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Diversity on the Board
Shareholder proponents remain keenly interested
in making the corporate boardroom more
diverse—for reasons of both equity and
performance. Almost all these resolutions get
withdrawn after companies agree to change their
board nominee procedures (graph right). Last year,
proponents withdrew fully 40 out of the 44
resolutions filed on the subject after agreements.
More of the same will occur in 2020. To date, we
have identified 49 proposals and a few more may
emerge; 27 are not yet public. New this year are
resolutions specifically seeking more diversity for
CEOs. This is in addition to last year’s shift to seek diversity beyond simply gender, race and ethnicity—with attributes such as age, gender identity, gender expression and sexual orientation.
The 30 Percent Coalition continues to coordinate resolutions and work in other ways to diversify boards. The coalition’s members include senior business executives, civil society groups, institutional investors, corporate governance experts and board members themselves. The proposals ask companies to add more diversity to the board room and report on how they manage this process. Since most of the very largest companies have made some commitment to more diversity, companies further down the revenue ranks are coming under scrutiny. Since 2010, proponents have filed about 280 proposals, withdrawing nearly three-quarters after companies have made their policies more inclusive, at least on paper. Proponents are most likely to file proposals at companies with no women or people of color on the board, but increasingly they are not satisfied with a token few and seek expanded representation even where there one or two diverse board members.
USING “ROONEY RULE” TO ADVANCE CEO DIVERSITY
MICHAEL GARLAND
Assistant Comptroller, Corporate Governance and Responsible Investment Office of New York City Comptroller
New York City Comptroller Scott M. Stringer, on behalf of the New York City Retirement Systems, submitted shareholder proposals to approximately 17 S&P 500 companies for the Spring 2020 proxy season calling on their boards of directors to adopt a policy for improving board and top management diversity. The policy would require that the initial list of candidates from which new management-supported director nominees and chief executive officers (CEOs) are recruited (if from outside the company) should include qualified female and racially/ethnically diverse candidates. The policy should provide that any third-party consultant asked to furnish a list will be requested to include such candidates.
There are two types of resolutions. One seeks adoption of a policy that would require consideration of diverse candidates in the selection process, based on the “Rooney Rule” concept that helped to diversify National Football League coaching. These proposals typically ask the company to:
adopt a policy for improving board and top management diversity (the “Policy”) requiring that the initial lists of candidates from which new management supported director nominees and chief executive officers (“CEOs”) recruited from outside the company are chosen by the board or relevant committee ( each, an “Initial List”) should include qualified female and racially/ethnically diverse candidates. The Policy should provide that any third-party consultant asked to furnish an Initial List will be requested to include such candidates.
The other type of resolution asks for reports and all recipients this year are new. The type commonly asks how companies will enhance board diversity beyond current levels, such as:
Strengthening Nominating and Corporate Governance policies by embedding a commitment to diversity inclusive of gender, race, ethnicity;
Commit publicly to include women and people of color in each candidate pool from which director nominees are chosen;
Report on its process to identify qualified women and people of color for the board.
Withdrawals—As of mid-February, proponents had withdrawn six of the policy adoption proposals and one of the reporting resolutions (see table).
SEC action—At PACCAR, the resolution was omitted on the grounds that a policy change made it moot. Liberty Broadband is contending As You Sow has not provided sufficient proof of stock ownership.
Board Oversight
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.”
Sustainability Disclosure and Management
The number of resolutions asking companies for disclosure of metrics, links to executive pay and other sustainability topics has dropped back to 39, after having increased to a high of 58 in 2018. Thirty-six are now pending, one has been withdrawn and two have been omitted. Many more withdrawals are likely, as companies are eager to claim leadership on sustainability. (Graph right.)
The number of straightforward requests for sustainability reports has largely dried up given the volume of companies now reporting, but requests to link a variety of sustainability issues to executive pay have been growing for several years— underscoring the proposition that executives deliver best if they are paid to pay attention. This year a new set of seven resolutions also asks about how companies are defining and delivering on their CEOs’ commitments to support the Business Roundtable’s statement last summer to attend to a wide variety of stakeholders, not just shareholders. (Graph right.)
Four proposals this year at large investment managers also seek support for ESG shareholder proposals, which has grown but remains relatively scant despite considerable support for a few climate change proposals and those about gun safety and the opioid crisis.
Executive Pay Links
The biggest category of sustainability resolutions concerns those that seek to link sustainability issues to executive incentive pay—continuing a trend that became apparent last year. Six address the risk of drug price increases and five more the legal costs of the opioid crisis; three are on senior executive diversity, four ask generally about ESG pay links; and there is one proposal each on student loan debt, community impact metrics and cybersecurity.
Drug pricing: Investors will be voting for the third year in a row on the idea of linking metrics about expensive pharmaceutical drug prices to long-term risks to companies posed by high prices. In 2019 and 2018, votes were in the 20-percent range. The resolution this year expresses concerns about specific drugs but make the same request in the resolved clause. At Amgen, Biogen, Eli Lilly and Pfizer it asks for an annual report “assessing the feasibility of incorporating public concern over high drug prices into the senior executive compensation arrangements.” Added at Merck (where it earned 28.7 percent in 2019) and Vertex Pharmaceuticals (22.8 percent) is guidance that the report
should include, but need not be limited to, discussion of whether incentive compensation arrangements reward, or not penalize, senior executives for (i) adopting pricing strategies, or making and honoring commitments about pricing, that incorporate public concern regarding the level or rate of increase in prescription drug prices; and (ii) considering risks related to drug pricing when setting financial targets for incentive compensation.
No companies have filed SEC challenges to date; last year commission staff rejected corporate assertions that the proposals related to ordinary business by dint of micromanagement and/or were moot.
Opioid legal costs: Five resolutions reprise proposals from last year about legal costs. The proposal is pending (and challenged) at Amgen, Bristol-Myers Squibb and Johnson & Johnson as well as at two other companies not yet public. It asks that each
adopt a policy that when a financial performance metric is adjusted to exclude legal or compliance costs when evaluating performance for purposes of determining the amount or vesting of any senior executive compensation award, it provide an explanation of why the precise exclusion is warranted and a breakdown of the litigation costs. “Legal or compliance costs” are expenses or charges associated with any investigation, litigation or enforcement action related to drug distribution, including legal fees; amounts paid in fines; penalties or damages; and, amounts paid in connection with monitoring required by any settlement or judgment of claims of the kind described above. “Incentive Compensation” is compensation paid pursuant to short-term and long-term incentive compensation plans and programs. The policy should be implemented in a way that does not violate any existing contractual obligation of the Company or the terms of any compensation or benefit plan.
The proponents want the companies to include litigation and compliance costs in future performance metrics for pay because of myriad lawsuits about opioids, while the companies say that excluding non-recurring or one-time events is a more accurate picture of performance. Each company is contending that the proposal relates to ordinary business and Amgen also says it is moot. Last year, AbbVie and Johnson & Johnson persuaded the SEC this resolution dealt with ordinary business and a similar exclusion seems possible this year.
Executive diversity: Proposals from Zevin Asset Management seeking reports on integrating senior executive diversity metrics into incentive pay are in their third year. The proposals ask for a report
assessing the feasibility of integrating sustainability metrics, including metrics regarding diversity among senior executives, into performance measures or vesting conditions that may apply to senior executives under the Company’s compensation plans or arrangements. For the purposes of this proposal, “sustainability” is defined as how environmental and social considerations, and related financial impacts, are integrated into long-term corporate strategy, and “diversity” refers to gender, racial, and ethnic diversity.
It is a resubmission at Alphabet, where it is co-filed by Warren Wilson College and earned 9.7 percent last year, and at Amazon.com (19.1 percent)—and newly filed at Walmart. Amazon is contending at the SEC that the company’s current compensation arrangements make the proposal moot, although those do not mention diversity as requested in the proposal.
General ESG considerations: Three pending proposals ask more generally for reports on ESG pay links to executive incentive pay, at Apple and United Continental and one more firm not yet public. The vote at Apple was 12 percent. The proposal says the report should explore “the feasibility of integrating sustainability metrics into performance measures, performance goals or vesting conditions that may apply to senior executives under the Company’s compensation incentive plans. Sustainability is defined as how environmental and social considerations, and related financial impacts, are integrated into corporate strategy over the long term.” At Stryker a fourth request is shorter: a report “assessing the feasibility of integrating specific sustainability metrics into Stryker’s executive compensation program.”
Student loans: At Navient, the Rhode Island Pension Fund makes the same report request as the one on opioids, but the body of the resolution makes clear the concern is student loans. Navient is contending at the SEC that the proposal is ordinary business; a proposal from Rhode Island on this topic earned 42.8 percent in 2018.
Privacy: At Verizon Communications, Trillium Asset Management is back for a third year, with a slightly different request for a report “assessing the feasibility of integrating user privacy protections into the Verizon executive compensation program which it describes in its annual proxy materials.” A similar resolution specially asking about cyber security earned 11.6 percent in 2018 and 12.5 percent last year. It notes this time that the proposal “does not seek greater disclosure or information regarding cybersecurity (the criminal or unauthorized actions), but rather is focused on legally permissible and permitted uses of data.”
CORPORATIONS REDEFINE THEMSELVES AFTER 50 YEARS OF SHAREHOLDER-PRIMACY
ANDREW BEHAR
CEO, As You Sow
In a 1970 New York Times Magazine article, economist Milton Friedman said corporations exist solely to serve their shareholders and must maximize shareholder financial returns to the exclusion of all else. Moreover, he maintained, companies that did adopt “responsible” attitudes would be faced with more binding constraints than companies that did not, rendering them less competitive. This has been the dominant interpretation of capitalism for nearly 50 years.
Metrics Disclosure
There are only six proposals seeking sustainability reports this year. At Alexion Pharmaceuticals, Carter’s, Old Republic International and one more firm not yet public the simple request is for an annual “report describing the company’s environmental, social, and governance (ESG) policies, performance, and improvement targets and quantitative metrics.” At Charter Communications, a resubmission specifies climate concerns—and an annual report “that includes greenhouse gas (GHG) emissions management strategies and quantitative metrics.” This resolution earned 28.2 percent last year.
One more new proposal from Diana Smith asked Dominion Energy to “evaluate how cultural shifts towards human rights and climate justice affect the corporation’s governance.” The company successfully challenged the proposal at the SEC, which agreed to was moot. The supporting statement suggested a wide variety of social and environmental issues could be considered in the requested evaluation.
Purpose and Policy
Corporate purpose: In August 2019, The Business Roundtable issued a statement signed by 181 CEOs who pledged to “lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities and shareholders.” As You Sow and Harrington Investments have filed resolution asking what this means, in practice, at six companies.
The proposal asks that the boards of Bank of America, Citigroup and Goldman Sachs, “acting as responsible fiduciaries, review the Statement of the Purpose of a Corporation to determine if such statement is reflected in our Company’s current governance documents, policies, long term plans, goals, metrics and sustainability practices and publish its recommendations on how any incongruities may be reconciled by changes to our Company’s governance documents, policies or practices.”
At BlackRock and McKesson, the proposal seeks “a report based on a review of the BRT Statement of the Purpose of a Corporation signed by our Chairman and Chief Executive Officer and provide the board’s perspective regarding how our Company’s governance and management systems should be altered to fully implement the Statement of Purpose.”
At JPMorgan Chase, the request is to “provide oversight and guidance as to how the new statement of stakeholder theory should alter our Company’s governance and management system, and publish recommendations regarding implementation.”
SEC action—All of the recipients save McKesson have challenged the resolution at the SEC, arguing variously that it is too vague, relates to ordinary business and is moot. So far, the SEC has agreed with the ordinary business argument at JPMorgan Chase. Challenges from Bank of America, BlackRock and Goldman Sachs are still pending.
Sustainable products portal: Individual investor Stephen Sacks says Amazon.com “shall in their sales website have a department category concerning sustainability products particularly to address climate change. They shall populate it from their other listings.” Amazon is contending at the SEC that this concerns ordinary business, and the challenge seems likely to succeed.
Proxy Voting
Proponents have filed or plan to file resolutions at four investment managers about their climate-related proxy voting policies. The resolution asks BlackRock and JPMorgan Chase to “initiate a review assessing [the company’s] 2019 proxy voting record and evaluate the Company’s proxy voting policies and guiding criteria related to climate change, including any recommended future changes.” Boston Trust Walden plans to file this resolution at several of the Vanguard mutual funds, as well, but the various funds do not always hold shareholder meetings each year and a proposal must be filed on a fund-by-fund basis.
PROXY VOTING POWER CAN TRANSFORM COMPANY CLIMATE ACTION
TIMOTHY SMITH
Director of ESG Shareowner Engagement, Boston Trust Walden
JARED FERNANDEZ
ESG Research Analyst, Boston Trust Walden
The power of proxy voting to transform corporate behavior is real. Through the height of the 2019 proxy voting season, shareholders had the opportunity—and responsibility—to vote on 177 shareholder resolutions addressing environmental and social issues and sustainable governance. Boston Trust Walden takes this fiduciary responsibility seriously, striving to vote on all company and shareholder proposals presented in proxy statements. Our multi-year initiative to hold asset managers we invest in accountable for thoughtfully incorporating long-term ESG considerations in their proxy voting practices remains an engagement priority.
Zevin Asset Management has a similar request at T. Rowe Price, seeking the same thing; it also says that the report should include “an assessment of any incongruities between the Company’s public statements and pledges regarding climate change (including ESG risk considerations associated with climate change), and the voting policies and practices of its subsidiaries.”
SEC action: JPMorgan says it cannot implement the resolution, that it is moot and that it concerns ordinary business; T. Rowe Price is making the latter argument, as well.
Conservatives
Proponents with a conservative political bent have filed most of their shareholder resolutions on social policy issues (top graph). The proposals have expressed support for free market solutions to the world’s ills and push-back against policies that favor protections for LGBTQ people or abortion rights. More usually get omitted than go to votes, although this was not true last year (bottom graph). Support from other investors tends to be scant, unless the resolved clauses are ones copied from other proponents with opposing views on political activity.
The National Center for Public Policy Research (NCPPR), a Washington, D.C.-based think tank, is the main player, with resolutions also filed by David Ridenour, one of its principals, and like-minded supporters. NCPPR calls itself “the nation’s preeminent free-market activist group focusing on shareholder activism and the confluence of big government and big business.”
Board diversity: Repeating an approach begun in 2018 that copies board diversity resolutions initially filed by the New York City Comptroller’s Office, NCPPR wants five companies—AT&T, Costco Wholesale, Deere, Johnson & Johnson and Pfizer—to adopt a policy to disclose to shareholders the following:
A description of the specific minimum qualifications that the Board’s nominating committee believes must be met by a nominee to be on the board of directors; and
Each nominee’s skills, ideological perspectives, and experience presented in a chart or matrix form.
The disclosure shall be presented to the shareholders through the annual proxy statement and the Company’s website within six (6) months of the date of the annual meeting and updated on an annual basis.
The proposal makes arguments in favor of diversity that parallel those expressed by supporters of greater diversity. But they aver that what is missing is “ideological diversity.” The resolution says that companies do not display “diversity of thought” but instead “operate in ideological hegemony that eschews conservative people, thoughts, and values. This ideological echo chamber can result in groupthink that is the antithesis of diversity. This can be a major risk factor for shareholders.”
Results—None of the seven proposals on the subject that went to votes last year earned more than 3 percent. The first vote this year was 1.4 percent at Costco Wholesale, and the next was 1.1 percent at Deere on Feb. 26. The other three recipients have convinced the SEC that their current board nomination processes address the concerns raised and the proposals were omitted on mootness grounds.
Diversity at work: An individual last year said conservatives at Facebook face cultural discrimination and proposed the company make efforts to increase their number through affirmative action, but he received support from just 0.5 percent of the shares voted. This year, NCPPR has taken up the idea and filed a similar resolution at Alphabet, Apple, Salesforce.com and Starbucks, asking for a report “detailing the potential risks associated with omitting “viewpoint” and “ideology” from its written equal employment opportunity (EEO) policy.”
Results—The first vote will occur on March 28 at Starbucks. Apple convinced the SEC this is an ordinary business matter, and challenges similar to Apple’s await the SEC’s response at the two other firms, making votes there unlikely.
Gay pride flag: An individual last year asked Intel to make a statement about the gay pride flag, saying the practice was disparaging to those who do not support LGBTQ rights, but it was omitted on ordinary business grounds. The same person is back this year with a similar request. He asks, “that Intel refrain from publicly displaying the pride flag.” The company has challenged the proposal again, arguing as last year that it relates to ordinary business.
Lobbying: NCPPR supports unfettered corporate spending in the political arena but takes language from the resolved clauses of proponents who want spending disclosure. (The main political activity campaign is covered in this report under Political Activity, p. 31.) The group also is critical of companies that support environmental regulation and incorporates these values in its resolutions. This year, The NCPPR resolution praises both companies for supporting the American Legislative Exchange Council and the Business Roundtable and says they should continue to “advance economic liberty” and “free speech rights.”
Results—NCPPR filed its lobbying proposal at Chevron, where a vote will occur at the end of May. The NCPPR resolution uses the same resolved clause as the main lobbying campaign but is informed by different motives; the 2020 NCPPR proposal got to Chevron before the pro-disclosure proponents and has been omitted because SEC rules allow companies to exclude the second-received resolution on the same issue. But the opposite occurred at Walt Disney, where the main lobbying proposal blocked the NCPPR version. Further similar resolutions are likely to crop up as the season progresses. Because the resolved clauses of the NCPPR resolutions are exactly the same, investors seem to vote the same way and results have been in the high 20-percent range.
Charitable giving: Tom Strobhar, a conservative activist who has filed many anti-abortion resolutions about Planned Parenthood support from companies’ charitable giving programs in the past, is back in 2020 with at least four resolutions that ask Bank of America, JPMorgan Chase, MGM Resorts International and Pfizer to disclose the recipients of any corporate charitable contributions of more than $1,000, “excluding employee matching gifts.” At Bank of America, MGM and Pfizer, Strobhar asks the boards to “consider issuing a statement on the Company website, omitting proprietary information and at reasonable cost, disclosing the Company’s standards for choosing which organization receive the Company’s assets in the form of charitable contributions, and the rational, if any, for such contributions.”
Results—The proposal arrived past the submission deadline at Bank of America, has been withdrawn at MGM and was omitted on mootness grounds at Pfizer. It remains pending at JPMorgan, but a similar proposal was omitted on ordinary business grounds given its specificity in 2018 and another omission seems likely because the company is reiterating its argument.
2019 Proxy Season Review and Trends
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.
Company Index
The index below shows with checkmarks (✓) how many proposals have been filed at each company, in each major topic categories presented in this report. More details on each of the resolutions can be found in the tables and text of appropriate sections of the report, as follows:
Climate/Environment
Corporate Political Activity
Decent Work/Diversity
Human Rights
Other
Sustainable Governance
| Company | Climate/Environment | Corporate Political Activity | Decent Work/Diversity | Human Rights | Other | Sustainable Governance | Grand Total |
|---|---|---|---|---|---|---|---|
| 3M | ✔ | 1 | |||||
| A.O. Smith | ✔ | ✔ | 1 | ||||
| Abbott Laboratories | ✔ | 1 | |||||
| AbbVie | ✔ | 1 | |||||
| Activision Blizzard | ✔ | 1 | |||||
| Adobe | ✔ | 1 | |||||
| Advance Auto Parts | ✔ | 1 | |||||
| AES | ✔ | 1 | |||||
| Air Products & Chemicals | ✔ | 1 | |||||
| Alaska Air Group | ✔ | 1 | |||||
| Alexion Pharmaceuticals | ✔ | 1 | |||||
| Allstate | ✔ | 1 | |||||
| Alphabet | ✔✔ | ✔✔✔ | ✔ | ✔✔✔ | 5 | ||
| Altria | ✔ | ✔ | 1 | ||||
| Amazon.com | ✔ | ✔ | ✔✔ | ✔✔✔✔✔✔✔ | ✔✔✔ | 14 | |
| Ameren | ✔ | 1 | |||||
| Ameresco | ✔ | 1 | |||||
| American Airlines | ✔ | 1 | |||||
| American Express | ✔ | 1 | |||||
| American Outdoor Brands | ✔ | 1 | |||||
| American Tower | ✔ | 1 | |||||
| American Water Works | ✔ | 1 | |||||
| Amgen | ✔✔ | 1 | |||||
| ANI Pharmaceuticals | ✔ | 1 | |||||
| Apple | ✔✔ | ✔ | ✔ | ✔ | 5 | ||
| Aqua America | ✔ | 1 | |||||
| Archer Daniels Midland | ✔ | 1 | |||||
| AT&T | ✔ | ✔ | 1 | ||||
| Baker Hughes | ✔ | 1 | |||||
| Bank of America | ✔ | ✔ | ✔✔ | ✔ | 5 | ||
| Bank of NY Mellon | ✔ | 1 | |||||
| Biogen | ✔ | 1 | |||||
| BlackRock | ✔ | ✔✔ | 5 | ||||
| Bloomin Brands | ✔ | 1 | |||||
| Boeing | ✔ | 1 | |||||
| Bridge Bancorp | ✔ | 1 | |||||
| Bristol-Myers Squibb | ✔ | 1 | |||||
| Broadcom Limited | ✔ | 1 | |||||
| Broadridge Financial | ✔ | 1 | |||||
| Brown-Forman | ✔ | 1 | |||||
| Carnival | ✔ | 1 | |||||
| Carter's | ✔ | 1 | |||||
| Caterpillar | ✔ | 1 | |||||
| CBRE Group | ✔ | 1 | |||||
| Centene | ✔ | 1 | |||||
| CenturyLink | ✔ | 1 | |||||
| Charles Schwab | ✔ | 1 | |||||
| Charter Communications | ✔ | 1 | |||||
| Cheniere Energy | ✔ | ✔ | 1 | ||||
| Chevron | ✔✔✔✔ | ✔✔ | ✔ | ✔ | ✔ | 5 | |
| Chipotle Mexican Grill | ✔ | 1 | |||||
| Choice Hotels | ✔ | 1 | |||||
| CIGNA | ✔ | 1 | |||||
| Citigroup | ✔ | ✔ | ✔ | 5 | |||
| CMS Energy | ✔ | 1 | |||||
| Coca-Cola | ✔ | 1 | |||||
| Cognizant Technology | ✔ | 1 | |||||
| Comcast | ✔ | ✔ | ✔ | 5 | |||
| Community Trust Bancorp | ✔ | 1 | |||||
| ConocoPhillips | ✔ | 1 | |||||
| CoreCivic | ✔ | ✔ | 1 | ||||
| Costco Wholesale | ✔ | ✔ | ✔ | 5 | |||
| CSX | ✔ | 1 | |||||
| CVS Health | ✔ | 1 | |||||
| DaVita HealthCare Partners | ✔ | 1 | |||||
| Deere | ✔ | 1 | |||||
| Dell | ✔ | 1 | |||||
| Delta Air Lines | ✔✔ | 1 | |||||
| Devon Energy | ✔ | 1 | |||||
| Diamondback Energy | ✔ | 1 | |||||
| Dollar General | ✔ | 1 | |||||
| Dollar Tree | ✔ | ✔ | 1 | ||||
| Dominion Energy | ✔ | ✔ | 1 | ||||
| DTE Energy | ✔ | 1 | |||||
| Duke Energy | ✔✔ | ✔✔ | 5 | ||||
| EastGroup Properties | ✔ | 1 | |||||
| Eli Lilly | ✔ | ✔ | 1 | ||||
| Ensign Group | ✔ | 1 | |||||
| Entergy | ✔ | 1 | |||||
| Evergy (was Westar) | ✔ | 1 | |||||
| Expedia Group | ✔ | 1 | |||||
| Exxon Mobil | ✔✔✔✔✔ | ✔✔✔ | ✔ | ✔ | ✔ | 11 | |
| ✔ | ✔✔ | ✔✔ | 5 | ||||
| Fastenal | ✔ | 1 | |||||
| First Horizon National | ✔ | 1 | |||||
| First Solar | ✔ | 1 | |||||
| FirstCash | ✔ | 1 | |||||
| Fiserv | ✔ | 1 | |||||
| Ford Motor | ✔ | 1 | |||||
| Fortinet | ✔ | 1 | |||||
| General Electric | ✔ | 1 | |||||
| General Motors | ✔ | ✔ | 1 | ||||
| Genuine Parts | ✔ | 1 | |||||
| GEO Group | ✔ | 1 | |||||
| Gilead Sciences | ✔ | 1 | |||||
| Goldman Sachs | ✔ | ✔ | 1 | ||||
| Halliburton | ✔✔ | 1 | |||||
| Hanesbrands | ✔ | 1 | |||||
| Hanover Insurance | ✔ | 1 | |||||
| HD Supply Holdings | ✔ | 1 | |||||
| Hertz Global Holdings | ✔ | 1 | |||||
| Hess | ✔ | 1 | |||||
| HollyFrontier | ✔ | 1 | |||||
| Home Depot | ✔ | ✔ | ✔ | 5 | |||
| Honeywell International | ✔ | 1 | |||||
| Hormel Foods | ✔ | 1 | |||||
| Huntsman | ✔ | 1 | |||||
| Hyatt Hotels | ✔ | 1 | |||||
| Illumina | ✔ | 1 | |||||
| Intel | ✔ | ✔ | 1 | ||||
| Int’l Flavors & Fragrances | ✔ | 1 | |||||
| IPG Photonics | ✔ | 1 | |||||
| J.B. Hunt Transport | ✔ | ✔ | 1 | ||||
| Johnson & Johnson | ✔✔ | ✔ | 5 | ||||
| JPMorgan Chase | ✔✔ | ✔✔✔ | ✔ | ✔✔ | 5 | ||
| Juniper Networks | ✔ | 1 | |||||
| Kellogg | ✔ | 1 | |||||
| Keurig Dr Pepper | ✔ | 1 | |||||
| Kohl's | ✔ | 1 | |||||
| Kraft Heinz | ✔ | 1 | |||||
| Kroger | ✔ | ✔ | 1 | ||||
| Lear | ✔ | 1 | |||||
| Liberty Broadband | ✔ | 1 | |||||
| LKQ | ✔ | 1 | |||||
| Loews | ✔ | 1 | |||||
| Luminex | ✔ | 1 | |||||
| Macy's | ✔ | 1 | |||||
| Marathon Petroleum | ✔ | ✔ | 1 | ||||
| Marriott International | ✔ | ✔ | ✔ | 5 | |||
| Mastercard | ✔✔ | 1 | |||||
| Maximus | ✔ | 1 | |||||
| McDonald's | ✔ | 1 | |||||
| McKesson | ✔ | 1 | |||||
| Merck | ✔ | 1 | |||||
| Metlife | ✔ | ✔ | ✔ | 5 | |||
| MGM Resorts Int’l | ✔ | ✔ | 1 | ||||
| Microsoft | ✔ | 1 | |||||
| Monster Beverage | ✔ | 1 | |||||
| Morgan Stanley | ✔ | ✔ | 1 | ||||
| Motorola Solutions | ✔ | 1 | |||||
| Natus Medical | ✔ | 1 | |||||
| Navient | ✔ | 1 | |||||
| Netflix | ✔ | 1 | |||||
| Neurocrine Biosciences | ✔ | 1 | |||||
| Newmont | ✔ | 1 | |||||
| NextEra Energy | ✔ | 1 | |||||
| Noble Energy | ✔ | 1 | |||||
| Nordstrom | ✔ | 1 | |||||
| Northrop Grumman | ✔ | 1 | |||||
| Northwestern | ✔ | 1 | |||||
| Nucor | ✔ | ✔✔ | ✔ | 5 | |||
| Occidental Petroleum | ✔ | 1 | |||||
| Old Republic Int’l | ✔ | 1 | |||||
| Olin | ✔ | 1 | |||||
| O'Reilly Automotive | ✔ | 1 | |||||
| Ormat Technologies | ✔ | 1 | |||||
| PACCAR | ✔ | ✔ | 1 | ||||
| Pattern Energy Group | ✔ | 1 | |||||
| PayPal | ✔ | 1 | |||||
| Pfizer | ✔ | ✔ | ✔✔ | ✔ | 5 | ||
| Phillips 66 | ✔ | ✔ | 1 | ||||
| Pilgrim's Pride | ✔ | ✔ | 1 | ||||
| PNM Resources | ✔✔ | 1 | |||||
| PPG Industries | ✔ | 1 | |||||
| Progressive | ✔ | 1 | |||||
| Puma Biotechnology | ✔ | 1 | |||||
| Republic Services | ✔ | 1 | |||||
| ResMed | ✔ | 1 | |||||
| Rockwell Automation | ✔ | 1 | |||||
| Rogers | ✔ | 1 | |||||
| Ross Stores | ✔ | 1 | |||||
| Royal Caribbean Cruises | ✔ | ✔ | 1 | ||||
| Salesforce.com | ✔ | 1 | |||||
| Sanderson Farms | ✔ | ✔ | 1 | ||||
| Sarepta Therapeutics | ✔ | 1 | |||||
| SBA Communications | ✔ | 1 | |||||
| SeaWorld Entertainment | ✔ | ✔ | 1 | ||||
| Sempra Energy | ✔ | 1 | |||||
| Sherwin-Williams | ✔ | 1 | |||||
| Simon Property Group | ✔ | 1 | |||||
| Skechers U.S.A. | ✔ | 1 | |||||
| Skyworks Solutions | ✔ | 1 | |||||
| Sonoco Products | ✔ | 1 | |||||
| Southern | ✔ | ✔ | 1 | ||||
| Southwest Airlines | ✔ | 1 | |||||
| Spire | ✔ | 1 | |||||
| Sprint | ✔ | 1 | |||||
| Starbucks | ✔ | ✔ | ✔ | 5 | |||
| Steel Dynamics | ✔ | 1 | |||||
| Stryker | ✔ | 1 | |||||
| Sturm, Ruger | ✔ | ✔ | 1 | ||||
| SunPower | ✔ | 1 | |||||
| SVB Financial Group | ✔ | 1 | |||||
| Syneos Health | ✔ | 1 | |||||
| T. Rowe Price Group | ✔ | 1 | |||||
| Tesla Motors | ✔ | ✔ | 1 | ||||
| Texas Instruments | ✔ | 1 | |||||
| TJX | ✔ | ✔ | ✔✔ | ✔ | 5 | ||
| T-Mobile US | ✔ | 1 | |||||
| Tractor Supply | ✔ | 1 | |||||
| TransDigm Group | ✔ | 1 | |||||
| Travelers | ✔ | 1 | |||||
| Tribune Publishing | ✔ | 1 | |||||
| ✔ | 1 | ||||||
| Tyson Foods | ✔ | ✔ | ✔ | 5 | |||
| Ulta Beauty | ✔ | 1 | |||||
| Union Pacific | ✔ | 1 | |||||
| United Airlines | ✔✔ | ✔ | 5 | ||||
| United Parcel Service | ✔ | ✔ | 1 | ||||
| United Technologies | ✔ | 1 | |||||
| Vanguard Mutual Funds | ✔ | 1 | |||||
| Verizon | ✔ | ✔ | ✔ | ✔ | 5 | ||
| Vertex Pharmaceuticals | ✔ | ✔ | 1 | ||||
| Visa | ✔ | 1 | |||||
| Walgreens Boots Alliance | ✔ | 1 | |||||
| Walmart | ✔✔ | ✔ | ✔ | ✔ | 5 | ||
| Walt Disney | ✔ | ✔ | ✔ | 5 | |||
| Waste Management | ✔ | 1 | |||||
| Wells Fargo | ✔ | ✔✔ | 5 | ||||
| Wendy's | ✔ | 1 | |||||
| Western Union | ✔ | ✔ | 1 | ||||
| Westlake Chemical | ✔ | 1 | |||||
| Williams Companies | ✔ | 1 | |||||
| Williams-Sonoma | ✔ | 1 | |||||
| World Fuel Services | ✔ | 1 | |||||
| Wyndham Destinations | ✔ | 1 | |||||
| XPO Logistics | ✔ | 1 | |||||
| Xylem | ✔ | 1 | |||||
| Yum Brands | ✔✔ | ✔ | 5 | ||||
| Grand Total | 85 | 75 | 71 | 46 | 30 | 62 | 369 |