Investor support for a wide range of social and environmental issues grew slightly in 2019 to 25.7 percent, on average, and eight proposals earned majority support. The final vote tally was 187, up 10 from 2018, with 457 filings in all. For the second year in a row, proponents withdrew more resolutions than the number that went to votes—a total of 210. There was a marked increase in filings about election spending and human rights, but a drop in those addressing climate change; sustainability proposals increased.
Companies were less successful overall in their efforts to block resolutions from inclusion in proxy statements by citing provisions of the shareholder proposal rule, about which the Securities and Exchange Commission (SEC) decides. (A total of 56 proposals were omitted in 2019, compared with 65 in 2018 and 77 the year before.) But the commission’s new view, established in 2018, that many resolutions seeking corporate action to cut greenhouse gas (GHG) emissions are inadmissible continued to block proposals and concern proponents. The New York City pension funds went to court to force inclusion of one resolution on emissions, but ended up settling before setting any precedent.
Major Themes
The three major themes of proxy season continued to be climate change, corporate influence spending and diversity. Shareholder proponents also filed a wide range of new proposals, many on human rights.
Climate change: Proponents continued to grapple with the SEC’s new stance on GHG proposals and filed new versions of proposals seeking disclosure and action on emissions, with mixed results; votes included a high score of 46.3 percent at Fluor and a new agreement at Emerson Electric. A new proposal about the impacts of extreme weather on petrochemical plants surfaced, but with uneven results. Proponents withdrew most proposals seeking carbon asset risk reports (16 withdrawn versus just six votes) and eight of 10 filed on clean energy. Investor scrutiny of how food companies attend to climate risk in their commodity supply chains continued and prompted some additional company commitments.
Political activity: Investor support for political activity proposals continued its upward climb, with three majority votes and 13 more earning above 40 percent. There were 13 agreements that led to withdrawals on election spending (proponents also withdrew six more); resolutions seeking election spending action increased to 55, while lobbying proposals dropped to 33; two combined both lobbying and elections. Ten lobbying withdrawal agreements included a new commitment from AT&T to report more about spending that flows through its trade associations—a long-sought goal given the company’s substantial lobbying budget.
Diversity: Proposals sought fair treatment and equal pay for women and people of color, and more diverse boards of directors—with some new angles. Citigroup agreed to disclose its global median gender pay differential in January, but proponents were unable to get commitments about similar reporting from other firms so 13 resolutions went to votes; many of these have seen resubmitted proposals on the topic for 2020. Proponents also tried with limited success to raise concerns about non-disclosure agreements, forced arbitration and sexual harassment. A handful of new requests at relatively small hotel firms asked for reporting on sexual harassment, but earned little support. Fewer resolutions asked about workplace diversity, but there were two majority votes, at Travelers and Newell Brands.
Other high votes and key issues: The continuing opioid epidemic prompted a 60.5 percent majority at Walgreens Boots Alliance, as shareholders eye the burgeoning legal challenges facing companies that make and distribute opioids. An unprecedented majority of 87.9 percent came at the private prison company GEO Group after the company withdrew its opposition to a request that it increase reporting on human rights protections for inmates and immigrant detainees. A board diversity resolution also received a majority—78.3 percent—after Gaming & Leisure Properties did not oppose it. Additional proposals asked for human rights risk assessments, while new proposals sought action to curb online child sexual exploitation. Proponents filed a record number of board diversity proposals, but withdrew almost all of them—41 out of 45. On the sustainable governance front, the number of proposals seeking links between various ESG issues and executive pay exceeded requests for generalized reporting for the first time. The largest number of pay links proposals concerned drug pricing.
As noted above, two of the majority votes came when companies did not oppose the proposals, prompting the nearly 88 percent vote on human rights at GEO Group and nearly 80 percent for board diversity at Gaming & Leisure Properties. Otherwise, in addition to the majority at Walgreens Boots Alliance, other votes over 50 percent were for reporting on executive diversity at Newell Brands, for greater oversight and disclosure of election spending and/or lobbying at Alliant Energy, Cognizant Technology and Macy’s, and for reporting on diversity data and affirmative action at Travelers. Furthermore, 22 resolutions earned more than 40 percent. Just four of the high scoring proposals were resubmissions (table below.)
Roundup of Results
This section includes final tallies in each of the major areas, updating information from the 2019 Proxy Preview.
Environment
Climate change: There were 63 proposals specifically concerned with climate change, down more than 20 from 2018, although the topic also came up in other proposals including those on sustainability disclosure and lobbying. Proponents wanted information about how companies are managing carbon asset risks, reporting and setting goals to cut greenhouse gas (GHG) emissions, using clean energy and addressing deforestation. The SEC’s changed view about what constitutes “ordinary business” in this arena continued to constrain the options for proponents about what they can bring up in shareholder resolutions for votes by investors at large, even though support for more climate reporting and action remains strong in the investment community.
Environmental management: There were 16 proposals about environmental management issues that go beyond climate change, about waste and recycling, water and nuclear power. Six went to votes, six were withdrawn, three omitted and one did not see a vote because of a merger.
Industrial agriculture: Thirteen resolutions raised concerns about the industrial food system—five dealing with antibiotics in feed and four more on pesticides. Four others dealt with farm animal welfare.
Social Issues
Corporate political activity: Proponents continued their longstanding campaigns asking companies about expenditures for elections and lobbying, with many more resolutions in 2019 on elections (56) and fewer about lobbying (33); two proposals combined the two and three addressed other matters of corporate political influence. The overall tally on the two issues had been dropping but in 2019 rose to 94—up from 80.
In 2018, while rejecting company no-action requests, the SEC noted previous levels of support of 20 percent or more—raising a question that it might boost the resubmission rule thresholds, which for more than 50 years have required that first year proposals earn only at least 3 percent to qualify for resubmission, 6 percent the second year and 10 percent in each year thereafter. The SEC’s proposal for a new rule, released on Nov. 5, 2019, does indeed propose a much higher bar. As noted earlier in this report, the rule would have a disproportionately negative impact on corporate political influence proposals that earn votes in the 20-percent range but may not hit 25 percent, and on those that reach 25 percent but may have slipped by more than 10 percent from any immediately preceding vote and therefore would be struck given a new “momentum” rule.
Decent work: Growing economic inequality in the United States, which is more acute for women and racial and ethnic minorities, along with the #MeToo movement’s demand for equal treatment—and, implicitly, equal pay—have driven a surge of resolutions about pay equity and working conditions since 2014. There were 33 proposals in 2019 about differential pay rates, mostly focused on women but sometimes also for people of color; another 20 were about working conditions. A new angle about “inequitable employment practices”—concerning among other things non-disclosure agreements, arbitration and sexual misconduct—went to a vote in only two cases because of SEC challenges.
Diversity in the workplace: Half as many proposals addressed workplace diversity data in 2019 as in 2018—just 16, down from 30—but there were two majority votes. Four of seven resolutions seeking reports on EEO data and affirmative action for women and people of color went to votes. One about LGBTQ protections—the only one on this subject in 2019— earned 37.4 percent.
Health: As opioid makers and distributors face a national class action lawsuit that aims to fund treatment for the tens of thousands of people affected, just one of four related resolutions seeking corporate oversight and disclosure regarding opioids went to a vote. (Additional proposals from Investors for Opioid and Pharmaceutical Accountability with corporate governance angles are not include in this tally.)
Human rights: After a dip in 2018, investors expanded their filing on human rights, with new resolutions on immigrant rights and detention, child sexual exploitation and food and human rights. In all, there were 49 proposals, 21 votes, 21 withdrawals, just five omissions and two that did not go to votes for other reasons. Many were to new recipients and a number asked about the penal system and migrant detainees.
Media: The “big three” social media firms—Alphabet, Facebook and Twitter—saw resubmitted proposals asking for reports on problematic content. The highest vote was 39.4 percent at Twitter.
Sustainable Governance
Board diversity: Proponents withdrew 41 of 45 resolutions that asked companies to diversify their boards or report on efforts to diversify. A spectacularly high vote of 78.3 percent occurred at Gaming & Leisure Properties, after the company did not oppose the resolution, and there were only three additional votes given all the agreements from companies to work on diversity.
Board composition and oversight: Fifteen resolutions asked for specific types of board oversight, up from eight last year; three more requested particular types of board member expertise. On oversight and experts proposals combined, there were seven votes, five withdrawals (three after SEC challenges) and six omissions. The most striking characteristic of these proposals was that each raised an issue of intense public debate that the proponents said company boards were not handling well—but investors gave support of less than 10 percent.
Sustainability oversight and disclosure: In 2018, as reporting requests surged to 58, more of the sustainability disclosure and management proposals were withdrawn than went to votes. In 2019, in volume these proposals (23 filings) fell behind requests to tie various ESG metrics to executive pay (24) and there was just one vote, 28.2 percent at Charter Communications.
ESG pay links—The big increase in 2018 with proposals seeking reports on how executive compensation is linked to sustainability metrics continued and was again dominated by nine proposals about drug price increases. Others raised a laundry list of issues. One notable withdrawal occurred when Eli Lilly agreed to more pricing disclosure; it has been under pressure given the skyrocketing price of insulin and was sued about drug price inflation in October 2018 by the Minnesota attorney general.
Conservatives
More of the 20 proposals from political conservatives went to votes in 2019 because proponents made it through the SEC by copying the resolved clauses from other resolutions but adding a conservative twist to supporting statements. In all, four concerned climate change, nine asked for disclosure on “ideological diversity” on the board, two related to sexual harassment, three were copy-cat resolutions on lobbying and two dealt with workplace diversity. The lowest vote of the season for any issue came at Facebook—0.5 percent support for a request to explore affirmative action for conservative people.