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 the 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.”

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

Climate Shareholder Resolution at Royal Dutch Shell

Resolution at 2017 AGM of Royal Dutch Shell plc (“Shell”), coordinated by Follow This

Shareholders support Shell to take leadership in the energy transition to a net-zero-emission energy system. Therefore, shareholders request Shell to set and publish targets for reducing greenhouse gas (GHG) emissions that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2°C.

These GHG emission reduction targets need to cover Shell’s operations as well as the usage of its products (scope 1, 2, and 3), they need to include medium-term (2030) and long-term (2050) deadlines, and they need to be company-wide, quantitative, and reviewed regularly.

Shareholders request that annual reporting include further information about plans and progress to achieve these targets.

This shareholder resolution is intended to express shareholder support for a course towards a net-zero-emission energy system. The why of a course towards a net-zero-emission energy system is clear: increasing costs of the extraction of fossil fuels, decreasing costs of generating renewable energy, and the global political pledge to stop global warming. The how and the what are up to the management of Shell. It is up to them to set GHG emission reduction targets and to develop activities to attain these targets.This supporting statement serves to offer rationale, elaborate on transparency, and recommend metrics to align these targets with the Paris Climate Agreement.

In Paris, in December 2015, during the twenty-first Conference of the Parties (COP21), representatives of 195 countries reaffirmed the goal of limiting global temperature increase to well below 2°C above pre-industrial levels and agreed to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. COP21 also agreed to aim for a global net-zero-emission energy system.In May 2015, by means of a shareholder resolution submitted by the Aiming for A investor coalition, shareholders directed that annual reporting will include information relating to climate change, such as emissions management, asset portfolio resilience, and investment strategies. Setting further targets on scopes 1, 2, and 3 is the next step.Major institutional investors have announced that they will drastically cut the carbon footprint of their investment portfolios with the aim of reducing the climate risks in them.

We the shareholders request that the company publish company-wide greenhouse gas (GHG) emission reduction targets according to the following 3 scopes:

Scope 1: direct emissions from the facilities under Shell’s operational control or the equity boundary,

Scope 2: indirect emissions from the facilities of others that provide electricity or heat and steam to Shell’s operations,

Scope 3: emissions that Shell estimates come from the use of Shell’s refinery products and natural gas products.

In order to align its emission reduction targets with a well-below-2°C pathway, we request the company to base these targets on tangible metrics such as the Intended Nationally Determined Contributions (INDCs), or to use any other metrics the company finds practical to align its targets with a well-below-2°C pathway. For example, the INDC of Europe calls for 40% emission reduction by 2030 and 80-95% by 2050, relative to 1990 levels. While the combined INDCs are not enough to get on a well-below-2°C pathway, these commitments may be ratcheted up. The company could use metrics of the Intergovernmental Panel on Climate Change (IPCC) as well. For example, to limit global warming to well below 2°C, the IPCC estimates that 40-70% reduction in GHG emissions globally is needed by 2050, relative to 2010 levels. In the light of changing technological drive, scientific progress, and incrementally rising policy commitments, Shell should review its GHG emission reduction targets regularly.

Risks: If actions to get on a well-below-2°C pathway are taken too slowly, this may lead to abrupt adjustments, resulting in costly shocks. An orderly transition should start with the expression of clear medium- and long-term targets. We fully realize that these targets will be just dots on the horizon and that the road leading there has to be discovered, but the longer the company waits, the harder it will be to attain the well-below-2°C pathway and the more disruptive the transition will be.

The political pledge to limit climate change to well below 2°C, the resulting future legislation, and the decreasing costs of renewable energy add to the risk that capital expenditures in fossil fuel projects will become stranded assets.Opportunities: Taking leadership in the global energy transition could increase the brand value of Shell. The company could distinguish itself from its competitors if customers knew that part of the profits from fossil fuels would be invested in energy sources that limit global warming.

Shell is accustomed to exploring for oil and gas resources. We encourage the company to explore new business models. Some investments will turn out to be profitable; some not, as is the case in the exploration for oil and gas.

Shell’s financial results greatly depend on the price of oil. Diversification of the energy system could turn out to be an opportunity to decrease risks and create the cash engines of the future.

Support: We encourage Shell to show leadership by enhancing its capability to innovate and make use of potential opportunities in a transforming energy landscape over the coming decades. We would welcome further alignment between the company’s strategic positions vis-à-vis emerging energy technologies that stand to benefit from the energy transition. With its decades of experience and expertise as an innovator, its global reach, its financial capital, and its human capital, Shell is excellently positioned to make use of these developments by applying new technologies and setting up related business models. We encourage Shell to set targets that are inspirational for society, employees, and shareholders, allowing Shell to meet increasing demand for energy while reducing GHG emissions.

Source: Shareholder resolution 2017 – Follow this

Big corporations are trying to silence their own shareholders – The Washington Post

David H. Webber, professor at the Boston University School of Law, writes about efforts funded by corporations to reduce the number of shareholder proposals. Note that a very small number of these proposals are filed each year, at a very small percentage of companies, and that even a 100 percent vote in favor is almost never binding on management. And yet, somehow advisory votes by shareholders are so terrifying that the snowflakes in the corporate boardroom get the vapors even thinking about them.

Corporate lobbyists at the Business Roundtable — led by JPMorgan Chase chief executive Jamie Dimon — are heralding an effort to sharply limit the ability of investors to have a say in their companies through shareholder proposals. If successful, it will reduce stockholders’ ability to shape the companies they own and hold corporate managers accountable. As with political voting rights, these corporate voter-suppression efforts demonstrate that even the most basic rights need constant vigilance to protect them.Shareholder proposals — governed by the Securities and Exchange Commission — allow shareholders to suggest ideas to be voted on by their peers at the annual meeting. As with voter-suppression tactics generally, the Business Roundtable would not eliminate shareholder proposal rights. Tactically, that would be too crude. Instead, it would interpose a series of technical requirements that would have the same effect as a ban. Most notably, the Roundtable would drastically raise the ownership threshold needed to file a proposal.But shareholder proposals are effectively tools for significant corporate change, akin to ballot initiatives that have played such an important role in American democracy. In recent years, shareholder proposals have called for better assessment and disclosure of climate change risks and for improved diversity in hiring….A recent SEC study shows that New York City’s efforts [to get companies to adopt proxy access provisions] led to a total increase of $10.6 billion in shareholder value at targeted companies…Even when unsuccessful, shareholder proposals can become important mechanisms for registering discontent and helping companies adjust policy…Shareholder proposals mainstreamed diversity as an investment issue, recently pounced on by State Street — a traditional investment house with $2.5 trillion in assets under management — which adopted a new voting policy favoring women board members, symbolically underscored by the company’s commission of the “Fearless Girl” sculpture on Wall Street….None of this is to say that shareholder proposal rules are perfect. Certain revisions might be worth considering. But nothing justifies the stratospheric threshold that Dimon and the Roundtable are backing. Apparently, they’re not interested in protecting shareholders — only in protecting themselves.

Source: Big corporations are trying to silence their own shareholders – The Washington Post

The Business Roundtable’s Proposal to Silence Shareholders

The Business Roundtable, once again proving that they only like capitalism when the providers of capital are silent and powerless, has released a proposal to “improve” the shareholder proposal process. They say this is necessary because

the current shareholder proposal process is dominated by a limited number of individuals who file common proposals across a wide range of companies but own only a nominal amount of shares in the companies they target. These investors are pursuing special interests — many of which have no rational relationship to the creation of shareholder value and conflict with what an investor may view as material to making an investment decision. As a result, the current process is often used to promote the self-interest of a minority of shareholders, frequently at a significant cost to the company. 

The BRT’s claims that these “improvements” are necessary are unpersuasive, including the alleged “costs” of proposals and a completely inapposite analogy to “proxy access” eligibility. A non-binding proposal is in an entirely different category than nominating a director who may be elected to the board.

If the BRT would pay less attention to the proponents and more attention to the level of support the proposals get from a wide range of investors, they would understand that this is what is referred to as a market test. It is an outrage that they want to limit even further the shareholder proposal process, when even a unanimous vote in favor is advisory only. The best way for corporate executives to reduce the number of proposals and votes in favor is to adopt corporate governance best practices and develop better lines of communication with investors.

Source: Responsible Shareholder Engagement and Long-Term Value Creation | Business Roundtable

Clean Yield’s Open Letter to Shareholders of Alphabet, Inc. on Political Spending

On May 26, Clean Yield Asset Management uploaded an open letter to other Alphabet, Inc. shareholders on the Securities and Exchange Commission web site. In it, we call for shareholders’ support for Proposal No. 7 on the ballot, which calls on Alphabet to fully disclose the extent of its political spending. The shareholder meeting takes place on June 8.

Specifically, Alphabet has refused calls to disclose what it contributes to so-called “dark money” nonprofits such as trade associations and 501(c)(4)s. These are entities that can receive payments from corporations but do not have to disclose the source of those contributions. In the 2012 and 2014 election cycles, dark money groups spent more than $474 million to influence electoral outcomes.

At the company’s stockholder meeting in 2014, a shareholder made a similar point to Mr. Schmidt, and he responded:

Let me summarize your request. We need to be more transparent? Is that right? We get it. We’ve heard that from a number of other shareholders, so let us come back with some ideas. We got a very clear set of messages from a number of shareholders about this transparency issue already.

But Alphabet has offered no “ideas” to date, and falls short of best practices. The company scored only 33 out of 100 possible points on the CPA-Zicklin Index, a widely-referenced benchmark of the political disclosure and accountability policies and practices of leading U.S. public companies.We’d like to know why it’s okay for Alphabet to contribute the company’s money to secretive groups that can spend it however they wish, even in ways that conflict with Alphabet’s values. Alphabet showed real spine when it quit the American Legislative Exchange Council in 2014, but it still has an expansive political footprint, supporting about 140 trade associations and other nonprofits across the political spectrum. The reputation risks are not hypothetical. Alphabet has come under heavy criticism in the media for its aggressive lobbying of the European Commission.

These activities contribute to the public’s worst suspicions that the U.S. political system is rigged in favor of large donors, which is a key factor in the political instability we are experiencing in the U.S. Alphabet can and should do better.

Source: Open Letter to Shareholders of Alphabet, Inc. – Clean Yield