Sustainable Investment Engagement on Campus:
Shareholder Activism and the 2011 Proxy Season
AASHE Annual Conference
Pittsburgh
October 10, 2011
Overview
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Proxy voting as a corporate engagement strategy
Regulatory change affecting proxy season
Growing support for sustainability shareholder proposals
Hot topics raised by activists in 2011
Does it make a difference?
Corporate Disclosure and the SEC:
Regulatory Ferment
• Proxy Plumbing
– July 2010 concept release, Oct. 2010 comments under consideration
– First revision of U.S. proxy voting system in three decades
• New SEC Disclosure Requirements
– Material climate risks/opportunities now in annual reports (Jan. 2010 guidance)
– Board diversity considerations now in proxy statements (Dec. 2010 rule)
• Dodd-Frank Financial Reform Act Mandates
– New 10-K disclosure rules promised on pay disparity, conflict minerals, mine safety,
resource extraction payments to host governments – but backlash/delays
• EPA Greenhouse Gas Emissions Reporting
– 2009 Clean Air Act rulemaking, but implementation delays extended in Aug. to 2013
& 2015 on corporate reporting; Agency actions remain political battleground
• Political Spending Disclosure Proposed in July to SEC
Historical Context
U.S. Social /Environmental Proposals Filed, 2002-2011
450
400
Number of Proposals
350
183
250
145
200
182
201
300
198
182
180
195
200
Voted On
161
150
60
49
56
65
68
62
48
140
145
148
146
2008
2009
2010
2011
64
49
100
23
50
98
105
2002
2003
87
113
103
111
2005
2006
2007
0
2004
Sources: Sustainable Investments Institute (Si2), ISS, IRRC
Omitted
Withdrawn
Voting Trends
Support Trends for U.S. Shareholder Proposals, 2002-2011
100
25
90
20.5
20
18.4
17.4
70
15.3
60
11.9
50
40
14.1
13.3
15
11.4
9.8
9.4
10
30
20
5
10
0
0
2002
2003
2004
2005
2006
2007
2008
2009
Sources: Sustainable Investments Institute (Si2), ISS, IRRC
2010
2011
Average Vote
# over 20 percent support
80
Average Vote
# Over 20%
2010 vs. 2011 Proxy Season Filings
2010
2011
Other, 2%
Banking, 4%
Conserv., 4%
Other
9%
Animals/Food
10%
Diversity
11%
Political
Spending
15%
Health, 4%
Animals/
Food, 5%
Environment/
Sustainability
37%
Labor/Human
Rights
18%
Source: Si2 n = 404
Environment/
Sustainabilitly
33%
Diversity
12%
Labor/ Human
Rights
13%
Political
Spending
23%
Source: Si2, n = 404 as of 10-7-11
Current Status 2011 Proposals
140
120
100
56
Number up >50% from 2010
80
pending
60
40
20
50
voted on
withdrawn
57
22
13
16
4
24
16
27
7
4
0
Source: Si2
n = 404 as of 10-7-11
4
5
omitted
2011 Season Hot Topics
• Five Majority Votes (A Record)
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Layne Christensen (mgt-supported), sustainability, 93%
KBR, sexual orientation/gender ID policy, 62%
Tesoro, refinery safety & accident prevention, 54%
Sprint Nextel: political spending, 53%
Ameren: coal risks, 53%
• 20 Votes Above 40% (Unprecedented)
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Most (9) on political spending disclosure
5 on coal (Ameren) and fracking (Chevron, Carrizo Oil, Energen, Ultra Petroleum)
2 on refinery safety & accident prevention (Tesoro, Valero)
Diversity (KBR, Leggett & Platt) & human rights (OM Group – conflict minerals)
New Issues & Results in 2011 (1)
• Environment
– Climate Change: New regulatory context for GHG disclosure and goals requests (but average support
down from 2010)
– Natural Resource Management: Coal, fracking with most support (note Energen 49%)
• Sustainability
– Continued high votes for disclosure (34% avg) but less enthusiasm for links to pay (<8%)
• Political Spending
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Continued big Center for Political Accountability campaign (34% avg)
New proposal focused on reputational risks, e.g., Target & Best Buy (withdrawals)
“Say on spending” just one low vote so far at Home Depot (5%); P&G on Oct. 11
Labor lobbying proposals newly approved at SEC (IBM decision precedent) – 5 mostly high votes
Increased intensity in campaign for disclosure of industry “secret spending”
New Issues & Results in 2011 (2)
• Human and Labor Rights
– New UN Framework on Business and Human Rights released March 21 by Prof. John Ruggie
– Conflict minerals (cobalt) at OM Group (43%)
– Process safety at oil refinery companies – AFL-CIO proposals (deal at Sunoco, moot at
ExxonMobil. Varied votes: ConocoPhilips (8%), Marathon (7%), Tesoro (54%), Valero (43%)
• Banking
– NYC proposal votes at BoA (39%), Citi (29%), Wells Fargo (23%) on disclosure about loan
modifications, foreclosures. SEC: not “ordinary business.”
• Health Care
– Religious group attempt to raise drug affordability issue, but little investor support – national
legislative solution clearly needed and individual company action largely ineffectual.
– Insurance premium affordability filed at 5 biggest insurers but excluded on “ordinary business.”
Does it make a difference –
What more can you do?
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Responsible investing started in the social protest politics of the 1960s and the anti-Apartheid
movement. Students questioned the institutional status quo and changed it:
• Schools used endowment money and institutional prestige to help create the opportunity for
democracy in South Africa.
• South Africa divestment, anti-sweatshop campaigns, Sudan divestment, pressure for action on
climate change – all are about reshaping the capital markets for long-term sustainability.
“Occupy Wall Street” protests today tap into current widespread feeling that financial markets and large
companies are responding inadequately to growing societal inequality.
Three questions to take home:
1
Shareholder resolutions bring sustainability issues inside the board room and
focus top-level corporate attention on issues that otherwise often are ignored.
Does your school vote on
shareholder resolutions?
2
Integrating environmental, social and corporate governance (ESG) objectives
into investment management can change “business as usual.”
Does your school have an ESG
investment strategy?
3
Community investing in local institutions brings access to capital and economic
opportunity, another key responsible investment concept.
How does your school invest in
its local community?
About Si2
Organization
• Non-profit membership association launched in 2010, funded by consortium of 14 of the
largest-endowed U.S. colleges and universities and two large pension funds.
• Tracks organized efforts to influence corporate behavior, shareholder proposals, related topics
Briefing Papers
In-depth analysis of hot topics:
• Climate Change
• Natural Resource Management
• Sustainability Reporting
• Corporate Political Spending
• Equal Employment/Diversity
• Human Rights
• Labor Rights
• Industrial Food System
• Drug Pricing
Contact
Heidi Welsh, Executive Director
Engagement Monitor
Searchable online tool detailed prospective
proposal identification
and tracking of
outcomes
Action Reports
Impartial company- and
resolution-specific
research and analysis
for proxy voting
decisions
Special Projects
October 2010/ November
2011 political spending
governance studies, first
to benchmark S&P 500
Forthcoming:
• Hydraulic Fracturing
• Environmental &
Human Rights Risks in
the Niger Delta
heidi@siinstitute.org Tel. 301-432-4721
www.siinstitute.org