Corp Fin refuses to allow exclusion of new form of proxy access fix-it proposal – Cooley PubCo

We think the word they are searching for is “motivated.”

You may have thought that, after the series of staff no-action positions allowing exclusion of so-called “fix-it” proposals during the last proxy season, we had seen the last of them. If so, you would be forgetting how persistent (or relentless, depending on your point of view) these proponents are.  And this time, the staff has rejected the no-action request of H&R Block—once again the unfortunate trailblazer— which had sought exclusion of another proxy access fix-it proposal—this time to eliminate the cap on shareholder aggregation to achieve the 3% eligibility threshold—from the prolific John Chevedden et al. Given the result, you can expect to see more of this form of fix-it proposal next proxy season. 

Source: Corp Fin refuses to allow exclusion of new form of proxy access fix-it proposal – Cooley PubCo

Shareholder Proposal Reform Rebutted – Corporate Governance

We strongly recommend James McRitchie’s point-by-point rebuttal to the Chamber of Commerce’s “fake news” plea to “protect” corporate executives from non-binding shareholder proposals. It is well worth reading in its entirety, but we particularly note his response to the Chamber’s claim that “social” proposals are not relevant and have no merit. That is a matter for shareholders to decide. The strong support from the broad range of the shareholder community for these proposals proves that they are relevant and the response by companies to that support shows that they can be effective. Indeed, that is the reason the Chamber wants to get rid of them. McRitchie says:

Rule 14-8 is not broken, many of the Chamber’s attestations are alternative facts and its recommendations are more likely to hurt our economy than help it.

Source: Shareholder Proposal Reform Rebutted – Corporate Governance

Another Shareholder Proposal? McDonald’s Deserves a Break Today – WSJ

Sigh.  Another whine about those pesky shareholders from those who insist they are the ultimate capitalists.  James R. Copland of the Manhattan Institute, which is funded by right-wing foundations (whose names should be disclosed in published material like this column), writes in the Wall Street Journal that poor McDonald’s should not have to bear the terrible burden of shareholder proposals.  He argues that the oxymoronically named CHOICE Act would not go far enough in merely requiring investors to hold one percent of the stock to submit a shareholder proposal; he wants to eliminate all “social” shareholder proposals entirely.  Since “ordinary business” proposals are already prohibited, that reminds me of the baseball manager who said that his team couldn’t win home games and couldn’t win away games “so all we have to do is find another place to play.”

He writes:

According to an SEC survey, it costs more than $100,000 merely to respond to a shareholder proposal and include it on the ballot. The far greater cost comes from the distractions such proposals create for directors and senior executives, as well as the risk that companies will change their policies under pressure.

We are find this self-reported, self-serving number highly suspect.  If, as Copland says, the proposals are re-submitted, how expensive can it be to cut and paste the previous year’s rebuttal?  How much time can it take for executives and board members to vote to oppose it again?

He also complains that some companies have made changes to respond to shareholder proposals, even if they did not get a majority vote.  That’s called a market-based response.  Since even a 100 percent vote is advisory only, we have no concerns that the executives and board members who have all of the decision-making power will be unduly persuaded unless the case is effectively made.  This is literally why we pay them the big bucks.

I do share some of Copland’s frustration with the shareholder proposal process, however.  I wonder if he would be willing to support my suggestion for improvement: no more shareholder proposals, but a strict majority vote standard so that instead of raising issues like the transparency of political contributions and the sustainability of the supply chain through non-binding proposals, a majority of shareholders can simply remove directors who are not satisfactory.

 

Source: Another Shareholder Proposal? McDonald’s Deserves a Break Today – WSJ

The Value of the Shareholder Proposal Process

One of the most appalling provisions of the proposed “CHOICE” legislation is the one that would severely limit shareholder proposals, which, in case anyone needs a reminder, are non-binding, so that even a 100 percent vote would not force a board or executives to make a change. Also, in case anyone needs a reminder, the subject matter of shareholder proposals is already strictly limited (excluding “ordinary business,” for example), and this provision has suddenly become important just as shareholder proposals have been getting majority support. Once again, the same people who love to rhapsodize about the purity of the free market do not want to let “the invisible hand” provide any market-based feedback.


Julie Gorte and Tim Smith write in defense of shareholder proposals at Harvard Law School’s Corporate Governance and Financial Regulation blog:

The voice of shareholders is valuable both to companies and to investors alike. Shareholders file proposals with companies to help them perform better, not to annoy them. The fact that many resolutions now get votes in the 30-50 percent range, and many pass with majority votes, demonstrate that shareholders often see these resolutions as being in their financial interests.

This point is easy to illustrate with examples. In 2016, there were about 1,000 shareholder proposals filed in the United States, of which about 400 were on social and environmental issues. The remainder concerned corporate governance. None of these categories are trivial or peripheral to protecting a company’s reputation or its value, as reams of research demonstrate.

Source: The Value of the Shareholder Proposal Process

Value of Shareholder Proposals, Even When They’re Wrong

[S]hareholder activists can help improve long-term value, even when following the activists’ proposals would not.  That is just as true today and these proposals may well prime the pump for future board or shareholder actions.  That is, GM has conceded that its stock is undervalued and that change is needed.  GM argues those changes are underway, and for now, most voting shareholder agree.  But we’ll see how this looks if the stock price has not noticeably improved next year.  An alternative path forward on some key issues has been shared, and that puts pressure on this board to deliver.  They can do it their own way, but they are on notice that there are alternatives.  And shareholders now know that, too.

This knowledge underscores the value of shareholder proposals as a process.  They can and should create accountability, and that is a good thing. I agree with GM that the board should keep control of how it structures the GM leadership team.  But I agree with the shareholders that if this board doesn’t perform, it may well be time for a change.

 

Source: Business Law Prof Blog

“Free Market” Shareholder Proposal on Lobbying Disclosure at Caterpillar

A shareholder proposal on disclosing of lobbying priorities from the right-wing National Center for Public Policy Research’s Free Enterprise Project:

At this week’s Caterpillar annual shareholder meeting, the National Center for Public Policy Research’s Free Enterprise Project (FEP) is asking company investors to support FEP’s shareholder resolution asking the heavy equipment manufacturer to report on how and why it chooses its lobbying priorities.

“After eight years of President Obama’s regulatory overreach, high corporate taxation and executive actions that hampered growth and led to America’s worst economic recovery since the 1930s, we finally have a president willing to work with business leaders on a pro-growth agenda. President Trump is showing an eagerness to increase American manufacturing and bring jobs back to America,” said National Center General Counsel and FEP Director Justin Danhof, Esq. “Our shareholder proposal urges Caterpillar to capitalize on the current political climate to advance the company’s goals and improving shareholder value.”

The labor group CtW also submitted a shareholder proposal at the Caterpillar annual meeting. Theirs was to implement a stronger clawback policy. It received 121,854,679 votes in favor and 292,939,985 votes against. There were votes more than 25 million cast against three of the directors as well.

Breaking the Ice: Investors Warm to Climate Change

A few years ago, climate change was a fringe issue. Ignored by mainstream investors, environmental resolutions were lucky to receive 5 percent support. Now, issuers who try to ignore the associated risks could face serious financial consequences.

The victory of Occidental’s shareholders was arguably the result of a perfect storm. Over the past few years, climate change resolutions have become increasingly sophisticated. Where once they tended to be overly prescriptive and confrontational, they now aim to appeal to all parties involved.Many resolutions exploit investors’ fiduciary obligation to act in the best interests of their clients by emphasizing the relevance of the disclosures being requested. Recent climate change proposals also make more of an effort to placate companies. Indeed, by being more general, and in many cases advisory, most current proposals rely on investor support to pressure companies into implementing what they want.

Source: Breaking the Ice: Investors Warm to Climate Change

Investors expect to meet with Exxon on climate-impact report | Reuters

Exxon Mobil Corp investors will push to meet with oil company officials this summer to hash out elements of a climate-impact analysis following a shareholder vote calling for studies of technology and climate-related risks to its business.Exxon has said that it will reconsider its opposition to the request, not that it would begin discussions or initiate new studies. The shareholder proposal, filed by 54 groups including financial, religious and corporate governance activists, won the support on Wednesday of 62 percent of Exxon holders.

“I anticipate we’ll be having a meeting this summer,” said Tracey Rembert, assistant director of Catholic Responsible Investing at Christian Brothers Investment Services, one of the 54 co-filers.The White House’s decision on Thursday to withdraw from the Paris agreement on climate change has no bearing on the proposal. “We expect the scenario assessment will start to be done quickly at Exxon,” Rembert said.

The investors behind the proposal routinely met in past years with Exxon between December and February to discuss annual meeting proposals, she said. Earlier discussions because of the majority vote are in order.

Source: Investors expect to meet with Exxon on climate-impact report | Reuters

For the First Time, A Climate Proposal Gets Majority Support: Occidental Petroleum

Emily Chasen writes in Bloomberg:

Occidental Petroleum Corp.’s shareholders approved a proposal Friday to require the oil and gas exploration company to report on the business impacts of climate change, marking the first time such a proposal has passed over the board’s objections.

The resolution, initiated by a group of investors including the California Public Employees’ Retirement System, received more than 50 percent of the votes at Occidental’s shareholder meeting in Houston on Friday, according to spokesmen for the company and Calpers. Occidental didn’t provide the tally, but said the exact figures will be submitted to the Securities and Exchange Commission in coming days.

“The board acknowledges the shareholders support for this proposal,” Eugene L. Batchelder, chairman of the board for Occidental, said in an e-mailed statement Friday after the vote. “We look forward to continuing our shareholder engagement on the topic and providing additional disclosure about the company’s assessment and management of climate-related risks and opportunities.”

The resolution came close to majority support last year. A crucial factor in exceeding the 50 percent mark was Blackrock, a major shareholder, who switched from voting against the proposal last year to voting for it. One reason might be the concerns that the new administration’s opposition to environmental regulation may mean that investors can no longer rely on the government to take care of the problem.

“The passing of this resolution is a sign of progress. It is a first in the United States. The vote at Occidental demonstrates an understanding among shareowners that climate change reporting is an essential element to corporate governance. I believe that we will see many more companies move in this direction. This vote shows that investors are serious about understanding climate risk.” – Anne Simpson, CalPERS Investment Director, Sustainability

First Climate Change Shareholder Proposal to Achieve Majority Support: BlackRock helps pass climate resolution at Occidental

Asset manager BlackRock Inc on Friday said it voted in favor of a shareholder proposal calling on Occidental Petroleum to report on the impact climate change could have on the energy company’s business, helping it to pass.The comments by BlackRock, the world’s largest asset manager, also marked a more detailed level of explanation than it has traditionally offered for its proxy votes, which could make it even more influential.

BlackRock, a major Occidental investor, last year had opposed a similar shareholder resolution, which failed to get a majority of support from investors.In a statement sent by a BlackRock spokesman explaining the switch, the fund firm said that despite talks with Occidental, “we remain concerned about the lack of discernable improvements to the company’s reporting practices” on climate issues.

An Occidental spokesman said via e-mail the shareholder resolution passed at the company’s annual meeting, held in Houston, Texas on Friday.”The board acknowledges the shareholders’ support for this proposal,” Occidental Chairman Eugene Batchelder said in a statement e-mailed by a company spokesman. “We look forward to continuing our shareholder engagement on the topic and providing additional disclosure about the Company’s assessment and management of climate-related risks and opportunities.”

Source: Switching sides, BlackRock helps pass climate resolution at Occidental | News | KFGO-790