As You Talk: Shareholders Proposals on Social, Environmental Issues Gain Momentum
In the latest episode of As You Sow’s interview series As You Talk on Clubhouse, Andrew Behar, CEO of As You Sow and Heidi Welsh, founding executive director of the Sustainable Investments Institute (Si2), give an overview of some outcomes from this proxy season.
Shareholder resolutions are a key form of engagement for U.S. investors interested in changing the environmental and social impacts of companies and Proxy Preview, published each March, includes the most comprehensive public data on hundreds of shareholder resolutions related to the environment, corporate political spending, human rights, diversity, sustainable governance, and more.
Welsh, a leading expert on proxy voting, has researched corporate responsibility issues since the late 1980s. She has covered a wide variety of social and environmental issues and is the lead author of several Si2 studies published by the Investor Responsibility Research Center Institute. Her recent work has focused on corporate political influence.
Shareholder proposals on diversity, climate change and corporate spending make headlines
One of the biggest breakthroughs this proxy season was on diversity and the social policy matters front, Welsh told Behar in an interview on As You Talk. “Black Lives Matter has made itself known in proxy season by a big push for more diversity data and in pressing companies on issues of racism.”
Welsh also highlighted a new initiative by The Shareholder Commons (TSC), a nonprofit asking companies to implement their pledge to the Business Roundtable to adopt the New Purpose of a Corporation, also known as “stakeholder capitalism.” TSC is working to address systemic financial risks for universal owner investors. The TSC is promoting “the idea that companies should become public benefit corporations,” said Welsh, so they have the legal room to address social and environmental concerns that affect society at large and the markets as a whole. TSC also presented a proposal in May asking McDonald’s to disclose the “external environmental and public health costs” of using antibiotics in its supply chain.
Many shareholder proposals made headlines this year, said Welsh, on climate change, diversity in corporate boardrooms and the workplace, and fair pay and political influence including lobbying and corporate spending in elections. So far the 2021 season has seen more majority votes including As You Sow’s 81.2% vote at DuPont on plastic pollution, the highest vote ever on an environmental resolution opposed by management.
Boardroom Accountability Project spearheads change in corporate governance
Progress is being made on the public disclosure of Equal Employment Opportunity (EEO) data. All private sector employers with 100 or more employees, and federal contractors with 50 or more employees, must submit workforce data on race, gender and ethnicity in 10 job categories to the Equal Employment Opportunity Commission in EEO-1 forms, but the data are usually not made public. New York City Comptroller Scott Stringer and others asked more than two dozen S&P 100 companies—including Home Depot, McDonald's, and Walmart—to “publicly release their EEO-1 report breaking down respective workforces by race, ethnicity, and gender.”
The request was part of Stringer’s Boardroom Accountability Project, which has spearheaded several innovative corporate governance campaigns. The Comptroller’s Office said the “Consolidated EEO-1 Report is the ‘gold standard’ for diversity disclosure and will enable investors to evaluate the performance of portfolio companies in terms of their ability to hire, retain, and promote employees of color and women.”
Racial justice resolutions gain momentum
A shareholder proposal filed by As You Sow in April asked Abbott Labs to report on its plan to promote racial justice. It asked the company to adopt policies that promote racial justice in its workplace and operations, as well as granular information on diversity equity and inclusion (or DEI).
Over the last year, As You Sow has created Racial Justice Scorecards on S&P 500 companies . The resolution filed at Abbott was prompted by the company's low score which is significantly below its peers in the healthcare sector. As You Sow said in the proposal that achieving racial equity will help Abbott and other companies improve their business models by attracting, retaining, and promoting employees by creating a strong brand reputation for DEI and an inclusive corporate culture.
Welsh observed that racial justice resolutions performed well this year, with high votes and a few commitments by companies. Change on this front is also being led by two trade unions, Change to Win and the Service Employees International Union, both of which Welsh said have targeted systemically important financial institutions.
“They were asking for reports on what the companies were doing because of systemic racism,” said Welsh. “And that translates into both what's going on internally for employees on diversity and inclusion, but also externally in terms of the provision of goods and services.” That includes fair lending, redlining communities and ensuring that banking practices are not disproportionately affecting any particular communities, she said. Some companies have made significant commitments to invest in more equitable lending and financial services, Welsh said. “But at the end of the day, there's a lot of work to be done. There's a lot of discriminatory behavior that still occurs. The financial sector is still dominated by white men. And that's not changing that quickly.”
As You Talk airs Thursdays at noon Pacific on the ESG Investing Club on Clubhouse. We will soon be posting blogs inspired by these episodes, covering topics such as plastic pollution in the world’s oceans, Net Zero Asset Managers Initiative, and how banks can limit climate finance.