While much recent public controversy about sustainable investment has centered around climate change and fossil fuel companies, almost all the shareholder proposals from organizations opposed to ESG investment considerations instead are about social issues. This section examines these proposals, which share a belief that corporate America is too liberal—“woke” in current parlance. The volume of proposals from “anti-ESG” perspectives stands at 43, up 60 percent over last year at this time, when Si2 had identified 27 resolutions. This suggests the 2022 record certainly will be broken. (Anti-ESG groups do not publish their plans in advance and declined to provide Si2 with lists of their filings, although one blog post from one group provides some data. Information here comes mainly from SEC records about resolution challenges and a few early proxy statements.)

The greatest number of anti-ESG proposals question the wisdom of racial and ethnic diversity on boards and suggest that diversity, equity and inclusion (DEI) programs and anti-racism initiatives discriminate against conservative white people. They contend that a liberal agenda from investors and companies will damage the economy and American culture; they also argue ESG matters have no bearing on the bottom line. (Left graph shows issues over the last decade.)

The ideas in anti-ESG resolutions have no traction with investors—nor with many companies—and on average earn 4 percent support or less. (Right graph.) The sole exception concerns doing business in China, where the left and right agree that China’s authoritarianism is deeply problematic, as is its persecution of the Uyghur people. Given the low level of support, few qualify for resubmission. Further, these resolutions tend to have procedural flaws, although many in the past also were omitted for nsubstantive reasons. There is little visibility about any engagement between these proponents and companies.

A few anti-ESG proponents have copied verbatim the resolved clauses of their ideological opponents, or use language in resolved clauses that makes the resolutions appear to support sustainability objectives—although the rest of the proposals cite right-wing opinion pieces and argue against their purported goal. This “Trojan horse” tactic has produced some high votes on political influence resolutions and was responsible for the 2018 bump-up in average support, which proved ephemeral.

Human Rights & Diversity

China: The NLPC last year earned notable support for one of its resolutions about ties to China, with two proposals that said business in China holds undisclosed risks. It earned 12.2 percent at 3M and a more usual 4.5 percent at Verizon Communications. It is proposing the same thing this year and nine proposals are pending, with the first two going to votes in March. It earned 4.4 percent at Apple and will see a vote on March 23 at Starbucks. The resolution asks each company to:

report annually to shareholders on the nature and extent to which corporate operations depend on, and are vulnerable to, Communist China, which is a serial human rights violator, a geopolitical threat, and an adversary to the United States. The report should exclude confidential business information but provide shareholders with a sense of the Company’s reliance on activities conducted within, and under control of, the Communist Chinese government.

(A similar proposal at Meta Platforms is covered in the Human Rights section, p. 66, but it is not substantively different; the proponent there withdrew after a procedural problem.)

Racial justice audit risks: Prompted by requests to conduct racial justice audits, the NCPPR filed mirror image proposals asking about the risks of anti-racism assessments and programs. The proposal last year received an average of 3 percent support at 10 companies, but NCPPR nonetheless has filed at four companies this year (with more likely to emerge). So far the only vote is at Apple (it earned 1.4 percent), given procedural flaws with the filings at Coca-Cola, Deere and Progressive. The resolution asks for (emphasis added):

an audit analyzing the Company’s impacts on civil rights and non-discrimination, and the impacts of those issues on the Company’s business. The audit may, in the Board’s discretion, be conducted by an independent and unbiased third party with input from civil rights organizations, public-interest litigation groups, employees and other stakeholders—of a wide spectrum of viewpoints and perspectives. A report on the audit, prepared at reasonable cost and omitting confidential or proprietary information, should be publicly disclosed on the Company’s website.

The only difference from the resolved clause in anti-racism proposals discussed in the Human Rights section above is the phrase highlighted here, although the supporting statements clash. NCPPR believes that Apple’s extensive DEI programs are discriminatory and create harmful controversy. Apple is conducting a civil rights audit and notes its history of commitment to civil and human rights; it describes related oversight and management as important to effective human capital management.

Last year, a request to Home Depot that it conduct a racial justice audit earned nearly 63 percent support and the company agreed to conduct the exercise. Irked, NCPPR now is simply asking the company “to rescind the 2022 Racial Equity Audit proposal and reject any racially discriminatory practices at the company” because.” It says the audit “may jeopardize Home Depot’s value by elevating divisive identity politics above its commitment to excellence, while also raising serious legal and commercial risks.” It further contends that these audits “promote claims about ‘white supremacy’” that many stakeholders “don’t accept.” The action is “far beyond the Company’s fiduciary remit” and could interfere with profit-maximizing decisions, it asserts.

SEC action—The racial justice audit proposals at Coke and Deere have been omitted because NCPPR did not prove its stock ownership. Home Depot’s complaint is substantive, though—it says NCPPR has not used the precatory formulation required for shareholder proposals.

Anti-discrimination policies: Three companies—JPMorgan Chase, M&T Bank and PayPal—face claims that their DEI programs are discriminatory, based on findings from the Viewpoint Diversity Index discussed above. The proposal seeks a report “evaluating how it oversees risks related to discrimination against individuals based on their race, color, religion (including religious views), sex, national origin, or political views, and whether such discrimination may impact individuals’ exercise of their constitutionally protected civil rights.” The proposal asserts corporate diversity policies restrict free speech rights and threaten American freedoms.

SEC action—It is not clear there will be any votes, although more proposals may pop up unchallenged in proxy statements. All three companies noted here have lodged challenges at the SEC, saying the resolution concerns product and services offerings and workforce management practices. PayPal also says religious and political discrimination are not significant policy issues as determined by the SEC. Inspire Investing has withdrawn and the SEC has yet to respond to the other two companies.

Liberal bias: Three additional proposals call for examination of a purportedly biased approach to the news media, EEO policies and content management:

Media bias—At AT&T, the resolution proposes “a report on the potential risks and consequences to the Company associated with the prioritization of non-pecuniary factors when it comes to establishing, rejecting, or failing to continue network relationships on its DirecTV platform.” The proposal takes issue with the company’s decision not to renew DirecTV’s contract with One America News (OAN), a conservative news outlet. It contends OAN was a solid revenue source and that left-wing groups “such as Greenpeace, GLADD, Media Matters, and the NAACP” were responsible for ending the contract, saying the decision showed “viewpoint discrimination” that hurts the bottom line for AT&T investors overall.

EEO—At Kroger, NCPPR seeks a report “detailing the potential risks associated with omitting ‘viewpoint’ and ‘ideology’ from its written equal employment opportunity (EEO) policy.” The resolution argues Kroger is hostile to conservatives and has taken “blatant leftwing actions” with the result that “individuals with conservative viewpoints may face discrimination at Kroger.” Cited evidence is that Kroger removed merchandise with political slogans and then worked to advance “a leftwing social agenda” by publishing a guide to support LGBTQ employees. Its current approach invites employee dissent and litigation, a material risk, according to NCPPR.

Censorship—At Meta, NLPC sees a home-grown problem with political repression. It seeks a semi-annual reports on the company’s

policy in responding to requests to remove or take down content from its platforms by the Executive Office of the President, Members of Congress, or any other agency, entity or subcontractor on behalf of the United States Government.

This report shall also include an itemized listing of such “takedown” requests, including the name and title of the official making the request; the nature and scope of the request; the date of the request; the Company’s action or inaction to the request; and a reason or rationale for the Company’s response, or lack thereof.

The proposal contends that the Biden administration inappropriately asked Meta to remove misinformation, mentioning COVID-19 posts and Russian propaganda. It suggests the company “cooperates with government officials engaged in unconstitutional censorship” and could be sued, claiming this presents a material risk.

SEC action—AT&T argues the proposal about OAN is ordinary business since it relates to specific products and services and concerns pending litigation. Kroger also says it is ordinary business because it concerns workforce management and employee policies. The SEC has yet to respond.

Gun control: Proponents are using two different approaches to defend personal gun ownership, all at financial companies that have lodged SEC challenges:

At JPMorgan Chase, Mastercard and Wells Fargo, the proposal is similar to the censorship resolution noted above. It asks for a semi-annual report

that specifies the Company’s policy in responding to requests to close, or in issuing warnings of imminent closure about, customer accounts by any agency or entity operating under the authority of the executive branch of the United States Government. [at Mastercard: or by any representative of a government of any individual state within the U.S.]

This report shall also include an itemized listing of such requests, including the name and title of the government official making the request; the nature and scope of the request; the date of the request; the outcome of the request; and a reason or rationale for the Company’s response, or lack thereof.

The resolution is new and outside the resolved clause critiques the Biden administration’s efforts to combat firearms and precious metals fraud, which the proponent says are unconstitutional constraints on free speech.

At American Express, the proposal’s focus on gun sales is more direct. It asks the board to evaluate and report “describing if and how the Company intends to reduce the risk associated with tracking, collecting, or sharing information regarding the processing of payments involving its cards and/or electronic payment system services for the sale and purchase of firearms.”

As noted in the Human Rights section (p. 67), companies have begun to use a new merchant code for firearms sales established by the International Standards Organization. The New York City Comptroller withdrew a proposal this year at American Express after it confirmed compliance with the new industry standard. However, NCPPR suggests the company’s use of the new code violates the Second Amendment right to bear arms—and that information collected may be shared with law enforcement and could be used to surveil and harass gun owners.

SEC action—All the recipients of the proposal contend the proposals are ordinary business. JPMorgan also says implementation would be illegal and impossible, since it would require the release of classified information. The SEC has yet to respond.

THE ANTI-ESG SHAREHOLDER PROPONENTS

HEIDI WELSH
Executive Director, Sustainable Investments Institute

Shareholder proponents who oppose most of the ideas supported by ESG investors have been around for a long time, but in the last two years they have filed many more proposals and a few new players have emerged.
The National Center for Public Policy Research (NCPPR) think tank in Washington, D.C., is the main player, although its principals and like-minded supporters also file on their own. NCPPR calls itself “the nation’s preeminent free-market” shareholder activist group, via its Free Enterprise Project. Its representatives also attend annual meetings without filing proposals to make statements about corporate policy; these regularly make their way into social media channels.

Political Influence

Business partnerships: A new proposal questions whether business partnerships are consistent with fiduciary duty. It asks Bank of America, Boeing and Pfizer for

a report, at reasonable expense, analyzing the congruency between voluntary partnerships with organizations that facilitate collaboration between businesses, governments and NGOs for social and political ends and the Company’s fiduciary duty to shareholders.

The resolution takes issue with company ties to the World Economic Forum, the Council on Foreign Relations and the Business Roundtable and contends the companies are hiding such connections. These organization have “agendas…antithetical with the Company’s fiduciary duty” because they aim to serve many stakeholders, not only shareholders, according to the proponents. At Bank of America, for instance, it says the World Economic Forum “openly advocates for transhumanism, abolishing private property, eating bugs, social credit systems, ‘The Great Reset,’ and [a] host of other blatantly Orwellian objectives.” Such aims are part of an “anti-human, anti-freedom agenda.”

A slightly different proposal is before Johnson & Johnson. It asks for a report on “the business rationale for its participation in corporate and executive membership organizations, and how such involvement by the Company and its corporate leaders fulfills its fiduciary duty to shareholders.”

At MetLife, the resolution wants a report on “risks created by Company business practices that prioritize non-pecuniary factors when it comes to establishing, rejecting, or failing to continue business relationships.” In the resolution’s body, it notes with disapproval the company’s decision not to offer a bulk discount to NRA members, the exclusion of firearms makers from investment portfolios, as well as excluding coal companies and oil sands extractors.

SEC action—The proposal fell to procedural errors at Bank of America and Pfizer and has been withdrawn at Boeing after the company argued NCPPR did not prove its stock ownership. MetLife says the proposal is ordinary business since it would affect business decisions for a wide range of stakeholders and does not raise a significant public policy issue. The SEC has yet to respond.

Charitable giving: A persistent concern from anti-ESG proponents is how charitable giving from companies may pose risks given the involvement of recipients in controversial activities. Three proposals have been filed to date on this theme for 2023. The first goes to a vote at Walt Disney on April 3, from Thomas Strobhar, who in previous years has voiced opposition to abortion and funding for Planned Parenthood. He would like the company to “consider listing on the Company website any recipient of $10,000 or more of direct contributions, excluding employee matching gifts.” The same proposal is at Kroger. At Merck, it asks for disclosure of contributions of $5,000 or more and wants to know about “the material limitations, if any, placed on the restrictions, and/or the monitoring of the contributions and its uses, if any, that the Company undertakes.”

SEC action—Walt Disney lodged an unsuccessful challenge. The SEC disagreed it is ordinary business because it is about contributions to specific organizations and would micromanage. Disney noted the proponent’s longstanding opposition to abortion and related shareholder efforts to this end. Merck says the proposal is moot, as does Kroger—which also makes an ordinary business argument; there is no SEC response yet.

Public policy advocacy: David Bahnsen wants McDonald’s and PepsiCo to report annually,

listing and analyzing policy endorsements made in recent years. The report should include public endorsements, including press statements released by the company and signing of public statements associated with activist groups and statements of threat or warning against particular states in response to policy proposals.

The report should analyze whether the policies advocated can rigorously be established to be of pecuniary benefit to the company and describe possible risks to the company arising from such statements, endorsements, or warnings.

The proposal is similar to one Vident Advisory withdrew in 2022 at Target, which also argued companies should carefully scrutinize their public policy involvement given the contentious nature of the political arena. The company apparently engaged with the proponent, who in the withdrawal letter thanked the company for “getting to understand our point of view.”

SEC action—McDonald’s has challenged the proposal at the SEC, arguing it is ordinary business since it is about public relations and does not raise a significant policy issue, and also that it is too vague. Similar arguments have not been successful in the past, so the proposal may go to a vote. But PepsiCo says it arrived past the deadline, so an omission there is likely.

Board advocacy oversight committee: An undisclosed proponent will see their resolution go to a vote at Starbucks on March 23. It asks for a new board committee “to oversee and review the impact of the company’s policy positions and advocacy on matters relating to the company’s ongoing growth and sustainability.” Outside the resolved clause the proposal blames “woke policies” for store closures.

Board member political activity: Resurrecting an idea that surfaced 10 years ago about former Al Gore’s board seat at Apple, Consumer Research executive director Will Hird asks ExxonMobil to

report to shareholders annually regarding all interviews, speeches, writings or other significant communications relating to ExxonMobil given by members of the Board of Directors to the media or public. The report should include all information necessary for shareholders to monitor and review director communications to the public, including date and transcript, and omit any confidential business information.

The proposal criticizes board member Jeffrey Ubben, a philanthropist and social investment venture capitalist, for his views on climate change. (Consumer’s Research is active in the effort to discredit consideration of ESG issues in the capital markets.)

SEC action—The company has lodged a challenge at the SEC, arguing that it concerns ordinary business because it would micromanage, and because it is about public relations strategy.

Climate change: As noted above, climate change is barely on the agenda of anti-ESG proponents in proxy season, despite the complaint at Exxon. There are three new proposals on the subject, however.

Steven Milloy earned 3.8 percent in 2021 for a proposal asking Alliant Energy for a cost-benefit analysis of the company’s environmental programs, while contending efforts to combat climate change are futile and that fossil fuels cannot be replaced. This year, he is reiterating this view and wants an annual report “about the company’s actual progress toward, and ongoing feasibility of Alliant Energy’s announced goal of reaching ‘net-zero carbon dioxide (CO2) emissions by 2050 for the electricity we generate.’” He argues that investors need this report because the company’s net-zero carbon goal is unattainable and any corporate plan for net zero is “pure fantasy” at best, which will hurt shareholders.

David Bahnsen and NCPPR have filed another proposal at Chevron and Duke Energy, asking each for a new board committee that will evaluate and report on what they deem “pie in the sky” climate goals whose pursuit will hurt shareholders. The proposal says each company should evaluate its

strategic vision and responses to calls for [company] decarbonization on activist-established deadlines. 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 demands for such decarbonization schedules, including the potential impacts on the Company from flaws in activists’ climate models, the possibility that the U.S. will not force decarbonization according to such schedules, thus obviating “stranded asset” calculations, the possibility that other countries will not adopt similar targets, thus making Company efforts meaningless, concerns about technological or economic infeasibility, and other relevant considerations.

SEC action—Alliant says the proposal is moot given its current oversight and disclosure efforts. Chevron says it is similar to an earlier proposal that did not earn enough to qualify for resubmission in 2020; Arjuna Capital asked it to set up board committee on climate change and earned 7.6 percent in 2019 and 8.1 percent in 2020, well shy of the 15 percent now needed to qualify for resubmission. Duke Energy initially said it was too long, but NCPPR trimmed the resolution and the company withdrew its challenge. Duke earlier had a proposal with a similar thrust from Milloy, seeking a cost-benefit analysis of environmental programs earned 4.4 percent in 2019, not enough to qualify for resubmission.

Board Oversight

Neither of two proposals NCPPR filed about setting up a more generalized board committee will see a vote because it failed to prove its stock ownership, at Levi Strauss and Warner Brothers Discovery. It had asked for a committee “to oversee and review the impact of the Company’s policy positions, advocacy, and charitable giving on social and political matters, and the effect of those actions on the Company’s financial sustainability.” Outside the resolved clause, NCPPR claimed that corporate support for civil rights organizations contributes to crime, undermines the police, hurts the economy and supports “civilization-destroying developments that now beset the company.”

Health

A final proposal at Eli Lilly from NCPPR takes its inspiration from corporate responses to the Dobbs v. Jackson Women’s Health Supreme Court decision that removed federal protections for abortion rights in June 2022. The proposal claims that the company’s public statements in support of abortion rights undercut its diversity policy and respect for those who oppose abortion. It calls for a report

detailing the known and reasonably foreseeable risks and costs to the Company caused by opposing or otherwise altering Company policy in response to enacted or proposed state policies regulating abortion, and detailing any strategies beyond litigation and legal compliance that the Company may deploy to minimize or mitigate these risks.”

Eli Lilly has challenged the proposal at the SEC, arguing it is ordinary business since it is about workforce management, does not focus on a significant social policy issue and would micromanage, but the proposal is in the proxy statement and will go to a vote on May 1.