and had to carefully evaluate what the changing market meant to their business.

In addition, the SEC, and other regulatory bodies, passed a number of new legislation measures in 2022, discussed in further detail below.

This part discusses updates to the following policy initiatives and trends from 2022:

  • Changes and trends in ESG shareholder proposals and disclosures;
  • Increased focus on director expertise, specifically with a focus on diversity disclosure and initiatives;
  • Virtual shareholder meeting regulations and trends; and
  • Geopolitical impacts on risk factors.


Shareholder proposals related to ESG

While governance proposals made up a decreased overall percentage of shareholder proposals, they still held the top spot in the 2022 ESG proposal sphere, making up just under half of shareholder proposals.[3] Meanwhile, social and environmental proposals increased in frequency over years past, holding 39% and approximately 11% of shareholder proposals respectively.[4]


Public disclosure on environmental factors largely focused on transparency. While the first waves of environmental disclosure may have had filers trying to disclose any and all ways in which they might create environmental impacts and how they attempted to mitigate them, the 2022 proxy season led to deeper disclosure, as filers had a few years to determine what their primary impacts are and how to mitigate them. Through the comment letter process, the SEC has started to push filers to consider both the short and long-term impacts their policies might have going forward.

Director Expertise

Following the adoption of NASDAQ diversity rules in 2022, the SEC, through use of the comment letter process, is pushing boards to adopt further diversity, not only in terms of metrics, but also in terms of expertise and thoughts. As discussed further in this guide, boards are being asked to more closely consider where they keep their expertise in areas like climate control and cybersecurity. showing a trend through the 2022 proxy season not only to diversify who is on the board of directors of a filer—but also what they know and how they put their expertise into action.

Virtual shareholder meetings and trends

If the 2022 proxy season showed one thing, it is that virtual shareholder meetings will not be going away. SEC staff initially issued guidance on how to conduct annual meetings virtually in light of the COVID-19 pandemic, and the SEC extended that guidance heading into the 2022 proxy season. At this point, many filers have adopted virtual meeting platforms, and these platforms don’t seem to be going away anytime soon. While state law ultimately governs the ability of filers to conduct shareholder meetings, given the strides in technology related to presentation of materials across meeting platforms, as well as the relative ease for shareholders to attend virtual meetings relative to in-person meetings, filer should expect to continue to conduct virtual meetings into 2023 and beyond.

Global impacts on risk factors

While the COVID-19 pandemic caused many filers to closely consider the impacts to their business model of a worldwide event, a number of additional events caused filers to have to consider their risk profiles in 2022. For example, the war in Ukraine caused public filers to have to think carefully about their risk profiles given both the increase in cybersecurity incidents caused by Russian hackers as well as impacts to supply chain. On a more local scale, filers also had to think carefully about how region-specific weather patterns may impact their production, services, and outputs as weather across the United States (and globally) became more extreme. Global events and external impacts likely will not go away as the world becomes increasingly connected, and filers will have to continue carefully considering how they might be impacted by things seemingly outside their control going forward.

Key Updates to the 2023 Proxy Season

Pay v. Performance Disclosure

The SEC’s final rule for its pay versus performance disclosure now requires filers to disclose information reflecting the relationship between executive compensation actually paid by a filer and the filer’s financial performance. The new requirements apply to all publicly traded filers, except emerging growth filers, foreign private issuers, and registered investment filers. There are three components of the required disclosures, (1) a tabular disclosure, (2) a comparative disclosure, and (3) a tabular list.

The tabular disclosure is required to present compensation and performance information for the company’s last five fiscal years. For the covered years, the table is to include: (1) the total compensation for the company’s principal executive officer (“PEO”); (2) the compensation actually paid to the PEO; (3) the average total compensation for the company’s named executive officers, other than its PEO, (the “Non-PEO NEOs”); (4) the average total compensation actually paid to the company’s Non-PEO NEOs; (5) the company’s total shareholder return (“TSR”); (6) and a “Company-Selected Measure” that the company identifies as its most important financial performance measure in aligning compensation “actually paid” to the NEOs with company performance.

To accompany the pay-versus-performance table, the rule also requires a comparative disclosure that provides a clear description, in narrative and/or graphical form, of (1) the relationship between compensation actually paid to the company’s NEOs as shown in the table and the company’s financial performance measures included in the table, and (2) the relationship between the company’s TSR and the TSR of its peer group. In calculating peer group TSR, filers who are not smaller reporting companies may use either the same peer group used for purposes of Item 201(e) of Regulation S-K or the peer group used elsewhere in the Compensation Discussion and Analysis for the purposes of disclosing compensation benchmarking practices. Finally, the company is also required to disclose a tabular list of three to seven of its “most important” financial performance measures that it uses to link the compensation “actually paid” to executives with company performance.

Universal Proxy

The SEC announced updates to proxy cards associated with contested director elections. For any director elections held after August 31, 2022 (which include the 2023 proxy season), a universal proxy card must be used to solicit proxy votes for candidates, and must include all director nominees presented by both management and shareholders up for election at a shareholder meeting. If a shareholder presents their own director candidates, such shareholder must solicit holders of a minimum of 67 percent of the voting power of shares entitled to vote in the election. Unlike standard proxy access proposals, universal proxy rules do not cap a number of nominees nor do they impose a holding period for shares or a minimum ownership threshold.

Some filers, such as registered investment filers and business development filers, will not be subject to the universal proxy requirement.

After observing the results of the initial proxy season and how practice and response has developed as filers acclimate to the new rule, there are a few updates filers might consider in their 2023 annual meeting to help limit the potential impacts of universal proxy access going forward: (1) a dissident shareholder’s notice should include the representation that the shareholder will solicit proxies from shareholders holding at minimum 67% of the company’s voting power; (2) filers might continue to require that dissident shareholders use a proxy card that is a different color than the color reserved for the company’s exclusive use, which they can reference in their proxy filing; (3) filers should require reasonable evidence of compliance with the universal proxy rules by dissident shareholders prior to the annual meeting; (4) filers should consider imposing a requirement for shareholders to disclose with whom they are collaborating in a proxy solicitation; and (5) filers should re-evaluate their director nominee notice bylaws in order to make sure the company’s nominating procedure is clear to shareholders.

Shareholder Proposals

In July of 2022, the SEC proposed substantive amendments to some of the bases under which a company may exclude a shareholder proposal under Rule 14a-8 of the Exchange Act. The proposed amendments would introduce new tests to determine whether: (1) a shareholder proposal could be excluded because it had already been implemented; (2) a shareholder proposal could be excluded because it substantially duplicates another proposal that will appear on the company’s proxy; and (3) a shareholder proposal can or cannot be re-submitted because it appeared on a prior proxy statement.

With regard to proposals that had already been implemented, according to the updated rules a proposal may be excluded if the filer “has already implemented the essential elements of the proposal.” In order to identify what those elements are, a filer must analyze the degree of specificity of the proposal as well as the stated primary objectives of the proposal. Only if the filer had met all those essential elements could the proposal be excluded.

With regard to the substantially duplicative exclusion, a filer could exclude a proposal only if it “addresses the same subject matter and seeks the same objectives by the same means.” Even if the proposals address generally the same subject matter, they would not be deemed substantially duplicative, as exactly the same means must be used to get to the same objectives (for example, a proposal that Filer A only use recycled paper to print proxy materials in order to decrease its carbon footprint would not be substantially duplicative as a proposal that Filer A only use domestic printing resources to print proxy materials in order to decrease its carbon footprint, as these are different means to a similar objective).

This same “substantially duplicates” analysis would also be used to compare a proposal being proposed for re-submission to a previously submitted proposal.

Guidance for Filers

As filers prepare their finishing touches for the 2022 proxy season, they should keep the following in mind:

New and Updated Disclosures

Pay versus performance

As previously mentioned, in August of 2022, the SEC adopted its “pay versus performance” rules, effective for large domestic filers with fiscal years after December 16, 2022 in the 2023 proxy season. The disclosure can be broken down into three new key elements: (1) a pay versus performance table comparing a five year period (though only three years are required for the first year); (2) narrative or graphic descriptions of the relationship between “compensation actually paid” and each performance measure disclosed in  the preceding table; and (3) a tabular list, in no particular order, of three of the most important financial performance measures used to connect the compensation actually paid to the performance for the most recent year shown as well as four additional measures for the same year. Compensation for relevant executive officers will have to be adjusted by pension and equity award values.

10b5-1 updates

Filers with 10b5-1 plans in place will be subject to additional disclosure after the SEC adopted a new Item 408 under Regulation S-K and corresponding amendments to Forms 10-K and 10-Q to require quarterly disclosure regarding the use of 10b5-1 plans and certain other written trading arrangements by an issuer’s directors and officers related to the trading of securities and annual disclosure of the issuer’s insider trading policies and procedures. The amended 10b5-1 rules will additionally add conditions to an insider’s affirmative defense related to trading on the basis of material nonpublic information while simultaneously enhancing public disclosures by issuers and insiders related to 10b5-1 trading plans. The amended rules provide for a minimum 90 day cooling off period after plan adoption or modification. Issuers themselves would not be subject to the cooling off period.

In addition, at the adoption of a plan, directors and officers must represent that they are not aware of material non-public information at the time of adoption and the plan is being adopted in good faith.

Filers that are smaller reporting companies will be required to comply with the new disclosure and tagging requirements in Exchange Act periodic reports on Forms 10-Q, 10-K and in any proxy or information statements that are required to include the new disclosures in the first filing covering the first full fiscal period that begins on or after October 1, 2023.

All other filers will be required to comply with the new disclosure and tagging requirements in Exchange Act periodic reports on Forms 10-Q, 10-K and in any proxy or information statements that are required to include new disclosures in the first filing covering the first full fiscal period that begins on or after April 1, 2023.

Clawback disclosures

The new clawback rule, which will be enacted by November 2023, will require all listed filers to adopt clawback policies subjecting any incentive payments to executive officers, both current and former, to recoup those incentive payments if an issuer is required to prepare an accounting restatement because of material noncompliance with securities laws. The clawback rule will have a three-year lookback based on financial information modified in the accounting restatement. It will apply to incentive payments that the officer otherwise would not have received, had the information initially been correct.

Filers will have to disclose their clawback policies as an exhibit to their annual reports, and will also have to disclose any overpayments that are subject to recoupment, as well as the standing balance of any such overpayment. While the updates to the rule do not impact filings for this proxy season, filers should start considering how they track any clawbacks they might make and what disclosure may look like in the future.


Board Committee Charters and Corporate Governance

Filers should closely review their board committee charters to make sure board committees have a careful division of responsibilities related to ESG. In particular, given the focus on cybersecurity and climate change, filers should be sure to have a clear plan for reporting and responsibilities related to information security, sustainability, human capital, and climate change. Relevant background experience related to these areas of expertise, and increasing breadth of director expertise to fully capture the scope of ESG should be a consideration of nominating and governance committees.

Say on Pay and Say on Pay Frequency

Though “Say-On-Pay” and “Say-On-Pay Frequency” vote requirements have been in place for a number of proxy cycles, the additional disclosures required by the new “pay versus performance” rules provide filers an additional lens through which to present information on top executive compensation, filers should reexamine Say-On-Pay disclosure. In addition, filers should be sure they are matching the Say-On-Pay Frequency votes appropriately. Votes must be at least once every three years.[5]

Proposed climate change disclosure

Given the current administration’s continued focus on ESG, the proposed climate change disclosure should be a continued area of focus for filers in the 2023 proxy season and beyond. Though the SEC has not yet finalized its climate change disclosure rules, proposed rules would require filers to disclose information related to greenhouse gas emissions and indirect emissions, including emissions from upstream and downstream activities if those activities are material. Over time, filers with certain emissions activities would have to include an attestation report from an independent provider disclosing emissions activity.

Lawsuits are expected to challenge both the content of the rule itself and the SEC’s authority to pursue it, particularly the prosed requirement that certain large filers report data about carbon emissions from their extensive supply chain networks and customers, known as Scope 3.  While there have been rumblings that the SEC may scale back its rule proposal, filers should consider whether they have access to data and tracking of greenhouse gas emissions as rollout of a final rule is likely to occur in 2023.

Even if the SEC’s climate change proposals continue to face delays, filers should be mindful of the fact that ISS and Glass Lewis have both increased their climate change proposal standards for the 2023 proxy season. 

Risk Factors

Mindfulness of Applicability

In the years 2020 through 2022, a great amount of economic and geopolitical instability wreaked havoc on public disclosures through the risks associated with the COVID-19 pandemic and the Russo-Ukrainian conflict. While neither of these forces are “resolved”, both present good examples of why filers need to carefully tailor their risk factors every year to the current and evolving environment. By this time, United States filers should be able to much better predict how both of these situations may impact their businesses, and risk factor disclosures should be tailored accordingly.  For example, many [term] have evolved their COVID-19 disclosures to more generically address the possibility of future pandemics. Filers should carefully consider whether disclosures related to potential mandates or shutdowns are still appropriate for their businesses at present rather than how they may have been closer to 2020.

ESG risk factors

Though the proposed rules on cybersecurity and climate change are not in effect for the 2023 proxy season, the SEC has signaled in prior years that these were, and are, two main areas of focus going forward. Therefore, filers should carefully consider both: (1) how environmental factors such as climate change may have a direct impact on their businesses; and (2) the impact their existing business practices may have in these areas going forward, and (3) whether those practices present any underlying risk to the business. Filers should think holistically about the associated risk: for example, increased climate volatility could lead to more severe flooding and storms, which could disrupt supply chain for filers dependent upon supply and transportation from concentrated geographies. Signaling from the SEC through increased rulemaking makes it clear that these factors are here to stay, and businesses should begin to better tailor their proxy disclosures to address potential future challenges. Depending on the nature of a filer’s business, it might be appropriate to have a subsection of risk factors dedicated to ESG.


“Glossy” Annual Reports

The implementation of new rules related to “glossy” annual reports mean that annual reports sent to shareholders must also be filed on EDGAR in PDF format as of January 2023. While filers have historically been able to submit their annual reports in paper form, the SEC’s amended rules now require “glossy” annual reports to be submitted electronically on EDGAR. When preparing the PDF for submission, the glossy annual report should not be reformatted, resized or redesigned as the electronic submissions are required to still capture the graphics, presentation style, and prominence of disclosures contained in the annual report. Finally, it is important to note the new rules do not affect the “notice and access” model for proxy solicitation, and filers using that method will still need to publish their glossy annual report on a website other than EDGAR. Reports filed on Forms 6-K and 11-K must also be filed on EDGAR. Filers should keep this in mind as annual reports are often prepared simultaneously with proxies.

Use of Matrices and Visuals

As previously highlighted, increased focus has shifted to materials related to corporate governance and executive compensation, which this year will include the implementation of pay-versus-performance disclosures. That being said, filers should think carefully about not only rule compliance in terms of what they are presenting, but also how they are presenting it. Information on corporate governance and compensation in the CD&A should not only be compliant, but should also present a compelling story to shareholders and, when appropriate, include supporting visuals. Tabular disclosure is also important in the implementation of pay versus performance disclosure as well as the NASDAQ diversity disclosure table adopted last year.

Matrices are also important for internal tracking and data organization purposes. Other areas where visuals have become increasingly important include in the development and creation of a director skills matrix. Updating a director skills matrix will help filers determine strengths and deficiencies through targeting skill sets. Diversity disclosure is not only demographic, it is also augmented by having a breadth of skill sets and expertise. Though the SEC’s proposed rules on climate change and cybersecurity are not going to be effective for the 2023 proxy season, the proposed rules both tie in elements of director experience, which filers should consider adding to their director skills matrices. These matrices can also serve as a useful tool when synthesizing data from Director and Officer Questionnaires.

[2] Tom. P. Skulski and Glenn O’Brien, 2022 Proxy Season–Shareholder Proposal Review, Harvard Law School Forum on Corporate Governance (2022).

[3] Id.

[4] Id.

[5] https://www.sec.gov/files/sayonpay.pdf