Interfaith investor group and CalPERS map out their shareholder campaigns for 2016

Leading responsible investors gear up for annual voting season

The Interfaith Center on Corporate Responsibility (ICCR), the coalition of nearly 300 organizations including faith-based institutions, socially responsible asset management companies, unions, pension funds, colleges and universities that collectively represent over $100 billion in invested capital, recently published its summary of the 2016 shareholder resolution campaign. The summary is a wealth of information on shareholder campaigns, reproducing the full text of hundreds of resolutions, as well as details of the shareholder proponents and which companies were the target of the campaigns.
The number of resolutions filed for the 2016 AGM season rose just over 12 per cent to including a record 91 resolutions either directly or indirectly referencing climate change. ICCR notes that: “As a general rule, the number of filings for any given year can be an important indicator of the level of corporate resistance to, or acceptance of, the changes being sought by ICCR members.”
In the wake of COP21, it is no surprise that investors asked 10 companies, including Ameren, American Electric Power, Anadarko, and ConocoPhillips, “to disclose the financial risks they face due to stranding of their assets” covering a range of scenarios, in which “10, 20, 30, and 40 per cent of a company’s oil reserves cannot be monetized.” But the resolutions on climate change this year represent a sophisticated and complex approach with filers calling on, for example, proxy voting services to report on discrepancies between their actual voting practices against climate proposals, and their publicly stated policies. Others call for sustainability metrics to be incorporated into executive incentive plans. Other resolutions reference supply chains and palm oil use, while some reference climate change in lobbying resolutions. Of course, in an election year, it is no surprise that filings addressing corporate lobbying and political contributions disclosure are on the rise with 62 resolutions, representing 24 per cent of total filings.
There are 40 governance resolutions – up from 22 a year ago, including proposals on shareholder rights, simple majority votes, one share/one vote and shareholders’ right to call special meetings. Others covered CEO & chair separation, pay disparity, and incorporating diversity metrics into executive pay. A further 29 resolutions covered diversity, including new resolutions calling for greater workplace and supply chain diversity, and for companies to address the gender “wage gap”. A new resolution on food waste, which apparently costs the US some $165 billion every year, was filed at Whole Foods. There were proposals on water risk, and 20 human rights and human trafficking filings, an increase over last year’s 17. Seven companies received a “standout new resolution” calling for minimum wage reform.Even more recently, public pension giant CalPERS announced its plans for 2016, which are described in detail in its proxy voting priorities. CalPERS’ priorities include proxy access, failed Say on Pay companies, majority votes for directors, climate risk reporting, and diversity. The announcement doesn’t just describe the resolutions CalPERS has filed itself but also campaigns by partner funds and the kind of support it will offer other proponents, which includes: “engaging companies, top investors, proxy advisory firms, filing shareowner letters with the SEC, attending annual meetings, and hiring proxy solicitors”. While it has only filed one proxy access resolution, at property insurance company Old Republic, it will support 60 resolutions filed by partner funds, and up to 40 other proxy access resolutions in line with the vacated 3 per cent ownership for 3 years SEC rule. Proxy access activity is also focused on companies with climate and diversity concerns. Staff will also monitor implementation of majority-supported resolutions from 2015. Fifty-six companies in the S&P 500 had failed Say on Pay votes in 2015, including retailer Bed, Bath & Beyond, software company Oracle, and insurance company W.R. Berkley. If pay problems continue at these companies, CalPERS will vote against the management resolution and against remuneration committee members.
The fund is also co-filing shareowner proposals at three energy companies requesting disclosure on climate change risk and opportunities and will support a further 18 resolutions asking for climate change impact assessments and routine proposals on increased disclosure surrounding climate issues. A total of 32 non-executive directors failed to receive majority shareowner support in 2015 and are still on the board. CalPERS will vote “against” these directors in 2016 and will consider voting “against” the nominating/governance committee members responsible. The fund will also routinely support diversity proposals, including those calling for the inclusion of diversity language, for greater diversity and a review of diversity policies.
A new set of six proposals from a variety of funds regarding share buybacks and their implications for incentive plan targets are described. These ask companies to exclude earnings per share or other financial return ratios from incentive plan targets, unless the effects of the buybacks have been excluded. CalPERS does not indicate whether it will support such resolutions.
A section at the end of the priorities notes a series of global issues extending beyond the US. One indicates fund opposition to the provision of the Florange Act in France that automatically gives double-voting rights to shares held for two years or more at French companies, which is contrary to CalPERS’ one share/one vote principle.