The 2020 proxy season was host to both unprecedented success and potential peril for shareholder proponents. Twenty-one shareholder resolutions earned majority support. Support for the 189 proposals that went to votes average 27 percent support, up more than a percentage point from 2019. A total of 459 were filed, about the same as in 2019. Proponents continued to withdraw more proposals than went to votes—a trend that started in 2018.

Company efforts to block resolutions from inclusion in proxy statements through provisions of the Shareholder Proposal Rule drifted up to 15 percent of the total, but this was not out of line with ups and downs over the last decade. Proponents remain concerned about SEC staff interpretations of climate change resolutions, however, and these resolutions were disproportionately omitted.

Rule changes: On September 23, 2020, the Securities and Exchange Commission (SEC) approved new rules that make it harder to file and resubmit shareholder resolutions. Earlier, on July 22, the commission issued a final rule imposing new strictures on proxy advisory firms, as well. In a related development, just before President Trump left office, the Department of Labor in December finalized a rule that makes it harder for some pension funds to vote on ESG shareholder resolutions, although the strictures are not as harsh as those initially proposed. The new rules do not go into effect until the 2022 proxy season. It remains uncertain whether and to what extent the Biden administration may try to roll the new rules back, or what legal action may occur.

Major Themes

The three major themes of proxy season in 2020 were corporate influence spending, diversity (on boards and in the workplace, with related proposals on fair pay) and climate change:

• Corporate political activity: Investor support for more oversight and disclosure continued its upward climb, with seven majority votes and more than a dozen earning more than 40 percent. There were two dozen withdrawals, with many corporate commitments, out of just under 90 filings. The SEC rule changes affect these proposals most, despite increased support that this year reached all-time average highs of 44 percent on election spending and 34 percent on lobbying.

• Diversity: Proposals sought fair representation, treatment and pay in the workplace and on boards of directors. Combined, proposals about women and people of color included about 30 about workforce inclusion, nearly 40 about sexual harassment and/or arbitration and more than 40 more about boards. These three categories combined made up about one-quarter of all filings in 2020. More than half were withdrawn by proponents after agreements.

• Climate change: There were 60 proposals about retooling business for the changing climate. Total filings on this issue have fallen as investors have expanded their engagements beyond proxy season. At the same time, there are more withdrawals from agreements and—conversely—greater success for companies seeking to block these resolutions in their SEC challenges. Three-quarters of climate resolutions asked about carbon asset risks.

2020 Highlights and Synopsis

As noted, proponents filed just under 460 proposals, consistent with the figures from the last three years but down from nearly 500 in 2017. Most U.S. annual meetings take place in the spring, but around a dozen go to votes in the second half of the year. (This discussion excludes two dozen proposals filed by conservative groups that oppose the aims of all the other proponents.)

Environment

Climate change: Sixty-six proposals were specifically concerned with climate change. They sought information about how companies plan to address carbon asset risks and explain how they will adjust to a low-carbon economy by using more renewable energy and combatting deforestation. The SEC’s decision to consider many proposals seeking greenhouse gas (GHG) goals as ordinary business has been one of the reasons for the decline in votes on this issue, on top of fewer filings.

There were majority votes on resolutions seeking reports on how companies plan to make their operations compliant with the Paris climate treaty—73.5 percent at Dollar Trees, 56.4 percent at Ovintiv an 54.5 percent at J.B. Hunt Transport; another majority of 54.7 percent was for a proposal asking Phillips 66 to report on how it guards against pollution risks from extreme climate change-related weather. A late season vote on deforestation at Procter & Gamble received just under 68 percent support.

Environmental management: Twenty-nine proposals asked about hazardous materials (all but one of the eight filings were about plastics); problems with pesticides, antibiotics and animal welfare in industrial agriculture; water and waste. Most companies were new recipients and challenges at the SEC were scarce.

Social Issues

Corporate political activity: Despite increased corporate action to oversee and report on political spending, information on so-called dark money remains scant. This reality fuels the longstanding disclosure campaigns.

Sixty-one of the 87 proposals filed on political spending and lobbying went to votes, 23 were withdrawn and three omitted. Most votes were repeats; most withdrawals on election spending were at new targets and several of the withdrawn lobbying proposals were resubmissions. Average support for election spending resolutions rose to more than 40 percent; for lobbying proposals it averaged 34 percent. There was an unprecedented number of majority votes—four on election spending, at Activism Blizzard (58.6 percent), Centene (51.4 percent), J.B. Hunt Transport (53.2 percent) and Western Union (53.3 percent), and two on lobbying, at Alaska Air Group (52.3 percent) and McKesson (52.1 percent).

Climate change connection—Notably, a mainstream financial player entered the fray as a proponent and earned majority support at an oil major, for the first time. BNP Paribas Asset Management, owned by one of France’s largest banks, proposed that four companies report on how their political influence efforts align with the Paris climate goals. At Chevron, which spends heavily to elect and influence lawmakers and not lobby them afterwards, the vote was an unprecedented 53.5 percent; it was 45.9 percent at Delta Air Lines and 31.5 percent at United Airlines. While direct expenditures for climate- related lobbying at the two airlines account for a relatively small proportion of their overall lobbying spend, both belong to trade groups that do much more and disclose little about climate priorities.

Decent work: The coronavirus pandemic brought home longstanding shareholder concerns about fair treatment and pay. A total of 58 resolutions highlighted working conditions, persistent economic inequality and high profile problems with sexual harassment and violence at work. About half went to votes and three were majorities. A new proposal asked five companies for reports on how they manage diversity and labor matters, invoking industry-specific SASB metrics. Two at auto parts stores received high support—79.1 percent at Genuine Parts and 66 percent at O’Reilly Automotive—which could have come only with votes in favor from leading mutual funds. In addition, the New York City pension funds earned 51 percent support for a request at Chipotle Mexican Grill for reporting on mandatory arbitration for “employment-related claims,” which includes sexual harassment.

Diversity at work: While shareholder proponents want fair pay, they also want fair access to employment and promotion in the first place for women and people of color. Proposals focused on diversity programs and data disclosure. There were 32 filings, eight votes and 24 withdrawals; only three were resubmissions. Investors gave a new diversity program assessment proposal high marks—61.1 percent for a resubmission at Fastenal, which currently discloses nothing on its workforce composition, and 70 percent at Fortinet, a leading cybersecurity firm that expresses support for diversity but also does not report much data. Proponents withdrew a dozen resolutions after companies promised more information; one agreement came at Travelers, where the vote last year was 51 percent.

Health: The Investors for Opioid and Pharmaceutical Accountability (IOPA) campaign, led by Mercy Investments and the UAW Retirees Medical Benefit Trust, entered its third year and notched a 60.9 percent victory at Johnson & Johnson. The company is a defendant in national class action litigation because it sold opioids. Another win and withdrawal this year for Mercy Investments was a commitment from Walmart to produce a report on its stewardship of opioids.

Human rights: About four dozen resolutions addressed a wide array of human rights problems. The biggest group asked for stronger policies and disclosure about risk management. Just eight were resubmissions. Twenty-one went to votes, 19 were withdrawn and nine omitted. Several proposals came from the new Shifting Gears effort led by Investor Advocates for Social Justice (IASJ), looking at the automotive supply chain.

A high vote of 44.8 percent came for one of the Shifting Gears proposals at Lear, an aerospace and automotive company. Of particular note given the context of the global pandemic were two proposals at chicken processors, with 36.8 percent at Sanderson Farms, 12.8 percent at Pilgrim’s Pride and 14.5 percent at Tyson Foods. Also notable was a vote of 24.9 percent for a resolution to Amazon.com about hate speech and offensive products. Other resolutions were on surveillance and technology, with two proposals—also at Amazon.com—getting 32 percent. But the highest vote, 40.6 percent, came at Apple, where Harrington Investments and SumOfUs asked for annual reporting on protecting free expression.

Sustainable Governance

Proponents continued to seek reform of corporate governance structures to address environmental and social concerns, focused on board composition and oversight, how these may be linked to executive compensation, and how financial firms consider sustainability in proxy voting. New was a query about how companies are interpreting their corporate purpose, following a controversial new approach announced a year ago by The Business Roundtable. (Many more on this theme have been filed in 2021.)

Board diversity: Proponents won majority support of 52.9 percent at Expeditors International for one of the 44 resolutions seeking policies or reporting on board diversity. That resolution was one of 16 from the Boardroom Accountability Project 3.0 of the New York City Comptroller, expressly asking for diversity in CEO searches. A more general proposal from the New York State Common Retirement System at National HealthCare seeking reporting earned 59.2 percent. These long- running proposals resolutions usually get withdrawn after agreements.

Board experts and oversight: Five resolutions asked for oversight of human rights or climate change. The highest vote of 16.3 percent was at Alphabet, on human rights. In addition, Mercy Investments withdrew a new proposal that argued for controls on the “vast unregulated thrift market” of third-party sellers hosted by Amazon.com, in exchange for more reporting and dialogue.

Sustainability disclosure, management & reporting: Forty-one proposals in 2020 asked companies about sustainable governance—including two dozen on links between executive pay and several issues as well as metrics disclosure. Thetotalisdownarecenthighof58twoyearsago.Only16wenttovotes,17werewithdrawnandeightomitted. Proponents have largely abandoned general requests for sustainability reports given their ubiquity, but one such resolution at the solar company Enphase Energy earned 52.3 percent.

Corporate purpose—Two versions of a new resolution asked six companies to explain how they will define and deliver on their CEOs’ promises to support The Business Roundtable’s redefinition of corporate purpose made in August 2019. The BRT suggests companies should attend to the needs of all stakeholders, not just shareholders and arguments for and against the idea abound. The SEC rejected a variety of challenges from companies, but all the votes were less than 10 percent.

Proxy voting—A handful of resolutions asked mutual fund firms to report on how they consider ESG issues in their proxy voting and despite relatively low support for these resolutions, it is clear that major mutual funds have started to vote in favor of some social and environmental shareholder proposals; the 20 majority votes this year could not have occurred without them. Further, Morningstar is now looking at fund voting practices for its sustainability ratings.