The push for board diversity has gained momentum in recent years, in part as an acknowledgment that a board’s needs are changing in response to an increasingly complex, competitive, and dynamic operating environment. The advent of disruptive technologies, geopolitical shifts, and evolving consumer behaviors and expectations has compelled boards to adopt a more expansive approach to oversight, strategy, and widening the lens on the risks that could harm the company. Recent retreats by ISS, Vanguard, and others of a full-throated endorsement of board diversity should be viewed for what they are – a calculated risk mitigation strategy in response to the current political climate and recent legal decisions around diversity mandates. The factors that underpin a commonsense business case for demographic diversity on boards are as relevant as ever.
Read moreThe Mandatory Board Director Say-On-Pay Bylaw By-Law Amendment
Shareholders have struggled to enforce corporate director accountability. Beyond contested board elections, shareholders today have little practical, direct impact on directors.
On one important subject, director pay, at almost all U.S. companies, directors have absolute authority over their compensation.
Read moreGood Corporate Governance Requires Active Board Monitoring of ESG Risks
In today’s marketplace, companies are under increasing scrutiny regarding their public impacts—and their governance of these matters. This has serious material implications for all stakeholders.
Read moreProxy Voting Could Bridge the Red and Blue Divide
Investors currently get the same voting advice from the leading proxy advisory firms, whether broadly diversified or highly concentrated. A portfolio-wide focus for voting makes more sense for diversified investors and investors concerned with environmental and social issues.
Read moreMotivating Progress on Climate with CEO Compensation
Companies increasingly are incorporating climate-related metrics into CEO pay packages. The effectiveness of CEO compensation as an accountability mechanism, however, hinges on at least three key factors.
Read moreThe European Union Driving Sustainability and Actionable ESG Data Forward
The arena of sustainable investment is evolving globally. For the European Union, the impact is clear: to operate in the EU, companies must elevate their sustainability game and material data disclosures.
Read moreClimate Related CEO Pay Incentives Lack Rigor and Specificity
In the last few years, companies have begun to use non-financial metrics more often in CEO pay packages. In 2021, 52 percent of S&P 500 companies reported including ESG metrics in compensation while 69 percent said they will be included in 2022 compensation packages.than one-third, posing the significant challenge of decoupling emissions from the sector’s growth.
Read moreBoard Diversity Disclosure Identifies Leaders and Laggards
Boards are becoming more diverse and detailed disclosure provides a critical window into progress. Boards that are both diverse and inclusive offer multiple ways to look at strategy and risk and a lower likelihood of groupthink. Their selection process extends beyond the board’s immediate network and diverse boards connect companies to communities that represent large swaths of its customers, employees and/or business locations. For investors and also for researchers, the more specific the company’s disclosures, the easier it is to assess board composition compared to the demographics of key stakeholders and society at large.
Read moreEmployees Unaware of Climate Risk in Retirement Plans
One hundred million Americans have invested more than $10 trillion in retirement savings that likely are not aligned with their values. Many corporations strive to reduce material risk for all stakeholders by becoming more environmentally and socially responsible. But if they do not consider climate-related financial risks, most invest employees’ hard-earned savings in oil, coal-fired utilities and agribusinesses involved in deforestation, which means employees’ savings fuel climate change.
Read moreA New Investment Theory for Dealing with Systemic Risks
The definition of what it means to invest is changing. Today, investors are looking beyond their trading terminals and tackling investing risks in the real world, where value is created, as well as in the capital markets, where it is priced.
Read moreCost Externalization: A Bad Trade for Diversified Shareholders
The Shareholder Commons has filed or otherwise supported 19 shareholder proposals in 2022 that focus on systematic risks, including mis/disinformation, climate change, and antimicrobial resistance. The common thread running through these proposals is how a company’s externalized costs affect shareholders by reducing the value of other assets in their portfolios.
Read moreHow to Make ESG Pay Links More Effective
Shareholder resolutions requesting companies disclose plans to achieve net zero emissions by 2050 received increased support in the 2021 proxy season. While this is a positive development, companies must do more to cut emissions in half by 2030 to meet the Paris climate treaty goals. The way to make this work is to have a direct link to executive compensation packages. If the board sets a real financial incentive then executives will make it happen.
Read moreBoards Face "NO" Votes Due to Lack of Climate Governance Practices
Investors increasingly are ready to hold board members of U.S. public companies accountable for failing to appropriately oversee their companies’ climate-related risks and opportunities.
Read morePositive Signs on the Road to Board Diversity
Board diversity is improving, but this is not the time to back down. Companies, shareholders, and the overall economy benefit when board oversight better reflects the marketplace and draws from the broadest possible talent pool.
Read moreIs Blackrock Finally Aligning Climate Policy And Proxy Voting?
BlackRock CEO Larry Fink’s annual letters to investees and clients are hotly anticipated, including by shareholders seeking that the company use its proxy voting practices to be more supportive of climate change proposals.
Read moreBeta Activism: Benefit Corporations and External Cost Disclosure
For far too long, ESG activism has been defined by proposals designed to improve a company’s financial performance or reduce its risk profile. While “doing well by doing good” can create positive outcomes, it does not preserve systems under threat from profits achieved through externalized social and environmental costs.
Read moreFacebook's Encryption Plan Will Hide Online Child Sexual Exploitation
As the world’s largest social media company – and the largest source of reported child sex abuse online – Facebook’s actions have a major impact on global child safety. A resubmitted shareholder resolution seeks a report from Facebook that will assess the risk of increased child sexual exploitation that will occur if it implements a plan to offer end-to-end encryption on its platforms.
Read moreUsing “Rooney Rule” To Advance CEO Diversity
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.
Read moreAlphabet / Google Needs Board Oversight Committee On Human Rights
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 power and 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.
Read moreCorporations Redefine Themselves After 50 Years Of Shareholder-Primacy
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.
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