Author Archive | James McRitchie

Sustainability at Morningstar

Sustainability at Morningstar (Morningstar Investment Conference #MICUS) in Chicago was an important topic, growing in popularity. As posted, their research found “72% of the United States population expressed at least a moderate interest in sustainable investing.” Nice to know many value a habitable planet as well as profits. However, research from Morningstar also finds we can divest from fossil fuels and other sectors without suffering underperformance. [Photo credit, Wyckoff-Tweedie Photography. Jon Hale of Morningstar, Michael Jantzi of Sustainalytics, Jackie Cook of Morningstar.]

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Mission-Led Employee-Owned Firms Top Charts

Mission-led employee-owned firms offer an alternative to conventional publicly-traded companies. With support from Partners for a New Economy, Fifty by Fifty‘s research demonstrates, mission-driven employee-owned firms are the Best of the Best.

Using data from B Lab, which assesses the social and environmental impact of B Corps, Fifty by Fifty found these firms outperform on multiple measures. Overall “B” Scores average 20 points higher for mission-led employee-owned than B Corps that are not employee owned, and 100 percent higher than ordinary businesses.

Mission-led employee-owned companies include:

  • Recology, a $1.2 billion waste management company employing 3,500 guided by its vision of “a world without waste”
  • Zevin Asset Management of Boston with 20 employees
  • Cooperative Home Care Associates with 2,300 mostly low income women of color
  • Eileen Fisher, the first US fashion house to pursue a safe chemical-certification program for its textiles of organic cotton and linen
  • EA Engineering, an environmental consulting company
  • Heritage Aviation, providing aircraft inspection and maintenance, a pilot lounge, and heated hangars in Burlington, VT

At Fifty by Fifty, their mission is to expand employee ownership to 50 million workers by 2050. That sounds like a great goal to me. Read the full report.

employee-owned

   

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Marriott 2019 Proxy Voting Guide

Marriott 2019 annual meeting is May 10th. Vote by May 9 online. For optimum accountability and shareholder return vote AGAINST J.W. Marriot Jr., Mary K. Bush, Eric Hippeau, Lawrence W. Kellner Aylwin B. Lewis, George Muñoz, Steven S. Reinemund, and Susan C. Schwab, as well as auditor and say-on-pay. Vote FOR Eliminate Supermajority and Provide Right of Written Consent.

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We Three Kings: Sharetopia

We Three Kings: Disintermediating Voting at the Index Fund Giants (download at SSRN) by Caleb N. Griffin provides insight as to how investors could influence the Big Three index funds — BlackRock, Vanguard and State Street, as those funds exercise increasing power over the economy. Like me, Griffin is interested in extending democracy to corporate governance, ensuring that index funds and the companies they influence are “controlled by the individual human investors who make up its (their) constituents.” (p. 3) Continue Reading →

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Proxy Voting Alignment Will Drive Index Fund Competition

Proxy voting alignment with client values will drive competition between index funds. Most index funds have low fees and earn close to the same rate of return for their investors. How can they differentiate themselves? SEC Commissioner Rob Jackson Jr. implies competition should be driven, at least in part, by funds aligning their proxy votes with the values of their customers. For that to happen, the SEC must update its proxy reporting rules to make it easier for investors to determine how funds have voted on proxy issues. Continue Reading →

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CSR 5.0 Skytop Strategies

CSR 5.0. I must have missed 2.0 through 4.9… focused on corporate governance and ESG. This was my first Skytop Strategies conference (agenda) or one specifically on the topic of CSR. It was billed as presenting “the evolution of corporate social responsibility from its initial shared value paradigm to its current form. The program will track the growth of CSR as a sector, examine the multi-dimensional ways that CSR programs are implemented in corporations today, and present cutting-edge ideas that will shape the future of CSR as an industry.” CSR 5.0 lived up to its billing.   Continue Reading →

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Discover 2019 Proxy Vote

Discover 2019 Proxy Vote Recommendations. The Discover Financial Services (DFS) 2019 annual meeting is May 16th. To enhance long-term shareholder value, vote AGAINST directors Aronin, Case, and Weinbach, as well as the auditor. Vote FOR pay, end supermajority standards and shareholder proposal to allow shareholder of 15% to call a special meeting. ABSTAIN on the board proposal allowing shareholders with 25% to call a special meeting. Continue Reading →

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Normalized Deception: Spectrem Group

Normalized deception in the world of politics has spread to proxy voting controversies. A recent white(wash) paper by the Spectrem Group purports to be “providing a voice to retail investors on the proxy advisory industry” by employing a ham-handed survey, which seeks to “educate” respondents through leading questions. The report’s catchy title is Exile of Main Street: Providing a Voice to Retail Investors on the Proxy Advisory Industry. Continue Reading →

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Gender-Diversity: Who Votes Fearlessly?

When investing for gender-diversity for other ESG, check fund voting records. With the SEC’s cryptic proxy vote disclosure system, that is difficult (draft Petition for Real-Time Disclosure of Proxy Votes), so ask your investment advisor and hope they subscribe to Morningstar Direct. As evidenced by a recent Morningstar report, State Street’s Fearless Girl appears timid about voting for diversity.  Continue Reading →

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MBII Elects Directors by Majority Vote

MBII elects directors by majority vote, effective March 15th 2019. Marrone Bio Innovations (MBII) amended its bylaws after a request by shareholder advocate James McRitchie and upon the recommendation of the Nominating and Governance Committee. The bylaws now provide that, in uncontested elections, MBII elects directors by majority vote of “For” and “Withheld” votes cast.

The board also amended MBII’s Corporate Governance Guidelines to provide that director nominee are to supply a conditional letter of resignation, effective if they fail to get a majority vote and the board accepts their resignation. I hope if the board fails to accept such a resignation, that would clearly be on a temporary basis.  Continue Reading →

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Morningstar Direct Uncovers ESG Hypocrites

Morningstar Direct is planning to offer its clients important voting data. The firm recently published a preview of what I impolitely term ESG hypocrites – funds that advertise themselves as allowing us to invest in our values but then vote proxies against our values.

For example, last week, students around the world participated in a massive #ClimateStrike. Some have called it a tipping point. With BlackRock, Fidelity, TIAA-CREF and Vanguard all offering ESG funds to invest in our values, we must be heading for a low-carbon economy, right? That assessment may be premature. Not all ESG funds are alike.

New Morningstar research – published for Morningstar Direct users – uses Morningstar’s Fund Votes database to examine how ESG funds voted during the 2018 proxy season on climate-related shareholder resolutions. The research reveals a striking difference in voting patterns from funds sponsors by ESG-specialists vs. ESG funds from more traditional, non-ESG fund companies.

Morningstar Direct Findings

A huge positive is that more funds are starting to “get” the importance of ESG, not only as a screening tool for investing but also in casting proxy votes. Morningstar research found votes cast by the largest asset managers across all funds shows a year-on-year increase in support for all climate resolutions voted since 2016. That is certainly good news. Morningstar surveyed 14 resolutions with a positive vote of 40% or higher. Notice the two largest funds, BlackRock and Vanguard, with combined assets under management of $11.5 trillion, are laggards. Changing how they vote would make a significant difference.

Moningstar Fund Votes ESG Trends

ESG funds from BlackRock, Vanguard, Fidelity Investments, and TIAA- CREF, among others, cast a number of votes that appear to conflict with an ESG mandate, especially for funds specifically aimed at the environment.

ESG votes by Mainstream funds

By way of contrast, among nine fund companies with an long-term ESG focus, not a single vote was cast against climate-change resolutions that garnered more than 40% of the shareholder vote. Asset managers with an ESG orientation unanimously voted for the 14 climate-related resolutions that garnered more than 40% of the shareholder vote across all funds managed.

Votes by SRI asset managers

Underlying Assets

It also might be useful to look at underlying assets. For example, compare holdings of the Trillium P21 Global Equity Fund with BlackRock’s Impact US Equity Fund. BlackRock’s Impact fund contains investments in coal, oil and gas, fossil-fired utilities, etc. They constitute only a small portion of the portfolio but that is enough to get them 0 out of 5 “badges” from Fossil Free Funds. In contrast, Trillium P21 Global Equity Fund wins 5 out of 5 badges.

Research based on Morningstar’s Fund Votes database will help Morningstar Direct clients differentiate ESG hype from ESG reality. The service is likely to increase demand for mainstream fund families to be more consistent in voting and investing within a transparent ESG framework. Traditional SRI funds have been investing and voting ESG concerns for decades. Some, like Calvert, Domini, Pax World, Praxis, and Trillium even announce their votes to the public before annual meetings. Do not expect that from mainstream ESG funds any time soon.

   

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Petition for Real-Time Disclosure of Proxy Votes

Petition for Real-Time Disclosure of Proxy Votes

Abstract: Corporations have facilitated the most dynamic economic growth in history. Addressing adverse externalities, like dark money and climate change, has been hampered by dispersed ownership. Mechanisms are needed to define common values and increase individual empowerment within corporate dominated economies. Ironically, recent concentration of corporate ownership by giant index funds presents an opportunity to increase corporate accountability, creating an economy that better serves our larger society by empowering people. Continue Reading →

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Corporate Lobbying Disclosure Proposals 2019

Corporate lobbying disclosure remains a pressing shareholder proposal topic for 2019. A coalition of at least 70 investors have filed proposals at 33 companies asking for disclosure reports that include federal and state lobbying payments, payments to trade associations and social welfare groups used for lobbying and payments to any tax-exempt organization that writes and endorses model legislation. This year’s campaign highlights the theme of corporate political responsibility, with a focus on climate change lobbying. Continue Reading →

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Cyber Security at Disney: Vote FOR Report

Cyber security at Disney would benefit from clear links between senior executive performance metrics and compensation. Cyber security and data privacy are vitally important issues for Disney and should be integrated as appropriate into senior executive compensation to incentivize leadership to reduce needless risk, enhance financial performance, and increase accountability.  Continue Reading →

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Prison Labor Fight at Costco: NorthStar Gathers Support

Prison Labor concerns raised again by NorthStar Asset Management won nearly 29% of shareholder votes at Costco Wholesale meeting on January 24, up from almost 5% last year.  The proposal asked for enhanced analysis and disclosure on risks related to prison labor in the company’s supply chain. Yes, if you just read that old link from a Change.org survey you saw the Thirteenth Amendment to our Constitution (to abolish slavery) includes the following:

Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. Continue Reading →

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