Investors are continuing to challenge corporate boards to further improve their oversight and disclosure around topics such as environmental sustainability and social responsibility.

A new study by Ernst & Young found that for the third straight year, environmental and social proposals lead the way among shareholder-sponsored resolutions on corporations’ proxy ballots. Such proposals accounted for 40 percent of all shareholder resolutions on proxy ballots last year, up from 30 percent in 2010. The proposals are also garnering increased support among shareholders, at 21 percent of votes cast in 2011, compared to 18 percent in 2010.

“Not only do resolutions on corporate sustainability issues represent the largest portion of all shareholder proposals we now see, but average support for these topics reached an all time high last year – and we expect this trend to continue to gain traction,” said Steve Starbuck, Americas leader of climate change and sustainability services at Ernst & Young LLP, in a statement.

The number and types of shareholder resolutions that have been reaching proxy ballots actually represent only a limited aspect of investors’ increasing engagement efforts, though. A significant number of proposals that are submitted to corporate boards are withdrawn and never voted upon as companies engage with shareholder groups in an effort to reach agreement ahead of the annual general meeting. The study found that companies are increasingly willing to enter into substantive dialogue with investors and other stakeholders and to take action, including by enhancing their disclosures around key issues.

In response to the increasing popularity of shareholder resolutions on issues such as the environment and social responsibility, Ernst & Young recommends that members of corporate boards and management consider enhancing their shareholder engagement and improving their disclosure on key issue areas; ensure that directors’ skills are relevant to the critical areas of stakeholder concern; and consider the use of sustainability-related measures in executive compensation practices as a way to help support broader corporate sustainability goals.

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