Posts filed under ‘research’

How Shareholders Can Make a Difference

“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.


June 1, 2010 at 8:20 am Leave a comment

Shareholder Proposals at ExxonMobil, 2010

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.

May 24, 2010 at 9:15 am Leave a comment

Massey Directors Narrowly Prevail

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.

May 19, 2010 at 9:55 am Leave a comment

Mutual Funds Seek to Shed ‘Rubber Stamp’ Tag

“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.

May 17, 2010 at 2:16 pm Leave a comment

Pensions to Withhold Votes From Massey Directors

“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,” 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.

May 14, 2010 at 1:41 pm Leave a comment

Key Issue: Sustainability Reporting

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.

* * *

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

 Recent Papers of Note

 Key Regulatory References

April 19, 2010 at 11:06 am Leave a comment

Key Issue: Labor Rights

ProxyDemocracy continues its coverage of social and environmental issues appearing on proxy ballots in 2010 with this installment on labor rights. More than 30 resolutions have been introduced this year on matters such as sweatshop labor and the disparity in pay between executives and lower-wage workers. The series was produced by the Sustainable Investments Institute, a Washington-based research center. SI2 co-founder Peter DeSimone wrote this report.

 * * *

This year’s lineup of labor rights proposals cover a range of issues, including:

  •  Pay disparity and concerns about differences between executive pay and wages for line workers. There have been 22 proposals filed.
  • Supplier labor standards and the debate over eradicating sweatshops in global supply chains. At least four proposals have been made.

Pay disparity:  The fractious public debate over disparity in pay between CEOs and entry-level employees has centered on the potential resentment it creates in the workplace, the risks associated with exorbitant short-term incentives, the negative effects of growing income and wealth disparities in the United States, and the possible disservice to shareholders in detracting from long-term shareholder value. 

The recent financial crisis has heightened the standoff and focused scrutiny of pay practices at financial services firms, especially those receiving bailout money under the U.S. government’s Troubled Asset Relief Program.

Besides seeking remedies through financial reform legislation, investor activists are asking companies for reports summarizing a review of executive compensation policies and pay practices. The reports would compare the total pay packages, including benefits, of each company’s top executives and lowest paid employees; an analysis of any changes in gaps in these pay bands; a determination if executive pay at each company is excessive; and a recommendation on whether changes or further monitoring is warranted, especially in light of any large disparities in pay or layoffs at each company.

Opponents say the activists’ contentions that CEO pay is out of line with share performance are flat wrong and contrary to the findings of a study commissioned by The Business Roundtable.  They also note that pay-for-performance is now routine at the vast majority of publicly traded U.S. companies.  Moreover, they warn, companies hamstrung by restrictions preventing them from paying market rates for executives risk losing key leaders and ground to competitors.

Supplier labor standards: Sparked by reports of abusive labor conditions from factory floors producing apparel and footwear in the 1990s, the anti-sweatshop movement in the United States has been in full swing ever since, although far fewer shareholder proposals have been filed on the subject in the last few years.  Activists’ attention has expanded beyond the retail sector to many other industries, including toys and agricultural products, the target industries of this year’s shareholder proposals.

Squaring off in this debate are labor-rights advocates and free-trade supporters.  The former argue that globalization is creating an unhealthy “race to the bottom,” as developing countries fiercely compete for scarce capital, contracts, investments and jobs.  They also raise concerns that suppliers violating basic labor covenants are also likely to be cutting corners in other places, namely quality, which could further damage a company’s reputation.

Free traders say globalization has created jobs where none existed before, and sweatshops are a natural byproduct of the progression from developing country to industrialized nation.  They argue that conditions will improve as economies grow and that until then market forces should prevail, as they provide the quickest path to prosperity.   

The shareholder proponents are asking companies to adopt supplier codes of conduct containing internationally recognized labor standards, to monitor suppliers for compliance with these codes and to report on findings from these activities.  They say that doing so will help companies mitigate risks to reputation related to engaging sweatshops and improve supply chain management.

Some critics question the effectiveness of voluntary corporate code compliance programs.  Detractors argue that shareholders should not have to shoulder the costs of enforcing labor laws in the face of government neglect.

Other labor issues:  At least eight resolutions have been filed on issues such as fair employment in Northern Ireland, the hiring of illegal aliens and the documentation of workers, and employee health care plans. 


Pay Disparity

 Supplier Labor Standards

April 16, 2010 at 10:24 am Leave a comment

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