SocialFunds.com
06-13-07
Shareholders Push Social and Environmental Issues to the Forefront
by Anne Moore Odell
Proxy season 2007 sees a huge number of social and environmental resolutions
at US companies with the growing support of voters.
SocialFunds.com -- With weeks still left in the US proxy season, the 2007 season
is on track to set new record highs for the number of social and environmental
resolutions in front of shareholders. As of the end of May, there were 359 social
and environmental resolutions proposed, reports the Social Investment Forum
(SIF), the national association for the social investment industry. SIF used data
supplied from Institutional Shareholder Services (ISS).
Free SRI Mutual Funds GuideFour themes dominate the socially responsible
resolutions: the environment, political giving, executive compensation and
sustainability reporting. Sustainability reporting has already seen a 100%
increase with shareholders asking companies to increase their sustainability
reporting with 40 resolutions already filed, as compared to only 20 similar
resolutions in 2006. Shareholders are also concerned about how corporations
are spending their money in the political arena and are demanding clearer
disclosure of political contributions and trade association ties. Climate change
leads environmental resolutions, with 79 companies already facing votes on this
issue. Sixty resolutions on executive compensation have already been in front of
shareholders.
"Investor support for proposals asking for better corporate performance and
disclosure on social and environmental concerns has been rising fairly steadily
over the past decade, and the first vote results available from the 2007 season
are consistent with this trend," said Meg Voorhes, ISS Social Issues Services
Director.
Shareholders want more oversight of corporate political giving, with this issue
leading the social and environmental docket SIF reports. Forty-four resolutions
on this issue were voted on last year. This year, there have already been 62
resolutions filed by shareholders. Most of the proposals ask companies to
disclose the political contributions made with corporate funds. The proposals also
ask companies to include in this disclosure, dues paid to trade associations that
support political causes. Many companies belong to trade associations that reject
climate change while the companies themselves proclaim they are working to
mitigate climate change.
Companies seem to be responding to shareholder concern over political giving
with 17 companies so far this year agreeing to political disclosure, compared to
just two companies withdrawing over this issue four years ago. Investor are
voting in greater numbers for the proposals that make it to vote. In 2004 and
2005, only 10% voted for these resolutions, growing to 20% support so far in
2007. The Center for Political Accountability reports that a political contribution
proposal at Unisys received 51% support, the first time that this type of proposal
has had majority support.
Echoing the concerns of people all over the world on the changing climate,
shareholder at US companies are concerned if the companies they invest with
are considering the risks climate change poses. Thirty-nine climate change
proposals had been filed as of May 30. Climate change resolutions include a
number of different tacks including asking companies to reduce their greenhouse
gas emissions, report on their climate change strategies, and invest in renewable
energy.
Ceres, a nonprofit coalition of investors and environmental groups that works to
address sustainability issues, points to some of the major highlights on climate
change resolutions this year. ExxonMobil saw a 31% vote on climate change
issues this year, while its competitor CononoPhillips announced that it was
joining the US Climate Action Partnership and is also funding a $22.5 million
research program at Iowa State University that will help develop biofuel
technologies. The vote at another energy provider, Allegheny, showed a 39%
support of its climate resolution. Ceres also noted that Wells Fargo agreed, after
its proxy statement had been printed, do a climate assessment in three key
sectors of its lending portfolio and to share findings with the proponents.
Forty resolutions have been filed this year asking companies o create
sustainability reports. Yet less than half of the proposals filed will be voted on, the
SIF reports, as filers and companies have reached agreements. Many of the
resolutions ask the company to use reporting standards created by the Global
Reporting Initiative.
Another issue that bridges the environmental, sustainability and social are the
proposals that ask companies to address the toxic chemicals found in their
products or usedto make their products,
"The nearly 45% vote at Hasbro on a sustainability report, based on our concern
about polyvinyl chloride, was the second highest vote ever recorded for a
sustainability resolution opposed by management," said Dr. Richard A. Liroff,
Executive Director, of the Investor Environmental Health Network (IEHN), a
group of investment managers that work with their portfolio companies
concerning the toxic chemicals in their products.
Liroff continued, "Equally noteworthy, however, are the votes that didn't occur
because resolutions were withdrawn at companies that either made firm public
commitments to act, like Apple on PVC and brominated flame retardants or were
willing to begin conversations with filers on safer chemicals policies, like Sears
on PVC, Mohawk Industries on PVC and PFOA, and CVS on cosmetics."
Liroff pointed to several companies that are working on developing best practices
around toxic chemical reporting and sustainability. SC Johnson's Greenlist
program works to systematically reduce the toxicity of chemicals in SC Johnson
products and reports that thus far it has made progress towards its goal, and the
progress is cost-neutral.
"Nike's 'Considered Chemistry' program, pat of its 'Considered Design' program,
has also shown important progress," Liroff said. "Wal-Mart's "Preferred
Substances Policy" offers great potential, but still hasn't produced the critically
important "chemicals scorecard" to guide suppliers towards safer chemicals use,"
he added.
ISS reports that according to preliminary vote results over the 18 votes this year
on executive compensation as of May 18, support for shareholder advisory votes
has averaged 42.5%. Shareholders are also asking for changes in how
executives are rewarded stock options and for advisory votes on supplemental
retirement benefits executives receive if the company is sold. On May 9,
shareholders of Blockbuster voted 57% in favor of the "say on pay" proposal filed
by the New York City Employees' Retirement System.
"This is the first year that there has been a critical mass of resolutions on 'Say on
Pay'" Timothy Smith, Senior Vice President of Walden Asset Management and
SIF member told SocialFunds. "Last year there were just over 5votes. The
response has been a significant show of support for this reform with 4 votes over
50 % and many in the 40% to50% range, with an average at present of 42%. We
believe this indicates a range of investors, including those voting yes for the first
time, believe this is an important and necessary change."
Social and environmental resolutions are important vehicles for concerned
investors to let companies know what shareholders think is important. As support
grows for social and environmental issue, companies and their boards are seeing
that the environmental and social issues are not the domain of special interest
groups, but rather, important to many investors and, finally, to their company's
financial performance.