Archive for March, 2010

Key Issue: Natural Resource Management

Shareholders have brought forward more than 40 resolutions this year to pressure companies on their management of natural resources. Many focus on gas fracturing and coal combustion waste. ProxyDemocracy continues its presentation of reports on key social and environmental issues coming before voters this proxy season. The Sustainable Investments Institute (SI2), a new research center based in Washington, produced the series. Amy Wilson, an analyst for SI2, wrote this report.

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This year’s crop of environmental proposals focuses heavily on natural resource management issues, with 45 resolutions filed by a broad coalition of investor activists. Natural resource management proposals are a diverse lot, targeting companies in a broad variety of industries and addressing a wide range of topics.

Two new shareholder campaigns target environmental impacts associated with fossil fuels — gas fracturing and coal combustion waste — illustrating the difficult choices investors and policy makers face in a world of increasingly limited resources and expanding energy demands.

While greenhouse gas emissions reduction is a central goal of these and other new and continuing campaigns waged by investor activists, these two big new initiatives primarily address the immediate risks that natural gas, oil and coal production and combustion may pose to water, air and land resources. Twelve proposals ask natural gas companies to report on their hydraulic fracturing operations, while five others to electric utility operators ask for information on coal combustion waste disposal practices and facilities.

Environmental activists hope the Environmental Protection Agency will enact regulations for hydraulic fracturing and coal combustion waste disposal, adding nationwide environmental standards to the current system of state and local regulation. This move would be contentious because political and economic pressures strongly favor maximizing domestic energy production and reducing consumer energy costs; companies and opponents of federal action argue it could both curb production and raise costs.

Natural gas combustion releases far fewer greenhouse gas emissions than does coal or oil, making it attractive as a “bridge fuel” to cleaner energy options. But recent events also have generated increased pressure to address environmental concerns about both gas fracturing and coal waste.

The accidental release of over a billion gallons of coal ash sludge from a Tennessee waste impoundment in December 2008 added weight to the argument for federal coal combustion waste disposal regulations. Further, a Gold Rush atmosphere surrounds natural gas drilling in the Marcellus Shale, which lies under densely populated Eastern states such as Pennsylvania and New York that have not seen gas development until recently.

This has piqued public concern about how hydraulic fracturing might affect aquifers and surface waters, pitting energy companies against urban water consumers and others worried about contamination.

Several other shareholder campaigns this year address other areas in which company activities may have direct impacts on natural resources. This report groups 18 proposals into this broad category — including two resolutions asking oil companies for the third year in a row to report on their operations in Canada’s oil sands, a significant source of crude oil for the United States.

New resolutions include two that ask about wetlands degradation caused by oil and gas drilling and two that have a new angle on rainforest protection. Three more address forestry practices, four address water pollution and use, and two are concerned with nuclear power safety; the final three address toxic emissions and environmental justice.

An additional 10 proposals take on the indirect impact that companies may have on natural resources. These proposals seek disclosure or policy changes on paper sourcing, recycling, and several different kinds of impact assessments. Of particular note are two proposals that seek a report on the financing of mountain top removal mining by two banks, both of which must surmount company challenges at the Securities and Exchange Commission to come to votes.


Hydraulic Fracturing

Coal Combustion Waste

Canadian Oil Sands


March 29, 2010 at 9:28 am Leave a comment

Key Issue: Diversity

More than 25 shareholder resolutions have been filed this year on the issues of workplace and board diversity. We continue our series of special reports on proxy ballot initiatives, produced by the Sustainable Investments Institute (SI2), a Washington-based research center. This paper was written by Peter DeSimone, a co-founder of and an adviser to SI2.

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Shareholders have been filing shareholder proposals at companies on diversity issues for more than three decades.  The resolutions fall into three categories:

  • Board diversity: Proposals addressing board composition and policies on recruiting and nominating directors.
  • Lesbian, gay, bisexual and transgender (LGBT) non-discrimination: Proposals seeking equal rights in the work place for LGBT employees.   
  • EEO-1 reporting: Resolutions asking companies to make public the annual EEO-1 filings they submit to the U.S. Equal Employment Opportunity Commission (EEOC). The reports describe the workforce breakdown by race and gender and employment category.

So far in 2010, a total of 16 resolutions have been filed on board diversity, although eight have been withdrawn.  Another nine have been filed on LGBT non-discrimination, with seven still pending and many more likely to be filed.  A single EEO-1 reporting resolution is slated to come to a vote. Additional filings are likely to surface as the season progresses.

Board diversity, defined by the gender, racial and cultural composition of the board of directors, has been a top corporate governance issue for social investors for more than three decades and is gaining traction with a broader array of mainstream investors.

While some progress has been made, the overall numbers and participation rates for female and minority board members remain low in the United States.  However, recent studies indicate that companies with comprehensive board diversity policies and diverse boards generate better financial returns than others. How to get there is at the center of the debate between shareholder proponents and companies.   

LGBT non-discrimination:  No federal law protects LGBT employees in the United States.  But a growing number of state and local statutes, along with corporate non-discrimination policies, do provide protections. 

The vast majority of Fortune 500 companies have decided to set uniform standards and include sexual orientation and gender identity in anti-bias policies, because these firms see financial benefits from these moves, including improvements in employee morale, recruitment and retention.

Still, some companies feel that their non-discrimination statements should stick to federal guidelines, and others are afraid of backlash campaigns from conservative family values groups if they adopt policies that are more progressive. The proponents contend companies need to push ahead for moral and financial reasons.       

EEO-1 reporting:  The U.S. government requires companies with more than 100 employees to report workforce diversity data by job function in an annual report to the EEOC. The data from these EEO-1 reports are not readily available to the public.

While some companies post their EEO-1 reports to their websites or make them available to various stakeholders by request, most do not.  This is why shareholder proponents have been asking U.S. companies for several decades to make their reports public.  They feel transparency and monitoring will help break down barriers to female and minority employees and improve workplace dynamics at the target companies.

Home Depot Inc., the only company with an EEO-1 reporting resolution slated to come to a vote this year, believes its diversity policies, affinity groups and management suffice. Home Depot’s high number of discrimination case settlements, the proponents believe, indicates that it has potential risks it is hiding from its shareholders — and that more disclosure is warranted. 


March 23, 2010 at 8:49 am Leave a comment

Key Issue: Human Rights

Shareholders and human rights advocates, seeking to hold public companies accountable for their operations in countries such as China and Burma, have introduced more than 30 resolutions for consideration at this spring’s annual meeting.

With our partner, the Sustainable Investments Institute (SI2), we continue our series of reports on significant proxy ballot issues. SI2 is a Washington-based research center that conducts impartial research and publishes reports on organized efforts to influence corporate behavior on social and environmental issues. Maureen O’Brien, an analyst for the institute, wrote this report.

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Activist investors are continuing to press companies to address human rights both at home and abroad in the 2010 proxy season, with a total of 31 proposals, or just under 10 percent of the total number filed on social and environmental issues this year.

Religious organizations and a few socially responsible investment firms have filed more than a dozen resolutions that raise traditional human rights concerns. Proponents want companies to be more accountable about their operations, particularly in countries with long-standing human rights problems such as Angola, Burma, China and the Democratic Republic of Congo. They are seeking this accountability through reports, expanded policies and the establishment of oversight bodies. One new concern relates to the health and safety of tobacco field workers in Malawi, where child labor is rife.

The 2010 shareholder resolutions also highlight connections to environmental and technology issues that move beyond the traditional human rights arena.  A relatively new campaign involves gaining corporate recognition of the human right to water; investment firm NorthStar Asset Management has filed this request with four companies in water-intensive industries.

Further, a range of different sponsors are again attempting to raise Internet concerns despite a Securities and Exchange Commission that remains wary of the subject.  One set of proposals focuses on net neutrality, a form of regulation that would create an even playing field among Internet service providers. Another batch deals with online privacy and (in some cases) cooperation with repressive regimes.

Expanding definitions of human rights:  As water shortages in drought-stricken areas around the world prove costly to corporate balance sheets and contribute to deteriorating health conditions, environmental groups have begun to ask companies to monitor their water use closely and look for opportunities to reduce it. This interest is exemplified in a February 2010 benchmarking study from the Ceres coalition, Murky Waters? Corporate Reporting on Water Risk, which assesses the water risks facing of 100 leading companies using an approach similar to corporate climate change risk assessment.

New technology also is changing how the general public looks at human rights. Privacy watchdogs are paying close attention to how technology companies track and use information shared online, prompting some of this year’s resolutions on Internet privacy. At the same time, the Federal Communications Commission (FCC) is grappling with regulations that affect how the Internet is governed; the comment period on a new rule proposed in October 2009 is this month. FCC attention comes as use of the Internet for work, school, medical advice and communication expands rapidly and equality advocates spar with companies over what sort of filtering technology restrictions, if any, should be allowed on the Internet.

 A difficult international context:  All the shareholder resolutions are being presented by investors concerned about the difficult state of human rights globally. The ongoing conflicts in Iraq and Afghanistan, a crackdown on public protests in Iran, suppression of free speech by the Chinese government and the ousting of a Honduran president raise troubling issues that affect companies around the world, as do continued problems with repression and corruption that are particularly acute in developing countries.  Reports from governments and civil society groups in the last year document continued stagnation in human rights progress.  Investors voting on the human rights proposals may want to ponder how companies can—or should—be enlisted to improve conditions in the places where they do business.

Human rights activists filing shareholder resolutions take their cue from the Universal Declaration of Human Rights, the most widely recognized statement on the inherent rights of the individual and the basis of international human rights law.  Another key reference is the set of core standards of the International Labor Organization.  But the U.S. Alien Tort Claims Act (ATCA), which allows human rights victims abroad to file suit against U.S. companies, raises the more tangible specter of substantial legal liability for companies that violate international norms.  Case law under the ATCA continues to develop, touching a growing array of companies, including several of the firms that have received shareholder resolutions in 2010. 


 Human Rights

 Human Right to Water

 Internet Issues

March 22, 2010 at 8:56 am Leave a comment

Key Issue: Corporate Political Spending

Even before the U.S. Supreme Court’s decision in the Citizens United case, activist investors filed five dozen resolutions seeking to require publicly traded companies to disclose their contributions to advocacy groups and trade associations.

ProxyDemocracy continues its series of reports on proxy ballot issues, with an overview of corporate political spending. These summaries are presented courtesy of the Sustainable Investments Institute (SI2), a Washington-based nonprofit research center. This report was written by SI2 analyst Robin Young.


Critics of the current system say political contributions from corporations corrode democracy when companies disproportionately influence elected officials to further their interests. Those who favor more minimal limits on political spending counter that restrictions on contributions (even by corporations) are unconstitutional limits on free speech.  The latter camp achieved a major victory on Jan. 21, when in Citizens United vs. the Federal Election Commission the U.S. Supreme Court threw out spending limits that have been in place for decades.

Activist investors had already filed a slew of shareholder resolutions for the 2010 proxy season, well before the Supreme Court decision, although the case puts a brighter spotlight on their campaign. 

Corporate political activity proposals—most of which ask for disclosure and are coordinated by the Center for Political Accountability (CPA)—make up the largest single issue category of all social and environmental policy shareholder resolutions in 2010.

Fifty-eight resolutions have been filed by labor unions, social investment funds, religious groups, and a conservative group.  The CPA proposals—a total of 44—request that corporations go above and beyond the current political contributions reporting required by federal campaign law, to disclose contributions to pressure groups and any fees they pay to trade associations that are used for political purposes. In addition, the CPA proposals ask companies to disclose how their decision-making processes for political spending work, which makes decisions, and what corporate guidelines are for contributions.

The AFL-CIO has filed three more proposals on lobbying, while Domini Social Investments filed two that also targeted “grassroots lobbying” that have been thrown out at the SEC.  The New York State Common Retirement Fund has another that asks for an advisory vote on political spending and mentions grassroots lobbying, as well. It just filed at American International Group Inc. 

The conservative National Legal and Policy Center has at least three more. The group requests that companies disclose how they identify and prioritize “legislative and regulatory public policy advocacy activities,” making clear that the proponents do not agree with company support for liberal causes.  Few if any of five others on miscellaneous political issues seem likely to come to votes given SEC challenges.

Current spending limits:  The U.S. Congress has enacted various reforms that have specifically limited political contributions from corporations, most recently through the Bipartisan Campaign Reform Act (BCRA) of 2002. Corporations currently may not donate money directly to candidates for federal office. BCRA does not affect donations to state and local candidates and contributions connected to state ballot initiatives from non-profit political groups; these are governed by state and local laws.  Contributions to certain unregulated “527” groups (named after their U.S. Tax Code designation) are unlimited and corporations may make undisclosed contributions to them.

 Citizens United holds that the government cannot ban certain political contributions by corporations in candidate elections because of First Amendment free speech protections. It left in place bans on direct donations to federal candidates by corporations and unions, but overturned a key section of BCRA that barred corporations and labor unions from using general treasury funds to electioneer in federal elections.  The court also left in place portions of BCRA that require contributors to disclose the identity of groups responsible for the content of advertisements and the identity of those who fund advertisements.

The full ramifications of the decision are not yet known, as the 2009-2010 election cycle will be the first conducted under the new rules. Estimates of the ruling’s impact range from the benign—with corporations limiting their spending because of fears that too much overt political involvement will backfire with serious public relations consequences, to the extreme—with corporations openly targeting specific candidates and spending freely to sway the outcome of particular contests.

 Shareholder focus on disclosure:  In their proposals, the CPA shareholder proponents do not contest the legality of political contributions by corporations or argue in favor of their elimination. Instead, they believe that corporations should be required to disclose to investors where and how company money is spent in the political arena.  About 15 percent of the 500 largest publicly trade U.S. companies provide enhanced disclosure using the CPA model, as do half of the 100 largest companies, according to CPA data from February 2010.     


The Center for Political Accountability:

The National Conference of State Legislatures:

The Center for Responsive Politics:

The National Institute on Money in State Politics:

CQ – Moneyline:

March 18, 2010 at 11:18 am Leave a comment

It’s Time to Vote

“Investing is about more than just making money. When you buy shares of stock, you’re not only getting the right to receive dividends and to benefit from any gains in the stock’s value,” according to Motley Fool. “You’re also buying partial ownership of a company, with all of the rights and privileges that go with it.”

Motley Fool’s David and Tom Gardner recommend ProxyDemocracy as a guide in exercising one of the most important shareholder privileges — voting a proxy ballot on corporate policy.

ProxyDemocracy helps you “look up your companies to see what issues are being voted on, get guidance on how you might want to vote and learn how your mutual funds have voted,” they write.

“Recent business scandals have led to cries for greater corporate responsibility — we shareholders must exercise our rights to participate in our companies’ governance. The best way you can be heard is by casting your vote.”

March 17, 2010 at 9:35 am Leave a comment

Key Issue: Climate Change

The Sustainable Investments Institute (SI2), a Washington-based nonprofit research group, has produced a series of reports on social and environmental issues that shareholders will vote on this proxy season. ProxyDemocracy is pleased to present the first SI2 report, covering climate change:

Significant regulatory changes in the last year have dramatically altered what shareholder proponents can ask for in resolutions and what companies must disclose about the risks to their business posed by climate change.

Investors face a large slate of climate-related shareholder proposals in 2010. Forty-three resolutions ask for disclosure or action to combat climate change, while a slew of additional proposals mention climate change in the context of additional environmental concerns.

Climate change proposals received their highest level of support in 2009 and one of them was supported by the majority of shares voted—the first time ever for a climate change proposal. In addition, three other proposals came close to gaining a majority at 2009 shareholder meetings. Similar results are likely in 2010.

In the last year, the administration of President Barack Obama has focused attention on reducing greenhouse gas emissions as a necessary step to slow global climate change. While the fate of federal climate change legislation remains uncertain, there have been a number of important policy developments that affect companies and investors.

These include:

  • In October 2009, the Securities and Exchange Commission (SEC) staff reversed a policy that had been in place for much of the Bush administration which allowed companies to exclude shareholder proposals if they asked for disclosure of financial and other risks posed by environmental and social issues. As a result, several shareholder resolutions asking companies to report on risks they face from climate change will be voted on in 2010.
  •  The SEC staff in January 2010 issued interpretative guidance to companies that made clear they are expected to report any material risks or opportunities presented by climate change in their public filings with the SEC. This clarification of the SEC reporting requirements was in part the result of a multi-year effort by a group of large investors to have more corporate disclosure on this issue.
  • In December 2009, following up on a 2007 Supreme Court ruling that the Clean Air Act gives the U.S. Environmental Protection Agency (EPA) the authority to regulate tailpipe emissions of greenhouse gases if the EPA determines these gases endanger human health and welfare, the EPA released its “endangerment finding” which concluded that greenhouse gases because of their contribution to global climate change do indeed pose a threat to human health. The EPA with the U.S. Department of Transportation then announced a schedule of increasing vehicle fuel efficiency standards through 2016.
  • In preparation for any possible future cap-and-trade program, the EPA released regulations in September 2009 that require the 10,000 largest emitters of greenhouse gases to report annually on their emissions. The EPA estimates these 10,000 facilities account for 80 percent to 85 percent of all the greenhouse gas emissions in the U.S. Most of this information will be available to the public.
  • The U.S. House of Representatives passed a cap-and-trade bill in June 2009 which would reduce greenhouse gas emissions nation-wide by approximately 17 percent by 2020 and 70 percent by 2050. The companion bill is bottled up in the Senate and has yet to come to a vote. There has been more action at the state level with the ten states in the Northeast and Mid-Atlantic that comprise the Regional Greenhouse Gas Initiative holding six auctions of carbon dioxide emissions allowances between September 2008 and December 2009. Electric power generators need to purchase these allowances to cover the amount of carbon dioxide they emit.

Many companies have responded to the mounting scientific evidence that man-made greenhouse gases are a major contributor to global climate change, and to the growing likelihood of government action, by taking steps to reduce their own carbon footprints and by lobbying for a phased-in, national level system that caps and then begins to lower emissions.

They believe that a phased-in reduction of greenhouse gas emissions that sets clear targets gives them the predictability they need to adapt and make long-range plans. They prefer a single federal program rather than several regional programs that could have different targets and timing.

Yet skeptics of this approach remain firmly entrenched in Washington and elsewhere. This year’s crop of shareholder resolutions are being proposed to a wide range of companies—firms which investor advocates believe should take more aggressive action to adequately tackle the risks and opportunities posed by climate change.


Climate Change Science

Company Responses to Climate Change

Company Disclosure of Greenhouse Gas Reduction Programs

March 17, 2010 at 9:11 am Leave a comment

Voting Your Shares Starts to Matter

 “What would happen if all the small investors banded together and cast their ballots during proxy season …?” the New York Times asks in an article that cites the contribution of ProxyDemocracy in educating shareholders. “How much of an impact would they have?”

It’s possible they could have more of an effect on corporate actions than ever, the Times says.

“More voter resources are beginning to sprout on the Web that aim to educate smaller investors, demystify the issues on the ballot and make voting easier,” according to the Times.

Organizations like ProxyDemocracy are helping shareholders to make decisions on issues like executive pay and corporate governance — and to increase their influence, writes Tara Siegel Bernard.

Individual investors own about 30 percent of outstanding shares, and have a much larger stake when their holdings in pensions and mutual funds are taken into account. While historically only a fraction of retail investors have voted their proxies, they do have the power to sway results, especially in close contests.

“Thirty percent of outstanding shares is a substantial portion, easily enough to change the outcome of many proxy voting results,” Mark Latham, a member of ProxyDemocracy’s board of directors, told the Times.

Nell Minow, co-founder of The Corporate Library, is quoted as saying that small stockholders should research how activists, such as the California Public Employees’ Retirement System, plan to cast their ballots.

Reporting how respected institutions will vote is one of the core services delivered by ProxyDemocracy. And Calpers is one of the key members of our roster of early vote disclosers.

The article points out how investors could benefit from changes in policy implemented or contemplated by the Securities and Exchange Commission and Congress. 

They don’t have to wait to help themselves, however. Mutual fund holders, whose managers vote proxies on their behalf, can shop around to find those that do the best job of voting their interests, Latham said.

“The biggest thing you can do is find a better mutual fund,” he said. “If you are in a Standard & Poor’s 500 index fund, there are many S.& P. 500 funds. But some vote better than others, and that is the biggest leverage you have.”

Comparing the voting records of funds is another of our key services. Go here to see how your fund votes.

March 5, 2010 at 8:55 pm Leave a comment


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