ICCR members are seeking information on prices for Covid-19 drugs in a new set of proposals. Other proposals are about public health generally, reproductive health rights in particular and tobacco. Just one addresses the opioid epidemic.
PUBLIC FUNDING, DRUG PRICING, AND EQUAL ACCESS FOR COVID-19 VACCINES
CATHY ROWAN
Director, Socially Responsible Investments, Trinity Health
Members of the Interfaith Center on Corporate Responsibility (ICCR) want pharmaceutical companies to disclose more on the impact of public funding for COVID-19 vaccines and therapeutic medicine access and pricing.
The shareholder proposals, filed at Eli Lilly, Johnson & Johnson, Merck, and Pfizer, ask for reports detailing “whether and how [the company’s] receipt of public financial support for development and manufacture of preventives and/or therapeutics for COVID-19 is being, or will be, taken into account when making decisions that affect access to such products, such as setting prices.”
Pandemic: Proposals at Eli Lilly, Gilead Sciences, Johnson & Johnson, Merck, Pfizer and Regeneron Pharmaceuticals are seeking a report “on whether and how” their “receipt of government financial support for development and manufacture of vaccines and therapeutics for COVID-19 is being, or will be, taken into account when engaging in conduct that affects access to such products, such as setting prices.” Boston Common Asset Management withdrew after Gilead Sciences agreed to update website information on its Covid-19 treatment remdesivir and to continue discussions about public investment. Eli Lilly is arguing at the SEC that the proposal is both false and misleading and moot, while Johnson & Johnson says it concerns ordinary business and moot; the SEC has yet to respond. (A related proposal that seeks a link between drug pricing risks and executive pay at AbbVie is covered in the Sustainable Governance section, p. 67.)
One other proposal from an individual investor asks Royal Caribbean Cruises to sue the Centers for Disease Control and Prevention about its order cancelling cruise ship sailings because of the pandemic. It calls the order “illegal” and says governments, not cruise ship companies and their shareholders, should bear the costs of the “no sail” order. The proposal is unlikely to go to a vote since the company has mounted a challenge arguing it is false and misleading, concerns a personal grievance and relates to ordinary business. An omission appears likely.
Public health: Two proposals address the public health costs of sugary products. One filed at three companies is a repeat from Harrington Investments. One raises similar concerns at two other firms.
Sugary drinks—Harrington Investments has returned to three companies, asking for a report by November 1st on:
on Sugar and Public Health, with support from a group of independent and nationally recognized scientists and scholars providing critical feedback on our Company’s sugar products marketed to consumers, especially those Coke products targeted to children and young consumers. Such report to shareholders should include an assessment of risks to the company’s finances and reputation associated with changing scientific understanding of the role of sugar in disease causation.
The resolution is in its third year at Coca-Cola (it earned 7.7 percent last year and 4.9 percent in 2019); and back for a second time at McDonald’s (9.4 percent last year) and PepsiCo (11.9 percent). Coca-Cola lodged an unsuccessful procedural challenge, but the proposal will need at least 25 percent support for further resubmission under the new rules; it needs to earn 15 percent at the other two companies to be resubmitted.
Externalized costs of food business—Taking up a new but similar health concern about food, Myra Young would like to see a report about the sales by CVS and PepsiCo. The resolution seeks “a report on the external public health costs created by the retail food business of our company...and the manner in which such costs affect the vast majority of its shareholders who rely on overall market returns.” At PepsiCo it substitutes “food and beverage” for “retail food.”
The proposal is part of a new set of resolutions coordinated by The Shareholder Commons about the societal impact of businesses. In the body of this resolution, Young asserts that support from each company’s CEO for the Business Roundtable Statement of the Purpose of a Corporation commits it to serve the interests of all stakeholders. She notes the public health costs of obesity (which the proposal implicitly ties to the retail food business of CVS and the snacks and beverages sold by PepsiCo), and says “shareholders have no guidance as to costs the Company is externalizing and consequent economic harm” that affects the company’s broadly diversified stockholders. She concludes the requested study “would help shareholders determine whether to seek a change in corporate direction, structure, or form in order to better serve their interests and to match the commitment made in the Statement.”
CVS is arguing at the SEC the proposal is not significantly related to its business and is an ordinary business matter; PepsiCo also says it is ordinary business and that its current reporting makes the thrust of the proposal moot. The SEC has yet to respond.
Reproductive health: As You Sow and Clean Yield Asset Management, working with Rhia Ventures, is reiterating concerns first raised last year about eroding access to abortion and other reproductive health care services. The resolution seeks a report by December “detailing any known and any potential risks and costs to the Company caused by enacted or proposed state policies affecting reproductive rights and detailing any strategies beyond litigation and legal compliance that the Company may deploy to minimize or mitigate these risks.” Proponents withdrew this resolution in 2020 after dialogue with Macy’s and Progressive. As You Sow has withdrawn at Church & Dwight, which had filed an SEC challenge on procedural grounds and also said it was too vague and concerned ordinary business. An ordinary business challenge remains undecided at Walmart.
The proposal points to the wide array of legal challenges that affect access to abortion and contraception, and the “patchwork” of relevant state laws. It reasons that because the companies targeted operate in the states with restrictions, and because their employees are affected, investors need a report on how the companies are handling the issue—particularly given their stated support for diversity and inclusion. It ties unplanned pregnancies to economic harms for women and employers, and says companies should “evaluate any risks and costs including, but not limited to: effects on employee hiring, retention, and productivity, and increases in litigation and brand risks. Strategies evaluated should include any public policy advocacy programs, political contributions policies, and human resources or educational strategies.”
(See Political Spending section, p. 36, for additional proposals asking about how companies make sure their corporate political spending is congruent with their stated support for women.)
Tobacco: Three proposals have been filed in 2021 about tobacco. The Sisters of St. Francis of Philadelphia have a new proposal that asks Rite Aid to report within the year “assessing how the increased health risks of severe COVID-19 infections to customers that smoke impact our company’s evaluation of risks associated with selling tobacco products.” The proponents believe the two drug stores, as the biggest U.S. retail pharmacies, can and should do more to mitigate risks from the combination of COVID-19 and smoking, which are just starting to be understood by scientists. Walgreens Boots Alliance investors gave this resolution 11.6 percent support in January. The company told shareholders it carefully monitors all the risks it faces through a robust Enterprise Risk Management Program (ERM), with board oversight, but the program does not mention tobacco and there is no tie between ERM and compensation arrangements for executives. The company did address pandemic risks in its proxy statement.
The other proposal, at Altria, is a resubmission that earned 36.6 percent support last year, an unusually high vote for a tobacco proposal. The Sisters of St. Francis of Philadelphia want Altria to commission a third-party report, at reasonable cost and omitting proprietary information, on:
corporate adherence to Altria’s principles and policies aimed at discouraging the use of their nicotine delivery products by young people, and marketing practices to communities of color and low-income populations,
the effectiveness of those polices, and
any damage inflicted on those communities as a result and present the results of that report to shareholders by November 2021.
The proponent believes Altria, the country’s largest tobacco firm, is not doing enough to curb tobacco use by young people, which has skyrocketed with their growing use of e-cigarettes. Altria has made new investments in its anti-tobacco use programs, but faces increasing scrutiny from Congress and regulators about the e-cigarette company JUUL Labs, where it owns a 35 percent stake, and new laws and lawsuits that aim to curb vaping.
Opioids: A lone proposal this year asks about the opioid epidemic, at Johnson & Johnson, but it was withdrawn by the Illinois State Treasurer. The proposal was a resubmission that earned 60.9 percent last year, seeking a report
describing the governance measures JNJ has implemented since 2012 to more effectively monitor and manage financial and reputational risks related to the opioid crisis, given JNJ’s sale of opioid medications, including whether increased centralization of JNJ’s corporate functions provides stronger oversight of such risks and any changes in how the Board oversees opioid-related matters, how incentive compensation for senior executives is determined, and how the Board obtains input regarding opioids from stakeholders.
The company has agreed to “more effectively monitor and manage financial and reputational risks related to the opioid crisis,” the proponent says. Johnson & Johnson had challenged the proposal at the SEC, arguing it was moot, but the withdrawal came before any SEC response.