The number of proposals about ESG board oversight is down dramatically in 2020, with just 10 filed as of mid-February—in contrast to two dozen in 2019. Resolutions about board oversight fall into two functional categories—suggesting specific types of committees are needed to properly oversee complicated sustainability issues (six, down from 16 last year) or asking for the nomination of specific types of experts to sit on the board (four, up from three in 2019).
Specific Issues
Climate change: Arjuna Capital has resubmitted proposals that went to votes last year at Chevron and ExxonMobil, seeking a new board committee on climate change “to evaluate [the company’s] strategic vision and responses to climate change. The charter should require the committee to engage in formal review and oversight of corporate strategy, above and beyond matters of legal compliance, to assess the company’s responses to climate related risks and opportunities, including the potential impacts of climate change on business, strategy, financial planning, and the environment.” ExxonMobil has again challenged the proposal at the SEC, arguing it is moot because its Public Issues and Contributions Committee is already charged with climate change oversight; this argument didn’t fly in 2019, however.
ALPHABET / GOOGLE NEEDS BOARD OVERSIGHT COMMITTEE ON HUMAN RIGHTS
LARISA RUOFF
Director of Shareholder Advocacy, The Sustainability Group of Loring, Wolcott & Coolidge
DR. CHRISTINE CHOW
Director, EOS at Federated Hermes
Through its ubiquitous platforms and services, Alphabet/Google has become an influential global force that has democratized information collection and sharing, connected and empowered communities, and transformed media and entertainment. While its technologies have tremendous potential to benefit society, without proper oversight these same technologies and the ways that companies deploy them can cause specific human rights impacts and unintended, widespread harm.
Human rights: The Sustainability Group of Loring, Wolcott last year saw a proposal about societal risk at Alphabet receive 8.8 percent support. It is back with a similar request, that the company
establish a Human Rights Risk Oversight Committee....The Committee should provide an ongoing review of corporate policies and practices, above and beyond legal and regulatory matters, to assess how Alphabet manages the current and potential impacts of the Company’s products and services on human rights, oversee the extent to which the Company is meeting international human rights responsibilities, and offer guidance on strategic decisions. At its discretion, the Board should consider creating an advisory body of independent subject matter experts to aid the Committee in its oversight responsibilities, publishing a formal charter for the Committee and a summary of its functions, and directing the Committee to issue periodic reports.
Members of the Garcia family also have filed a resolution at MetLife, asking it to “create a standing committee to oversee the Company’s response to domestic and international developments in human rights that affect MetLife’s business.” The Met has not had such a resolution before but has lodged a challenge at the SEC, arguing it is moot given an existing board committee on governance and corporate responsibility.
Mercy Investments would like a report from Amazon.com “on the process and effectiveness of board oversight of ESG risks associated with third-party sellers on Amazon’s website, including the board’s assessment of any progress, policies and trends toward reducing the presence of unsafe products for sale on the site.” The resolution highlights what it says are thousands of unsafe articles sold through the company’s third-party seller platform, which it asserts presents risks to the company—it says Amazon is essentially an “unregulated thrift market” that “poses significant risks and liability to our company, as highlighted a recent Wall Street Journal article. It says the company’s response to these criticisms is insufficient. The company has challenged the resolution at the SEC, arguing it concerns ordinary business since it relates to product safety issues and items sold by the company.
The Nathan Cummings Foundation would like Facebook to report,
on Board-level oversight of civil and human rights risks. In doing so, Facebook might consider reporting on board level expertise in civil and human rights; board level responsibilities for advising on and managing civil and human rights risk; board level expertise pertinent to oversight regarding civil and human rights issues impacting Facebook’s community of global users; and the presence of board level infrastructure ensuring ongoing consultation with leading civil and human rights experts.
An earlier proposal from Trillium Asset Management that covered some of the same ground as this year’s but was more broadly framed about risk; it earned 11.6 percent support in 2018.
Experts
Three of four resolutions in 2020 that ask companies to nominate human rights experts to the board are now pending, all from Arjuna Capital. The proposal asks Alphabet, Facebook and Twitter to:
nominate for the next Board election at least one candidate who:
- has a high level of human and/or civil rights expertise and experience and is widely recognized as such, as reasonably determined by Alphabet’s Board, and
– will qualify as an independent director within the meaning of the listing standards of the New York Stock Exchange.
SEIU has withdrawn a proposal at CoreCivic, the prison company, which urged the company “to amend the ‘Board Membership Criteria’ section of the Company’s Corporate Governance Guidelines to add human rights expertise to the factors the Nominating and Governance Committee...and/or Board takes into account when evaluating persons for nomination or re- nomination to stand for election as directors.”
