How to engage your investors on ESG issues during proxy season and beyond

By Mike Wallace and Sarah Corrigan

Spring brings a new proxy voting season, as shareholders exercise their right to raise issues of importance to company management, the board of directors and fellow shareholders. In recent years, the number of shareholder proposals devoted to environmental, social and governance (ESG) issues have increased at a fast pace. While institutional investors may not be involved in the majority of these proposals, companies should note that institutional consideration of ESG practices has grown significantly.

Last month, the Sustainable Investments Institute, Proxy Impact and As You Sow teamed up to publish their annual guide to proxy season, Proxy Preview 2015. This preview reveals that shareholders have filed 433 resolutions regarding ESG issues (excluding traditional governance proposals) through the middle of February, a slight uptick since the same time last year.

Of those proposals, the greatest proportions pertain to the environment and corporate political activity, at 27 percent and 26 percent, respectively. Many shareholders have withdrawn proposals as the result of corporate action, typically aided by discussions between the filing shareholder and the company’s investor relations team.

To read the full article please visit GreenBiz.com.

Ernst & Young publish 2011 Proxy Season Report

Ernst & Young just published its 2011 Proxy Season Report that features highlights and implications for the coming year. E&Y found the top five proxy season results to be:

1. Advisory votes on pay receive high support from shareholders in the first year of mandatory say-on-pay
2. Director opposition votes decline
3. Issue-shareholder engagement moves to a new level
4. Trends continue for implementation of greater accountability measures at the board level and elimination of barriers for shareholders to push change
5. Voting support demonstrates the growing value shareholders place on social and environmental issues

Overall the 2011 proxy season brought about significant changes to the governance landscape. Investors gained more rights through the Dodd-Frank Wall Street Reform and Consumer Protection Act. The ability to directly vote on executive pay practices and issue more frequent say-on-pay proposals provides investors with new avenues to express their opinions and views on executive pay. These new rights have also opened the door to better dialogue between issuers and shareholders.

These changes also imply that boards will feel increased pressure to keep up with trends and respond to results. Investors are expected to closely follow management responses to votes on say-on-pay proposals that receive strong support. Investors are more focused on the make-up of the board as well, with regard to gender, race and age. Boards will be challenged to defend their decisions on strategic objectives going forward, and analyze how executive compensation impacts long-term strategy and risk.

Two other interesting results from the 2011 Proxy Season include;

1. Proposals to appoint an independent board chair received average support and has not increased much over the years and may indicate investors believe boards should have discretion over their formation.
2. Proposals for diversity on boards has one of the fastest growth rates over the years and may indicate shareholders’ desire for more input on board makeup.

Support for corporate responsibility proposals also continues to grow.

To read the full proxy report please click here.

Investors target ‘fracking’, political contributions and network neutrality this proxy season

A wide variety of resolutions have been filed for this proxy season, targeting issues like fracking, political contributions, network neutrality and oil sands. Natural gas hydraulic fracturing is the subject of resolutions at 9 oil and gas companies including ExxonMobil, Chevron, Cabot and Southwestern. The resolutions call for the disclosure of plans for managing water pollution, litigation and regulatory risks, and were coordinated by the Investor Environmental Health Network and Green Century Capital Management with assistance from Ceres.

Investors involved are Domini, As You Sow, Trillium and Miller/Howard. New York City Comptroller John Liu and the city’s pension funds have called on 6 companies to disclose their political contributions, including Charles Schwab, Coventry Health, DTE Energy and Sprint. These companies in particular were unresponsive during the 2010 proxy season, while AES Corp, Altria, Humana and Norfolk Southern agreed to be more transparent.

Further, Liu called on Siemens to sever all ties to the US Chamber of Commerce, as they’ve ‘vigorously opposed’ environmental reform. Trillium alone filed several resolutions in January against companies such as Ford, Halliburton, Comcast, AT&T, Dentsply, ExxonMobil, ConocoPhillips and Chevron.

To read the full article on Responsible-Investor.com please click here.

 Responsible-Investor.com asserts that ‘battle lines have been drawn’ this proxy season with the issues that have been raised in the resolutions. How do you think the targeted companies are going to deal with it? Do you think they’ll oblige with the shareholders, or push back if they disagree? If there is pushback, what could the ramifications be for these companies? Discuss!