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Room for Improvement: 2020 Proxy Voting Highlights

As environmentally and socially responsible investors, we seek to buy stock in companies whose values we already have substantial alignment with. That said, we have yet to find a company without room for improvement on environmental, social or governance (ESG) issues. So we welcome the annual arrival of proxy voting statements for shareholder meetings–most of which take place in April through June–as an opportunity to advocate for progress in certain areas, even within companies who may already be leading the way in others.

With this year’s proxy votes, we have pushed companies in familiar directions, while at the same time new themes have emerged:

  • Corporate lobbying has become a key theme among several of the largest companies in our clients’ portfolios, with Verizon, UPS, Abbott, and Comcast all facing resolutions from shareholders who want stronger disclosure of corporate lobbying activity. While each company’s board recommended a “no” vote, we have supported each resolution. In each case, companies have pointed to existing lobbying disclosure requirements, and in some cases, additional, voluntary disclosures, as sufficient. Our issue with existing disclosures is that they do not tell a story. Simply knowing which elected officials a company has donated to, or what trade associations they belong to, does surprisingly little to reveal how much money is going to support specific positions and legislation. Encouragingly, many other investors have agreed with us that better reporting is needed, with 47% shareholder support for a lobbying activities report at Verizon, 23% at UPS, 20% at Abbott, and 26% at Comcast. Each result to date is well over the SEC’s existing resubmission thresholds, meaning these resolutions can be brought again in future years, when further efforts to increase shareholder support will, we hope, win passage.
  • While digital rights have received media attention for some time, activism around consumer privacy and online discrimination have more recently reached the annual meetings of tech and communications giants. This year, we voted for digital rights proposals at companies including Google, where 16% of shareholders supported creating a Board-level Human Rights Risk Oversight Committee (and, separately, 9% of shareholders voted to nominate a human rights and/or civil rights expert to the Board). At Verizon, a resolution we supported seeking to integrate a user privacy metric into the company’s executive compensation program received over 30% support.
  • In the governance realm, board chair independence remains a pressing topic for ESG investors. We believe that, in most circumstances, preventing a company’s CEO from also serving as the chair of its board of directors reduces risk by increasing oversight, democratizing decision-making among leadership, and providing space for a potentially more inclusive agenda, which can drive business success by promoting different points of view. This season, we are supporting proposals for independent Board chairs at companies as diverse as Cisco, Gilead, Johnson & Johnson, and Comcast.

Notably missing from this list are shareholder proposals around climate change. This is largely a result of the kinds of companies whose stock we hold, many of which are in lower-impact tech- or healthcare-related industries, or are already leading the pack on climate in the relatively more carbon-intensive industries in which they operate. Now that shareholder activism around climate change has helped drive more than a few success stories, many of this year’s new climate proposals are also targeting oil and gas companies directly, a development which we cheer but are unable to participate in (since we are completely divested of fossil fuel holdings).

Other noteworthy opportunities to advance our clients’ social goals this proxy voting season have included a shareholder proposal that Johnson & Johnson report on its opioid-related risks, in which we were part of the 60% majority that supported such a report; a proposal that Comcast conduct an independent investigation into the risks of failing to report sexual harassment; and a repeat proposal that Google improve its reporting of global gender and racial pay equity. Voting for such proposals, even when they don’t pass, is critical to raising investor awareness and legitimizing ongoing engagement with companies in order to push them to do better on such issues.

On the governance side, we were cheered this season to see several companies bring their own proposals for board declassification to their annual meetings, taking the initiative to democratize boards by giving shareholders the ability to vote on board members each year. (On “classified” boards, members can serve longer terms before facing re-election.) Companies we hold that voluntarily proposed declassification included Allot, Cerner, and Church & Dwight. We also found ourselves voting for several shareholder proposals to allow a smaller number of shareholders to call a “special meeting,” again with the goal of democratizing those companies by increasing shareholder power to take action. Finally, we voted against the proposed funding levels for several companies’ employee stock plans, when we viewed those plans as non-equitable to all employees and/or needlessly dilutive to shareholders.

This proxy season was especially exciting for us as we began to formulate our first official set of proxy voting guidelines, which will both serve as a guide for future proxy votes and continue to evolve with the issues and the opportunities for shareholders to push for progress from companies around the world.