Paul Hodgson: This year’s story of US shareholder resolutions is…complex

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There is a lot in play this proxy season in the US for shareholder resolutions: a captured SEC, a new ‘purpose’ for corporations, the fact that shareholder resolutions may be a thing of the past next year. So, activity – voting, withdrawals, engagements, BlackRock’s alleged increased levels of support and Vanguard even naming names – seems more furious than ever. 

And there are a number of different perspectives from investors that make the picture a complex one.

Some investors say all their resolutions went to a vote; others that all their resolutions were withdrawn; while some say investors are down to dealing with the laggard companies on many of the issues that have been raised in resolutions over the years. 

The complexity is encapsulated in the story of a single median gender pay gap resolution at Pfizer, the US pharmaceutical firm. The resolution was withdrawn last year as a result of the company’s promise to conduct an ‘adjusted and unadjusted’ pay gap analysis But, the resolution was refiled this year because the company failed to make the results public. RI will take a closer look at that resolution in a separate piece early next week.

First, what is happening in aggregate in US shareholder resolutions?

Michael Passoff, CEO of US shareholder engagement and proxy voting service, Proxy Impact, said that in his experience fewer resolutions were being withdrawn. Is this because companies are feeling more emboldened by the SEC’s seeming opposition to shareholder resolutions? Passoff replied: “That was one of the reasons with some resolutions. And there were a couple that I wanted to keep in because I was not sure I would get another chance next year, and other people have had that same thought.”

But there were other reasons, he said. “For some of the long-standing issues such as political spending, lobbying, climate resolutions, gender pay gap and other diversity resolutions, now we are just getting to companies that are the laggards, to companies that are intransigent and don’t agree that these are important issues. There is also less tolerance for companies that keep giving us the runaround.” Passoff also noted that the onset of the pandemic, coming as it did right at the point where negotiations are at their most frenetic, just prior to the filing of proxy statements, made communications between companies, filers and co-filers very difficult and also affected this year’s process.

Though not shareholder resolution co-filers, Passoff works closely with Arjuna Capital and its gender pay equity campaign, which scored a couple of early successes this year, and withdrew resolutions. All their other proposals, however, went to a vote.

Other active US shareholder proponents, including NorthStar Asset Management and Zevin Asset Management, said all their resolutions had gone to a vote too. “We had a 2019 proposal at TJX Companies asking the discount retailer to analyze and report on pay gaps in its workforce based on gender, race, or ethnicity,” said Pat Tomaino, Director of Socially Responsible Investing at Zevin. “The company did gender-based reporting a couple years ago, but it was holding out on the race/ethnicity analysis. We got a good vote result in 2019 and the company pledged to make the disclosure by the end of 2020. So we held off on re-filing for 2020, and the company has now made the (admittedly bare-bones) disclosure. Not a withdrawal story, but pretty close.”

Heidi Welsh, Executive Director of US Sustainable Investment Institute (Si2), sent me the figures on the fortunes of shareholder resolutions she has collated so far. Withdrawn resolutions are down in 2020 so far, compared with 2018 and 2019 (183, compared to 210 and 200 respectively) and resolutions that have gone to a vote are up (198 compared to 177 and 187 respectively). In fact, initially it looks like withdrawn resolutions have dropped below the number going to a vote, reversing the trend of the last couple of years, though Welsh commented: “Most of the ‘no vote others’ [category] are likely withdrawals.” Adding those in might push ‘withdrawals’ above ‘voted’, but only just. “Already, we have seen more proposals go to votes this year than in the last two, but still below the apex of 2016,” she added.

Andrew Behar, CEO of US shareholder advisory firm, As You Sow, has had a different experience: “My impression is that the companies are much more willing to hear our ideas and embrace them this year. Maybe it’s the BRT [Business RoundTable] new manifesto [the new purpose of a corporation] that has given them permission to collaborate with their stakeholders. We won the 50-year debate on the philosophical framework of what a business is about – so the shift makes sense from an historical perspective.”

Figures for resolutions in which As You Sow was involved, as of 11 June, were: “126 engagements, 73 escalated to resolutions, 42 withdrawn.” As You Sow’s experience with diversity resolutions was markedly different. “This year, we withdrew every diversity resolution because each company agreed to disclose.” Among resolutions on SASB [Sustainability Accounting Standards Board] disclosures, many were withdrawals after companies agreed, though four went to a vote, he said by email: “Three were majorities and the one that got 11% support, the company agreed to full implementation an hour after the annual meeting.”