Proxy Preview 2019 issue trends

Proxy Preview 2019: Better Every Year

Proxy Preview 2019 reveals intensified shareholder pressure on corporations across a wide range of ESG issues from climate and political spending to women. Investors with a conscience; we are having a bigger impact every year. Download the report and/or watch webinar here

Proxy Preview 2019, released today by As You Sow, Sustainable Investments Institute (Si2), and Proxy Impact, offers a comprehensive look at nearly 400 shareholder resolutions filed on environmental, social, and sustainable governance (ESG) issues. Of 400 proposals filed, 303 are headed for votes at annual  corporate meetings this spring

Corporate political influence spending and climate change top investors’ concerns with about half the ES proposals filed. Investors are also filing for more diverse boards of directors, better sustainability disclosure, more transparency, and action on human rights, fair pay, and equitable working conditions. Investors this spring also will get to cast votes on corporate connections to contentious immigration practices, digital privacy, hate speech, and the opioid crisis.

Heidi Welsh, executive director of the Sustainable Investments Institute (Si2) and co-author of Proxy Preview 2019, said,

Shareholder proposals challenge corporate boards and give investors a chance to weigh in on how their companies can respond to the biggest issues of our time. This year underscores that neither political dysfunction nor a lighter regulatory approach in Washington mean companies can ignore the views of investors.

Starting in 2017, several major mutual funds that own influential stakes in every corner of the American financial markets started to support shareholder requests for better climate change disclosure, pushing up votes. They didn’t do it on their own but with plenty of pushing by longstanding heroes like Tim Smith, of Walden Asset Management. In 2018, more funds also lent support for more transparency about possible culpability in the opioid epidemic as well as gun control — prompting 12 unprecedented 50-percent plus victories. A key question this year is where the big funds will weigh in next and if they will help keep the momentum going.

According to Andrew Behar, CEO of As You Sow,

As every environmental and social system reaches a breaking point, corporate executives and boards listen carefully to shareholders who want collaborative action on the path to a safe, just, and sustainable future. The 2019 shareholder resolutions offer a roadmap that will help companies and their investors lead the way.

Record high shareholder votes in the last two years and growing acceptance of the importance of sustainability issues by mainstream investors have provoked a backlash from some politicians and industry groups. They want to limit shareholders’ right to speak through these resolutions. It’s not yet clear if the U.S. Securities and Exchange Commission rules will be changed, but the 2019 proxy season will certainly provide more fodder for the debate.

Shareholder rights are under attack. Shareholder proposals were designed as a formal communication channel between investors and management. For more than 40 years shareholder proposals have successfully identified risk and opportunities that have improved corporate policies and practices,

according to Michael Passoff, CEO of Proxy Impact and co-author of Proxy Preview 2019.

Proxy Preview 2019: A Few More Highlights

Proxy Preview 2019: Commissioner Rober J. Jackson

It is not the SEC’s role to impose from Washington the views of Commissioners about what’s important upon millions of American investors. We should be looking to the issues that investors deem important—the proposals most frequently raised by shareholder proponents, the disclosures that stock returns show are meaningful—when deciding these matters.

Proxy Preview 2019: Sanford Lewis

Based on the Commission’s 1998 Release, as well as the Bulletin, a key question (on “micromanagement” as well as on the significance of the issue to the company) is whether there is a large difference between actions taken by the company and what the proposal requests (referred to in the Bulletin as the “delta”). The proposal process has long played a pivotal role in allowing shareowners to encourage their companies to better address large and long-term strategy questions—issues that are becoming more transparent as environmental, social and governance (ESG) data demonstrate which companies are lagging their peers.

Frankly, I think the bulletin will serve as a boon mostly to outside counsel, helping companies prepare no-action requests.

Proxy Preview 2019: Carla Fredricks

The First Peoples Investment Engagement Program (FPIEP) recently published an innovative case study to qualitatively identify and to quantitatively assess the social risks that became material losses during the Dakota Access Pipeline (DAPL) controversy.

Proxy Preview 2019: Michael Garland

It is usually companies that bypass the SEC’s no-action process. I know, since I have been unsuccessfully sued several times. I was delighted to see NYC Comptroller Scott Stringer take this course of action. As reported by Garland, the NYC Funds filed a lawsuit in U.S. District Court, Southern District of New York, alleging that TransDigm was attempting to illegitimately block a shareowner proposal that would require TransDigm, for the first time, to examine and set goals for managing its greenhouse gas (GHG) emissions. At the time, the Division had not yet responded to TransDigm’s no-action request. As part of a settlement, TransDigm agreed to end its no-action request and allow the Funds’ shareowner proposal on GHG emissions to go up for a vote at the company’s 2019 annual meeting on March 12th in Cleveland, Ohio. NYC Funds have also been announcing many proxy votes prior to annual meetings. Don’t know how to vote an issue? Copy them; that’s what I do on occasions. Enter company ticker into “Company Search” field. Hit “update,” then “+Expand” to find the current meeting.

Proxy Preview 2019: John Keenan

In 2019, the investor campaign for lobbying disclosure is focusing on corporate political responsibility, with an increased concentration on climate change lobbying. More than 30 proposals have been filed asking companies to disclose their federal and state lobbying, trade association payments and support for the American Legislative Exchange Council (ALEC).

Proxy Preview 2019: Laura Campos and Meredith Benton

There are also legal risks attendant in relying on arbitration and non-disclosure agreements, which exist under a patchwork of state laws. Recognizing the damage that these policies can cause, at least seven states have limits on non-disclosure agreements in harassment settlements. California, for instance, bans confidentiality agreements in sexual harassment and discrimination cases.

For long-term investors, these “keep it secret” policies present real risks. They aren’t just bad for business, they are, more importantly, bad for employees. When nearly half of African-Americans have faced race-based discrimination in the workplace and more than half of senior-level women have been sexually harassed during their careers, it is clear that these policies and practices are contributing to harmful work environments. We’re hopeful that the companies we’ve engaged on these issues will follow the lead of Microsoft and others and discontinue arbitration and secrecy requirements when it comes to sexual harassment and discrimination claims, because to continue to ignore this pervasive problem is indefensible.

Proxy Preview 2019: Natasha Lamb

For two years, Arjuna has been sounding an alarm at Facebook… This year’s proposal, filed by Arjuna Capital and the New York State Common Retirement Fund, asks the board to report on the more encompassing notion of “content governance.” That is, how Facebook is managing the risks posed by election interference, fake news, hate speech, sexual harassment and violence disseminated over its platforms.

The above is only a very small sample of side-bar comments. Be sure to download the report. Proxy Preview 2019 will give you a better idea of what’s ahead this season than any other source.

   

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