This is the second of two features looking at the outlook for the 2019 US annual voting season. The first looked at the annual Proxy Preview.
Some 250 resolutions had been filed by Interfaith Center on Corporate Responsibility ( ICCR) members at 163 companies by the end of January this year.
Some of these have already been withdrawn, while others have been challenged at the SEC, but most will go to a vote. Even more impressively, ICCR’s Julie Wokaty, answering a questing at the end of the ICCR webinar on its 2019 Proxy Resolution and Voting Guide, disclosed that ICCR members were also involved in 348 additional corporate dialogues. “Generally the split between resolutions and dialogues is more even,” said Wokaty, “but this year more attention has been paid to dialogues, as investors prefer to make progress through them.”
The largest growth area was human rights proposals, with 43 overall, “a big surge,” as she described it, with many focused on digital rights and tech giants. There are 10 resolutions at Amazon alone. Wokaty also noted 14 brand-new resolutions this year, many having to do with human rights and detainee rights. The two largest groups of resolution, however, remain lobbying and political spending disclosures (50) and climate (45), covering everything from Paris compliant business plans to climate criteria for investing in projects to mitigating health and climate impacts of coal use et cetera. Resolutions on diversity and inclusiveness (37), held strong, including a new type on the use of NDA/mandatory arbitration in sexual harassment cases at McDonalds.
Other new campaigns cover the unsustainability of profits solely from drug price increases, new focuses on plastics and non-recyclable packaging, sustainable forests and commodity-based deforestation, as well as two new resolutions on evaluating the impact of overdraft practices on bank customers.
There have been 36 agreements to date, including at Wells Fargo to include language on private prisons in its safe lending policies, at Emerson to establish a GHG reduction target, at Sanderson to cease administering medically important antibiotics to its chickens, and at GE to expand transparency regarding election-related spending at the trade associations it is a member of.
Resolutions calling for the integration of drug pricing into executive performance metrics received votes in favour last year ranging between 21% and 28%, said Wokaty. And during questions, she added that they were targeting companies where opioids were part of a business plan to boost profits. “It’s one of the things that we want greater board oversight of,” she said, “and so far we have found a number of the companies that we been working with that are amenable to developing more rigorous board oversight of their opioid sales practices. Prior to the engagement, most had not been paying attention to the risks that their business practices might cause.”
Hannah Lucal, of Open MIC, outlined current concerns over facial recognition products that reproduce racial and gender bias, on which there are several resolutions this year.Further concerns were voiced that Google is sharing user data with the Chinese government through its new compliant search engine and is, therefore, not fulfilling its obligations to human rights due diligence. “Since the software development, engineers have been leaving Google which is also leading to human capital risks,” she added.
The new investor campaigns on immigration are in response to concerns about the role of corporations implementing Donald Trump’s zero tolerance immigration policy, such as heightened surveillance, detention et cetera. These business lines present risk to shareholders on financial, legal and reputational grounds.
Mary Beth Gallagher, Tri-State Coalition for Responsible Investment, noted that the Investor Coalition on Human Rights is also behind the increase in human rights resolutions, due to a greater understanding of the costs and impacts of human rights violations, pushing companies to: “disclose more, have better management systems, and to devote more resources and attention to understanding their human rights impact, as well as engaging with stakeholders in a meaningful way, having policies in place and, more importantly, demonstrating those policies can be implemented effectively,” she said. Adding that with disclosures, it is very important to be able to compare performance across companies.
Ten resolutions were filed at Amazon: calls for a statement on community impact; a societal risk oversight committee; incorporate diversity and sustainability metrics into top pay; GHG reduction; human rights impact assessments; independent board chair; majority vote; reduce food waste; report on efforts to address hate speech; risks of sales of facial recognition software – Rekognition. Many of these have been challenged at the SEC. In an answer to a question at the end, is Amazon the worst player or is it just an easy target, Jared Fernandez of Green Century Capital said: “They have tremendous influence and a huge footprint. Anecdotally, I have been told that Amazon has not been responsive to investor interviews and would not grant dialogue with investors, even on pressing issues, and when dialogues were granted they were extremely unproductive and the company refused to share anything other than publicly available information.” Referring to the recent decision by the company to pull out of its planned headquarters in a borough of New York City, Fernandez added: “If shareholders had been able to bring this issue to Amazon before the decision to site HQ2 in Queens had been made, they might not have had to pull out. Shareholders could have encouraged them to alter the due diligence and the assessments that they did in choosing the site to, maybe, realise that it wasn’t a good idea to begin with, or that their approach would, by necessity, have to be slightly different if being sited in New York City was such a critical goal for the company.” This decision and its fallout was already the object of a couple of resolutions at the company even before the announcement that it was pulling out.
Danielle Fugere of As You Sow spoke about resolutions at Chevron, Exxon, Anadarko and Hess, as well as a number of banks, which have been asked to come up with Paris compliant business plans.
These cover operational and indirect emissions, along with emissions associated with bank investments.
Bruce Freed of the Center for Political Accountability said there were close to 100 resolutions this season on the issue, so clearly some were not filed by ICCR members. In demonstrating the potential reputational risk to companies of political contributions, Freed noted that the companies which had made contributions to Steve King, who was removed from committee assignments in the US House of Representatives for racist comments, saw sales of their products hurt. “Millennials are hypersensitive to such issues,” said Freed, “with comments often going viral, and they will move quickly as employees or consumers leaving companies to face not just reputational, but financial risks.”He added during the question and answer session that another reason to support increased disclosure was that: “27 companies that reaffirmed their support for the Paris climate agreement after Trump withdrew from it, had then contributed to the election campaigns of attorneys general candidates who were filing suit against the EPA Clean Power Plan. “Those are serious problems,” he said, “that are not just reputational but bottom line.”
Finally, Tim Smith of Walden Asset Investment, asked speakers and listeners to stress the importance of investors working together to support the efficacy of the shareholder resolution process. Fugere wholeheartedly supported his comments, saying: “It’s a critical time for investors to step up and talk about the successes that investors and companies share because they have invested in ESG programmes and policies that have contributed to the success of the company and brought returns to shareholders.”