ESG resolution round-up: Investors win disclosure on vaccine pricing at Moderna & Pfizer

Disclosure by pharma giant prompts withdrawal of proposals, including LGIM’s

Legal & General Investment Management (LGIM) has pulled its Covid-19 vaccine pricing proposal at Moderna, after the US drug maker stepped up its disclosure on the issueand published its ‘Government Funding, Pricing and Access Initiatives’ statement.

A similar proposal filed at Moderna’s rival Pfizer has also been withdrawn by its filer Trinity Health, following a commitment from the company. Cathy Rowan, Director of Socially Responsible Investments at the US SRI investor told RI that it withdrew the resolution “as the company agreed to disclose whether or not they took public funding into account.” That statement is not thought to have been made public yet.

Both resolutions called on the pharma giants to disclose how their receipt of government financial support is or will be reflected in the price of Covid-19 vaccines and therapies.

LGIM highlighted in its proposal that, unlike its peers Janssen and AstraZeneca, which also received huge sums of public money to support their development of treatments, Moderna “has not committed to provide its vaccines on a nonprofit basis during the pandemic.”

A spokesperson for LGIM told RI that it took the “extraordinary step” of filing the proposal because the pandemic “was and continues to be a significant risk to our clients’ assets”.

They added that following engagement, Moderna drafted a public statement detailing “funding from the US government, other states and supranational organisations; the capital they have raised from investors; and the different prices that the Company set for the US, other states, COVAX and the African Union.”

The spokesperson applauded “Moderna’s openness to engage with us on the important issue of vaccine pricing and access,” but added that LGIM will continue to push for increased transparency and disclosure in this area: “The withdrawal of this resolution does not indicate that we would not support similar [COVID] proposals at Moderna or at any of its peers during the upcoming AGM season or in the future.”

Both Moderna and Pfizer had sought to exclude the resolutions via the US Securities and Exchange Commission’s (SEC) ‘no action’ process, whereby companies seek permission from the regulator to omit a shareholder proposal from being taken to the vote at its annual general meeting by appeals to rules governing the process. In this instance, both companies argued that they had or would by the time of their annual meeting have substantially implemented the proposals.

SEC rejects pharma giants’ bid to exclude other Covid proposals

Had the proposals on vaccine pricing at Moderna and Pfizer not been withdrawn, it seems likely that the SEC would have blocked the companies’ bids to exclude them, given its rulings on other related proposals.

For instance, the SEC has denied Moderna’s attempts to exclude another proposal co-filed by NGO Oxfam America and US SRI firm Domini, asking it to consider the feasibility of “promptly” sharing the intellectual property and technical know-how behind Covid-19 vaccines with “qualified manufacturers located in low- and middle-income countries, as defined by the World Bank”.

The regulator did not agree with the company’s argument that the proposal fell afoul of the rule on micromanagement – a rule that the SEC has recently given new guidance on, guidance which many see as tipping the balance towards investors when it comes to ESG questions.

The SEC has not yet ruled on the same proposal filed at Pfizer.

The powerful regulator has, however, also denied Johnson & Johnson’s (J&J) bid to exclude a proposal asking for a report on public health costs created by the company’s “limited sharing” of its Covid vaccine technologies, particularly with “poorer nations”, and how that might harm “market returns available to its diversified shareholders”.

The SEC rejected the firm’s argument that the proposal, which was filed by Californian activist Harrington Investments, breached the rule on ordinary business or that it substantially duplicated another filed at the pharma giant.

Regulator backs racial justice audit again this year, this time at J&J

The SEC’s support for racial equity audit proposals at US financial giant last year was one of the first signs that the regulator would be a very different proposition under President Biden’s Administration compared to that of his predecessor.

Despite rejecting arguments made last year around substantial implementation and micromanagement made by the likes of Citigroup and JP Morgan Chase, some companies are attempting to exclude similar proposals this year using the same arguments, including McDonald’s.

Californian banking group SVB Financial, by contrast, does not appear to be challenging the racial justice proposal filed at it by Boston-based SRI firm Trillium Asset Management. Tech giant Apple did not attempt to exclude the civil rights audit proposal it is facing this year either.

The fast-food giant’s chances of being successful in its bid to exclude the call for an independent civil rights audit from US asset manager SOC Investment, therefore, looks unlikely, especially given the SEC’s recent ruling on J&J.

Earlier this month, the SEC rebuffed J&J’s attempt to exclude the proposal filed by Mercy Investments, asking the pharma firm to undertake an independent racial justice audit. J&J had unsuccessfully argued that the proposal substantially duplicates another filed by right-wing think-tank National Center for Public Policy Research (NCPPR).

Lydia Kuykendal, Director of Shareholder Advocacy at Mercy, told RI that it is “thrilled the SEC saw the NCPPR proposal for what it is, which is materially different than our proposal. We hope that all J&J investors recognize the differences and vote appropriately.”

Civil Rights Audit goes to the vote at Apple this week

One of the first outings for the civil rights audit proposal this year will be at Apple on Friday. RI reported last week that both the big US proxy advisors had thrown their weight behind the resolution, which was filed by SOC Investment, US union-backed SEIU and Trillium – the trio which were also behind most of the racial justice and civil rights audit proposals last year.

While the Californian tech giant did not seek to exclude the audit proposal, it did unsuccessfully try to exclude another asking it to report on its use of concealment clauses when it comes issues such as “harassment, discrimination and other unlawful acts”. The concealment clause proposal was filed by Californian impact specialist Nia Impact Capital.

In December, the US Department of Labor (DoL) confirmed to CNN that it had launched a whistleblower investigation into Apple. The DoL’s whistleblower protection programme, administered by the Occupational Health and Safety Administration (OSHA), investigates cases of alleged retaliation by employers against workers who raise concerns about issues such as employee safety.

Both ISS and Glass Lewis are also supporting the concealment clause proposal and it is, therefore, more likely to attract significant support.

The proxy giants, however, disagree on proposals asking Apple for a report on median gender and racial pay disparities and another asking for a report on forced labour in supply chains, with ISS supporting them and Glass Lewis opposing in their recommendations.

As has been widely reported ISS, unlike its rival Glass Lewis, is also recommending that shareholder vote against the package awarded to Apple’s CEO Tim Cook, whose pay last year increased 519% to $91m, according to ISS, mainly driven by a $75m equity award.