Proxy season is underway, and early signs show that public companies are facing more pressure than ever to address climate change and social justice.
So far, shareholder resolutions were passed at Disney, Apple and Costco, with investors asking those companies to report pay gap data, conduct a racial equity audit and measure Scope 3 greenhouse gas emissions, respectively.
On their own, each of those developments was surprising in the proxy voting world, where investors historically have voted in step with recommendations by corporate boards. But they appear to be just the beginning of a very busy year.
This season, there have been at least 529 shareholder resolutions filed — an increase of more than 20% over figures from this time in 2021, Proxy Preview reported in a paper issued Thursday.
The big themes are climate change and human rights.
Currently, there are 94 pending proxy votes on climate change, up from just 25 in 2021, and 68 on human rights and racism, also up from 25, Heidi Welsh, executive director of the Sustainable Investments Institute, said Thursday, speaking at a presentation on the report. The institute contributed to the paper, along with As You Sow and Proxy Impact.
“We’ve never seen so many proposals filed so far,” Welsh said. “We may hit 550 by year’s end.”
Last year, 39 shareholder resolutions received majority support, and there could be significantly more this season.
Behind the momentum for shareholder resolutions is a more shareholder-friendly Securities and Exchange Commission under the Biden administration, which has sided less often with companies requesting that proposals be kept off ballots. Further, institutional shareholders increasingly have been siding with smaller investors that file the resolutions.
Last year, for example, mutual funds voted in favor of resolutions on average 33% of the time, Welsh noted.
“The resolutions really at this point represent issues that cannot be ignored,” she said.
Of the proposals brought this year, 412 are going to votes or already have, according to the report. Another 106 were withdrawn, which often indicates that companies have agreed to address the issues they raised. The SEC allowed companies to omit just 11 resolutions, less than half the number at this time a year ago. But 103 resolutions have yet to be decided, the report stated.
A vote earlier this month at Apple’s meeting hints at how support for human rights issues is growing. Fifty-three percent of shareholder votes supported a measure asking the company to agree to a civil rights audit conducted by a third party.
“It’s showing, particularly in the area of social issues, that investors are really expecting the values that a company is espousing to line up with what a company is doing,” Tejal Patel, corporate governance director at SOC Investment Group, said at the presentation.
In December, Tyson Foods voluntarily agreed to a third-party racial equity audit in response to a shareholder resolution that was then withdrawn.
Last year, human rights resolutions largely targeted banks — but this year they have expanded to companies in a variety of sectors, including retail, food, health care, materials, technology and utilities, Proxy Preview noted.
Increasingly, the proposals aren’t just about race, Patel said. They are also starting to focus on social rights broadly, across sex, ethnicity, age, gender identity, sexual orientation and other categories.
One human rights resolution filed at Amazon focuses on freedom of association, to help protect workers who are interested in collective bargaining, Patel noted.
Other proposals are asking for environmental justice audits, which would measure the health impacts of a company’s activities on low-income or minority communities, she said.
With the increasing number of proposals, investors should pay close attention to the language in their supporting statements, Patel said. The upcoming April 28 meeting for Johnson & Johnson, for example, includes two different civil rights proposals. One asks the company to agree to a third-party racial justice audit. The other proposal appears similar at first but in its supporting statement asks the company to consult with conservative civil rights groups and “include groups that defend the civil rights and liberties of all Americans, not merely the ones that many companies label ‘diverse,’” the proxy statement read.
On climate issues, companies that lean on carbon offsets to meet emissions-reduction goals are being called out. Those that might have set net-zero goals for 2050 but not significant reductions by 2030 are also facing some proposals, including audits by third parties, Michael Passoff, CEO of Proxy Impact, said at the presentation.
“Many companies are actually looking to make the change. There is just all this unknown about how to do it,” Passoff said. “Climate risk is financial risk. That is something that is becoming clear to everyone.”
A resolution filed at Williams-Sonoma challenges the company’s use of offsets to help meet a goal of being 50% carbon-neutral by 2030, he noted.
“That’s an area that companies and shareholders have not been seeing eye-to-eye on,” Passoff said.
Tesla faces a proposal related to the emissions associated with cryptocurrency.
Some companies aren’t fighting climate resolutions. Boeing’s board of directors, Passoff noted, is supporting a shareholder proposal asking for a report examining the firm’s net-zero goals.
“We consider climate change to be an urgent issue and we are devoting significant resources in support of net-zero emissions in Boeing operations and for our industry,” the company’s board stated in its notice to shareholders.
Another issue that’s receiving more attention from investors is political spending, especially in the hyperpolarized environment in the U.S.
There are 34 resolutions on lobbying so far this year, with shareholders questioning whether companies’ publicly stated values match with those of the politicians and lobbying groups they support, according to the report.
Often, companies take the stance that they’re supporting both the left and the right, but that generally only applies to spending at the federal level, and even then, it skews conservative, Welsh said.
Given recent efforts to restrict voting rights, access to abortions and protections for gender identity, investors are seriously concerned about political spending. That is especially the case at the state level, she said.
“The money follows who is in power, and not just by a little bit,” Welsh said. “Companies are really under a microscope … They are in the hot seat, and this is not expected to change.”
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