Responsible Investment Forum with Steve Schueth
The number and variety of resolutions submitted to company shareholders this spring demonstrates an unprecedented level of investor engagement focused on the financial risks of irresponsible corporate behavior. By Joshua Humphreys
Springtime is "proxy season" -- when most corporations hold their annual meetings and shareholders have a chance to let management know what they think about how their company is being run. If you are among the tens of millions of people who own stock in corporate America, your mailbox may have filled up with corporate annual reports and proxy statements over the past few weeks. Annual reports do not make the most exciting reading, but you might be surprised to find that many proxy ballots include an increasing number of shareholder resolutions related to some of the most pressing social and environmental problems -- like climate change, excessive executive pay, drug pricing, healthcare access, and global labor standards. As guest columnist Joshua Humphreys explains, vote your shares and let your voice be heard!
According to the Social Investment Forum, the number of shareholder resolutions focused on social issues coming to a vote in the first half of this year is up 6.5% over the same period last year. Over the last few years, resolutions on issues such as climate change, corporate political contributions, toxic emissions, sexual orientation anti-bias policies, the HIV/AIDS pandemic, vendor labor standards, and sustainability reporting have won large votes of support at companies such as Coca-Cola, J. C. Penney Co., Tyco International, Yum! Brands, Inc., and ExxonMobil.
Socially responsible money managers, mutual fund companies, pension funds, foundations, college endowments, trade unions, non-profit and religious organizations are now regularly filing shareholder resolutions and voting their proxies in ways that align more closely with their values and missions. The Social Investment Forum has documented more than $700 billion under the control of institutional investors filing shareholder resolutions on social and/or environmental issues.
Fifty institutional investors collectively with $3 trillion in investment assets have joined together as the Investor Network on Climate Risk to encourage their portfolio companies to manage the risks and seize the opportunities presented by global climate change. Ceres, the Coalition for Environmentally Responsive Economies, recently released a comprehensive report, Corporate Governance and Climate Change: Making the Connection, measuring how well 100 of the world's leading companies are managing climate risk in a "carbon-constrained" global environment.
Any shareholder who has owned $2,000 worth of a company's stock for at least one year can submit a proxy resolution. Every shareowner has an opportunity to vote on any issue that appears on the company ballot. Every proxy vote counts, but that's where the similarity to political democracy fades. If you don't complete and return your proxy ballot, your votes default to company management. Unfortunately, it's rare that a shareholder-initiated resolution gains the support of management, and shareholder resolutions almost never garner a majority of votes without management's explicit support.
The average vote for social resolutions has ranged between 10% and 12% over the last several years, up from less than 9% on average five years ago. And yet, because of the unequal distribution of power within the modern corporation, management fully recognizes that even minority votes in favor of a shareholder resolution can signal much deeper discontent about a company’s performance and impact. While management is not required to act upon any given resolution, even when a majority of shareholders back it, the reality is that many management teams increasingly do.
Indeed, the shareholder-resolution process, along with behind-the-scenes dialogue and letter-writing campaigns, catalyzed numerous important reforms in corporate policies and practices. Investors have repeatedly generated groundswells of public support for proposals demanding greater corporate transparency, compliance with labor and environmental standards, and diversity in workplaces and boardrooms alike.
So rather than tossing those annual reports into the recycling bin, scan the proxy ballot and vote your shares before the annual meeting. Many companies, brokerages, and websites now even allow online voting.
It’s getting easier to be an actively engaged shareowner. The As You Sow Foundation, Rockefeller Philanthropy Advisors, and the Jesse Smith Noyes Foundation have produced a valuable annual Proxy Season Preview (PDF) that identifies companies where social and environmental issues will appear on their ballots and summarizes the issues. The Interfaith Center on Corporate Responsibility (ICCR), a coalition of faith-based shareholder advocates, provides resources to religious investors. Environmental groups such as the Sierra Club and Friends of the Earth each have shareholder activism programs. And through its SHARE POWER campaign, Amnesty International is educating its members about the tools of shareholder advocacy to address human rights problems at corporations like Chevron and DOW Chemical.
If you invest through mutual funds, your fund managers vote proxies on your behalf, so make sure your funds are voting in a way that reflects your values and concerns -- or find a socially responsible alternative. You might be surprised to learn that some of the largest mutual fund families, like Fidelity, Vanguard, and American Funds routinely abstain from or vote against shareholder resolutions on a host of social and environmental issues. To put pressure on these mutual fund families, Co-op America has created an online petition where you can tell these funds to support proposals on climate change.
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Joshua Humphreys is associate fellow at the Rutgers Center for Historical Analysis and scholar-in-residence at the Rockefeller Archive Center, a division of the Rockefeller University. An historian by training with a doctorate from New York University, he has studied as a Fulbright Scholar in Paris, directed research at the Social Investment Forum, and worked with numerous non-governmental, governmental, and international organizations.
Steven J. Schueth is president of First Affirmative Financial Network, LLC. An independent investment advisory firm registered with the SEC, First Affirmative specializes in serving socially conscious individual and institutional investors nationwide. A former director and spokesperson for the Social Investment Forum, Schueth lives in Boulder, Colorado.
Reference to a specific company or mutual fund should neither be considered an endorsement of the company or fund, nor an investment recommendation. Past performance is never a guarantee of future results.
Shareholder Democracy
The number and variety of resolutions submitted to company shareholders this spring demonstrates an unprecedented level of investor engagement focused on the financial risks of irresponsible corporate behavior.According to the Social Investment Forum, the number of shareholder resolutions focused on social issues coming to a vote in the first half of this year is up 6.5% over the same period last year. Over the last few years, resolutions on issues such as climate change, corporate political contributions, toxic emissions, sexual orientation anti-bias policies, the HIV/AIDS pandemic, vendor labor standards, and sustainability reporting have won large votes of support at companies such as Coca-Cola, J. C. Penney Co., Tyco International, Yum! Brands, Inc., and ExxonMobil.
Socially responsible money managers, mutual fund companies, pension funds, foundations, college endowments, trade unions, non-profit and religious organizations are now regularly filing shareholder resolutions and voting their proxies in ways that align more closely with their values and missions. The Social Investment Forum has documented more than $700 billion under the control of institutional investors filing shareholder resolutions on social and/or environmental issues.
Fifty institutional investors collectively with $3 trillion in investment assets have joined together as the Investor Network on Climate Risk to encourage their portfolio companies to manage the risks and seize the opportunities presented by global climate change. Ceres, the Coalition for Environmentally Responsive Economies, recently released a comprehensive report, Corporate Governance and Climate Change: Making the Connection, measuring how well 100 of the world's leading companies are managing climate risk in a "carbon-constrained" global environment.
Any shareholder who has owned $2,000 worth of a company's stock for at least one year can submit a proxy resolution. Every shareowner has an opportunity to vote on any issue that appears on the company ballot. Every proxy vote counts, but that's where the similarity to political democracy fades. If you don't complete and return your proxy ballot, your votes default to company management. Unfortunately, it's rare that a shareholder-initiated resolution gains the support of management, and shareholder resolutions almost never garner a majority of votes without management's explicit support.
The average vote for social resolutions has ranged between 10% and 12% over the last several years, up from less than 9% on average five years ago. And yet, because of the unequal distribution of power within the modern corporation, management fully recognizes that even minority votes in favor of a shareholder resolution can signal much deeper discontent about a company’s performance and impact. While management is not required to act upon any given resolution, even when a majority of shareholders back it, the reality is that many management teams increasingly do.
Indeed, the shareholder-resolution process, along with behind-the-scenes dialogue and letter-writing campaigns, catalyzed numerous important reforms in corporate policies and practices. Investors have repeatedly generated groundswells of public support for proposals demanding greater corporate transparency, compliance with labor and environmental standards, and diversity in workplaces and boardrooms alike.
So rather than tossing those annual reports into the recycling bin, scan the proxy ballot and vote your shares before the annual meeting. Many companies, brokerages, and websites now even allow online voting.
It’s getting easier to be an actively engaged shareowner. The As You Sow Foundation, Rockefeller Philanthropy Advisors, and the Jesse Smith Noyes Foundation have produced a valuable annual Proxy Season Preview (PDF) that identifies companies where social and environmental issues will appear on their ballots and summarizes the issues. The Interfaith Center on Corporate Responsibility (ICCR), a coalition of faith-based shareholder advocates, provides resources to religious investors. Environmental groups such as the Sierra Club and Friends of the Earth each have shareholder activism programs. And through its SHARE POWER campaign, Amnesty International is educating its members about the tools of shareholder advocacy to address human rights problems at corporations like Chevron and DOW Chemical.
If you invest through mutual funds, your fund managers vote proxies on your behalf, so make sure your funds are voting in a way that reflects your values and concerns -- or find a socially responsible alternative. You might be surprised to learn that some of the largest mutual fund families, like Fidelity, Vanguard, and American Funds routinely abstain from or vote against shareholder resolutions on a host of social and environmental issues. To put pressure on these mutual fund families, Co-op America has created an online petition where you can tell these funds to support proposals on climate change.
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Joshua Humphreys is associate fellow at the Rutgers Center for Historical Analysis and scholar-in-residence at the Rockefeller Archive Center, a division of the Rockefeller University. An historian by training with a doctorate from New York University, he has studied as a Fulbright Scholar in Paris, directed research at the Social Investment Forum, and worked with numerous non-governmental, governmental, and international organizations.
Steven J. Schueth is president of First Affirmative Financial Network, LLC. An independent investment advisory firm registered with the SEC, First Affirmative specializes in serving socially conscious individual and institutional investors nationwide. A former director and spokesperson for the Social Investment Forum, Schueth lives in Boulder, Colorado.
Reference to a specific company or mutual fund should neither be considered an endorsement of the company or fund, nor an investment recommendation. Past performance is never a guarantee of future results.