“Shareholders are fed up about corporate excesses,” Laura Berry writes in a guest column for the Des Moines (Iowa) Register. “But they aren’t waiting for Congress to make changes.”
At the annual meetings of Bank of America Corp. and Goldman Sachs Group Inc., for example, more than 30 percent of shareholders have supported resolutions demanding the “companies provide more information before trading in derivatives, the financial instruments blamed for fueling the financial crisis.”
Berry, the executive director of the Interfaith Center on Corporate Responsibility, says the scores of shareholder resolutions on topics such as executive compensation can force — or shame — companies into making changes.
In urging shareholders to cast their ballots, by the way, she praises ProxyDemocracy as an excellent website “that can help you understand the issues” on corporate ballots.
For the full column, click here.
Shareholders of ExxonMobil Corp. will vote on eight resolutions concerning the environment, human rights and diversity. The Sustainable Investments Institute (SI2), which researches organized efforts to influence corporate behavior on social and environmental issues, has published several articles examining the ExxonMobil proposals. Read SI2’s studies here.
Massey Energy Co.’s slate of three directors was narrowly reelected in a shareholders’ vote, calling into question the legitimacy of the board, CtW Investment Group said.
According to Bloomberg BusinessWeek: “Baxter Phillips, Richard Gabrys and Dan Moore, members of Massey’s safety committee, were opposed by 48.5 to 49.8 percent of the shares voted at the Richmond, Virginia-based company’s annual meeting, CtW said.”
“Massey said that each of the candidates received at least 55 percent of the vote, which took place six weeks after the explosion at the Upper Big Branch mine killed 29 workers.”
“It’s an unambiguous call for new directors,” CtW spokesman Michael Garland was quoted as saying. “The vote casts a cloud over the legitimacy of this board. The onus is on the board now to name new directors.”
The California Public Employees’ Retirement System, Florida State Board of Administration, AFSCME Employees Pension Plan and Christian Brothers Investment Services withheld votes from the candidates.
“Investor activists say they are finally getting some support from the $12 trillion mutual fund industry, huge shareholders long scorned as rubber stamps for the management of companies whose shares they own,” Ross Kerber says in a report for Reuters.
“Sensitive to the issue, mutual fund executives say they have begun to demand more details and to vote more aggressively in corporate elections. … Activists hope to see the new approach reflected when the results of this season’s shareholder proxy votes are released, especially in the aftermath of the financial crisis that plunged the world economy into recession.”
ProxyDemocracy will track mutual funds’ reports of their proxy votes to see how measurable this trend is.
“In the wake of last month’s tragedy at Massey Energy Co.’s Upper Big Branch coal mine in West Virginia, the New York State Common Retirement Fund called on shareowners to withhold votes from three candidates for the company’s board of directors,” SocialFunds.com reports. “The three — Baxter F. Phillips, Richard M. Gabrys and Dan R. Moore — also serve on the board’s safety, environmental and public policy committee.”
“The disaster at Upper Big Branch, which claimed the lives of 29 miners, occurred in the aftermath of repeated environmental and safety violations by Massey, which led to at least two criminal convictions in the past three years. In addition, Massey has already reported that financial losses from Upper Big Branch could lead to losses of as much as $150 million.”
The California State Teachers’ Retirement System, which discloses its votes with ProxyDemocracy, will withhold support from the three candidates.
Whether Massey’s two major institutional shareholders, Fidelity Investments and BlackRock Inc., will side with the dissidents is unknown, according to Reuters. Both companies said “their voting policies were based on enhancing shareholder value,” Reuters reported. Fidelity owns about 9.5 percent of Massey’s common stock, while BlackRock holds just over 9 percent.
Massey’s annual shareholder meeting is scheduled for May 18. Check here for more vote announcements or sign up for our e-mail alerts.
“Investor rebukes of executive-pay practices last week at Motorola Inc. and Occidental Petroleum Corp. mark a significant shift in the relationship between corporate boards and shareholders,” Erin White reports in the Wall Street Journal.
“The messages came via say-on-pay votes at the companies’ annual meetings. Corporate activists have been arguing for an advisory vote on executive pay for years, but such votes have only recently become commonplace thanks to Congress, which required them for companies that got federal bailout funds, and voluntary adoption by others.
“Last year, not a single major U.S. company lost a vote, despite widespread complaints over excessive pay. Some governance watchers wondered if the measures lacked teeth, or if ordinary investors just didn’t consider pay to be an issue. After the defeats at Motorola and Occidental, that has changed.”
See the full story here.
ProxyDemocracy concludes our series on social and environmental issues appearing on proxy ballots with this article on sustainability reporting. The coverage was provided by the Sustainable Investments Institute, the Washington-based research center. Heidi Welsh, SI2’s co-founder and executive director, wrote the final report.
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The 38 sustainability reporting proposals filed in 2010 account for one of the biggest slices of the activist pie this year, but two-thirds of the resolutions have been withdrawn after agreements, leaving just 16 pending.
Companies have grown more comfortable with the concept of sustainability reporting given investor pressures for more disclosure. Accords with proponents have been driven by the high votes these proposals receive, as well as recent regulatory developments.
Stakeholders: Calls for comprehensive sustainability reporting on environmental and social issues come from a wide range of corporate stakeholders. Pension funds, religious groups, foundations and social investment funds favor detailed disclosure to ensure companies are effectively managing their social and environmental risks and opportunities.
Their demands are supported by a growing body of academic literature that also has helped convince mainstream investment analysts, who are seeking data they can incorporate into both qualitative and quantitative investment risk and opportunity models. The proponents also believe that robust disclosure is closely tied to effective corporate management of critical public policy issues that affect constituencies beyond the investment world. These, too, hold implications for the terms under which firms operate.
Efforts to enlist companies in the search for a more sustainable global economy got their start with environmental initiatives begun 40 years ago by multilateral organizations. As the United Nations has gradually drawn private sector actors into its efforts, it has helped to expand the definition of corporate sustainability to encompass social factors such as respect for human rights, although the latter present a complex challenge for sustainability assessment.
Key voluntary schemes: Keen interest by so many players has produced a dizzying array of voluntary standards and codes of conduct, which have yet to coalesce into a single international protocol. Several voluntary initiatives stand out, including the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP).
Nearly all the 2010 shareholder resolutions ask companies to use GRI and to participate in CDP’s annual survey; both organizations boast an impressive array of supporters and each provides companies with a well-developed reporting framework. Members of the U.N. Principles for Responsible Investment, which boasts adherents with some $20 trillion in assets under management, support cooperation with both GRI and CDP. PRI members work to promote more disclosure and are continuing to press companies to sign on to yet another set of principles, the U.N. Global Compact.
Policy questions: The sustainability resolutions present investors with two key questions: 1) whether sufficient evidence exists to support a clear link between good performance on environmental, social and governance (ESG) factors and positive financial return, and 2) whether investors have a fiduciary obligation to take ESG factors into consideration in their investment management approaches.
Meta-studies from Mercer Investment Consulting suggest there is scant evidence of a negative ESG-performance correlation, while a study just released by MIT Sloan Management Review underscores the potential for significant profitability and competitive advantages that can be realized by aggressive sustainability management. Further, the landmark 2005 legal opinion from international law firm Freshfields Bruckhaus Deringer that said ESG “is arguably required in all jurisdictions” was updated in 2009, with a new analysis that concluded investment managers may be sued by their clients if they do not take ESG issues into account, further upping the legal risk ante.
Regulatory developments: The regulatory landscape, still roiled by the financial crisis and its aftermath, saw important developments related to sustainability in the last year. In the United States, the Securities and Exchange Commission issued new interpretive guidance for companies on Jan. 27, saying that firms now must report the material effects of climate change in their regular securities filings.
The SEC also signaled its clear interest in examining additional ESG disclosure mandates, and gave favorable mention to the GRI guidelines. The new SEC Investor Advisory Committee is considering a wide range of options that give investors a much greater voice in securities regulation and leaving the door open for more scrutiny of corporate activity.
The U.S. developments are occurring as ferment continues in Europe, where several months of discussion focused on how corporate ESG disclosure might be made “better and more widespread” have just concluded.
International Initiatives and Codes
- Carbon Disclosure Project (http://www.cdproject.net/)
- Equator Principles (http://www.equator-principles.com/)
- Global Reporting Initiative (http://www.globalreporting.org/)
- International Finance Corp.’s Performance Standards (http://www.ifc.org/ifcext/sustainability.nsf/Content/EnvSocStandards)
- Principles for Responsible Investment (http://www.unpri.org/)
- UN Environmental Program Finance Initiative (http://www.unepfi.org/)
- UN Global Compact (http://www.unglobalcompact.org/)
Recent Papers of Note
- The Business of Sustainability, The Boston Consulting Group and MIT Sloan Management Review, October 2009. (http://www.mitsmr-ezine.com/busofsustainability/2009#pg)
- Future Proof? Embedding Environmental, Social and Governance Issues in Investment Markets, Who Cares Wins, January 2009. (http://www.ifc.org/ifcext/sustainability.nsf/AttachmentsByTitle/p_SI_WCW08_report_WEB.pdf/$FILE/p_SI_WCW08_report_WEB.pdf)
- Shedding Light on Responsible Investment: Approaches, Returns and Impacts, Mercer Investment Consulting, November 2009. (http://www.mercer.com/summary.htm?idContent=1363935&siteLanguage=100)
Key Regulatory References
- Commission Guidance Regarding Disclosure Related to Climate Change, U.S. Securities and Exchange Commission, Jan. 27, 2010.(http://www.sec.gov/rules/interp/2010/33-9106.pdf)
- European Commission on Enterprise and Industry: Sustainable and Responsible Business consultation 2009-2010. (http://ec.europa.eu/enterprise/policies/sustainable-business/index_en.htm)