Shareholders asked to approve new ESG policies are warming up to the "G" even as they continue withholding support for the "E" and "S."

"G" refers to corporate “governance" changes, and such proposals received considerably more shareholder support this year than proposals targeting environmental (E) or social (S) changes, according to an analysis of ISS-Corporate data conducted by law firm Freshfields.

Of the 154 so-called governance proposals that went to a vote between Jan. 1 and June 14, 38 were successful, according to the analysis.

Most that passed called for the elimination of supermajority vote requirements for significant company actions, including at California chip maker Nvidia (NVDA).

Other successful proposals required that all directors stand for reelection each year or empowered shareholders to call special meetings.

That 25% success rate is considerably higher than E and S proposals that would force companies to reduce greenhouse gas emissions, adopt more sustainable supply chain practices, and adopt diversity, equity, and inclusion (DEI) targets.

Just two environmentally focused proposals received majority shareholder backing during the same period measured by Freshfields.

The support was even thinner for social proposals. Just one passed, requiring glucose monitoring medical device company DexCom (DXCM) to report its political contributions. That measure received a 52% majority.

No 'backlash'

One possible reason for this divergence is that the G in ESG does not attract the same level of political scrutiny as the E or the S.

"These types of proposals are not considered overly prescriptive on companies and don’t play into any of the backlash to ESG more generally we have seen recently, meaning they tend to have a broader base of support,” said Michael Arnold, a corporate governance attorney with Cravath, Swaine & Moore LLP.

Both ESG and DEI have been hot-button issues during the 2024 presidential campaign. Former President Donald Trump has promised to banish ESG-minded retirement account investments "forever," while a top Trump ally has called DEI "bigotry" against white men.

Republican-led states are also pushing companies to rescind race-based employee quotas, piggybacking on the Supreme Court's decision in 2023 to strike down race-based admission policies at Harvard University and the University of North Carolina.

This anti-ESG and anti-DEI momentum has forced some companies to peel back some of their existing policies, let alone adopt new ones.

Under pressure from shareholders, rural retailer Tractor Supply in June announced that it would retire its DEI goals.

Tractor maker John Deere made a similar announcement in July, stating that it would continue to track workforce diversity but end participation in cultural- and social awareness-focused events.

But the fact that many E and S proposals were voted down this year may not signal less shareholder interest, according to Freshfields’ Pam Marcogliese.

Marcogliese instead suggests that this year's votes could indicate that shareholders have grown more satisfied with companies’ ESG progress and that investors see these latest proposals as too incremental to make a difference.

"Investors maybe don't really think it's worth it because that type of proposal is more about micromanaging the company, rather than really providing more helpful data," Marcogliese said.

And some of the environmental proposals this season failed only by slim margins. Proposals at Denny’s (DENN), Quest Diagnostics (DGX), and Dine Brands (DIN) came close to receiving majority support, with yes votes hovering around 40%.

It should also be noted that there were 51 shareholder proposals that actually opposed companies’ existing DEI efforts — and none of those passed, either.

'Are supermajority votes headed for extinction?'

Certainly, shareholders were much more comfortable signing off on certain governance changes.

There were 252 such proposals and 38 were successful out of the 154 that went to a vote between Jan. 1 and June 14. Those figures exclude proposals concerning executive compensation.

That means that 15% of all governance proposals filed were adopted, up from 7% in 2023, according to Freshfields.

For companies included in the Russell 3000, ISS-Corporate said the figure was even higher — at 20% of all proposals filed.

The most popular change was to reduce supermajority vote requirements and replace them with simple majority voting standards — a move designed to enhance the rights of shareholders. This was the proposal approved at Nvidia (NVDA).

Supermajority vote requirements can make it more challenging to amend a company’s bylaws or charters, making it more difficult to get changes approved.

In a recent report — titled "Are supermajority votes headed for extinction?" — ISS cited a Tesla (TSLA) vote in 2019 as one example of how supermajority policies can slow things down.

That year proposals designed to improve governance practices at the electric vehicle maker received robust support among votes cast, according to ISS, but failed because just 52% of the company’s share capital was represented — as opposed to two-thirds.

"The percentage of S&P 500 companies still employing supermajority rules has declined to just over one third, meaning those retaining the practice increasingly look like outliers and may face more scrutiny and pressure to change," ISS said in its report.

Not all governance proposals did well this year, however. One notable outlier came with attempts to split the CEO and board chair positions, according to the Freshfields analysis.

Of the 44 such proposals, zero passed.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.

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