Financial Column: Pushing the Bar on Environmental, Social, and Governance Issues
By Michelina A. Roth & David M. Roth
Signs of Spring are prevalent across the Gorge, but did you realize that Spring is also Shareholder season? Publicly traded companies are required to hold annual meetings to allow for democratic participation from company shareholders and the filing of shareholder resolutions. Because most companies end their fiscal year on December 31st, most annual meetings are held the following Spring.
In our recent articles, we’ve highlighted divestment as a powerful tool for change - choosing to not own shares in things like fossil fuel, for-profit prisons, and tobacco. Yet, even when investors choose to divest from the worst corporate players, there is still work to do to push all corporations to make changes for a better world. Shareholder season is an important time to highlight the importance of shareholder advocacy in order to push the bar on ESG (Environmental, Social, and Governance) issues.
Shareholder resolutions, also known as shareholder proposals, are specific requests, typically asking corporations to disclose or measure the impact of their policies and/or change their policies to mitigate risks. Last year, under the Trump Administration, the Securities and Exchange Commission (SEC) had a rule change which essentially made it harder to file a resolution and shifted the balance of power from shareholders more heavily towards management. The SEC Acting-Chair, Allison Herren Lee, has indicated that the 2020 rules change may be reviewed and/or changed. This document from the Interfaith Center on Corporate Responsibility is a great resource for those interested in the rule changes, including specifications that in order to file a resolution you must own at least $2,000 worth of stock in a company, that you can only file one resolution in a company in any specific year, and that you must gain at least 3% investor support in order to re-file a resolution the following year.
In spite of these changes, Shareholder Advocacy continues to be a powerful tool for change and the 2021 Shareholder Season is a busy one. More than 430 Shareholder resolutions were filed on Environmental, Social, and Governance Issues.
We’d like to highlight a few that illustrate the kinds of resolutions that are filed.
Both Blackrock and Facebook faced votes on whether or not they should become public benefit corporations. (A Public Benefit Corporation may consider the concerns of all stakeholders, not just shareholders)
Canadia Pacific Railway was the first North American Company to agree to a Shareholder Resolution asking that climate transition plans be issued and also to provide for an annual shareholder advisory vote, akin to “say on pay” votes for executive compensation. More than 75 such resolutions have been filed.
On Climate Issues in the last few years, there have been many resolutions aimed at reducing plastic pollution. This year saw a shift from asking companies to make plastic more recyclable to asking that they instead reduce plastic pollution. A resolution at DuPont asks for information about reporting on current trends and policies and actions to reduce plastic pollution at the company.
In order to respond to the gender pay gap in the US and the company’s reluctance to provide data regarding gender equity in compensation, shareholders are asking Cigna for the third consecutive year to provide quantitative data about the pay gap between male and female employees, across all ethnicities. More than 70 such resolutions have been filed at US companies in the last several years.
Bank of America and Johnson & Johnson both faced resolutions asking for “racial justice audits” and a resolution at Abbott Laboratories asked for the companies plans to promote racial justice.
A resolution filed at Altria asks for a third-party report on the effectiveness of policies that aim to discourage tobacco use by young people and policies that target communities of color, and low-income people.
More information about these and other resolutions can be found at https://www.proxypreview.org/2021/report Proxy Preview is a collaboration between As You Sow, the Sustainable Investment Institute and Proxy Impact. These words from Andrew Behar, the CEO of As You Sow provide a good summary of the 2021 Proxy Season, “This is the year that corporate boards can put their rubber stamps away and exercise real oversight, requiring substantive action from management. Shareholders are organizing as never before to vote against boards that will not adopt a climate transition plan; disclose diversity, equity, inclusion and racial justice metrics; adopt policies to eradicate systemic racism; and implement the tenets of stakeholder capitalism that they have all pledged to uphold. Words will not suffice. Now is the time for action.”
Michelina A. Roth & David M. Roth, BFATM Financial Planner O:509.398.8428 | C: 541-705-7918 www.FairPlanetAdvisors.com
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