US shareholder resolutions set for record year, political spending tops concerns: Si2 data

Ten year trend shows near doubling of investor activity.

Investors are increasingly challenging US companies at their annual general meetings (AGMs) on their environmental and social policies and 2013 is likely to be a banner year for the number of votes backing related shareholder resolutions, according to research from the Sustainable Investments Institute (Si2). Significantly, this year has seen a huge rise in the number of calls by investors for companies to disclosure their political spending; related shareholder resolutions accounted for nearly a third of the total filed. Si2 said that so far this year 401 sustainability-related shareholder proposals have been voted on at US companies, already above last year’s total of 393. Average vote support for these proposals has increased from 18.4% in 2012 to 21.3% so far this year. As a result, it should surpass the previous all-time record of 20.1% in 2011, once the final tally has been averaged out. Along with political spending, shareholder resolutions on board/workplace diversity and sustainability reporting dominated the numbers of resolutions and received the strongest levels of investor support. Interestingly, the Si2 research shows that investor support for shareholder resolutions is showing a significant long-term rise. Ten years ago, average votes across all resolutions hovered around 10% (versus 20%+ today) and fewer than 30 votes in total got more than 20% backing. The number of votes above 20% is nearing 100 this year, up from 79 in 2012 and 91 in 2013.
Four resolutions earned majority votes (+50%) in 2013. Three were at fertilizer maker CF Industries Holdings,concerning board diversity (50.7%), political spending (66%) and sustainability reporting (67%, the highest ever social vote). The other was at aerospace and defence firm Alliant Techsystems on lobbying disclosure. According to the Si2 data, it appears that companies have been less successful in lobbying the SEC to make so-called ‘no action’ rulings to keep shareholder resolutions off AGM proxy statements in 2013: 12% of this year’s proposals were excluded compared with 16% in 2012. However, investors withdrew more than one-third of all shareholder proposals filed before the AGM in so-called ‘negotiated agreements’ with companies, a trend which Si2’s research shows has been growing. Proposals that look like earning high levels of investor support are the most likely subjects for negotiation. In the last three years, shareholder challenges on diversity (on boards and in the workplace) and sustainability reporting have had the highest average vote levels and withdrawal rates. Si2 said the most prolific sponsors of shareholder proposals are social investment firms, pension funds and faith-based investors. Individuals, unions and single-issue groups are important proponents, but they don’t file as many resolutions. Si2 Executive Director Heidi Welsh, said: “Companies can’t ignore these votes and the growing number of negotiated agreements shows they increasingly are listening to their investors. This trend puts more pressure on firms that don’t pay attention to these initiatives,” she added.
Disclosure: RI is a media supporter of Si2.