Environmental and Social Proposals in the 2017 Proxy Season

Thomas Singer is a principal researcher in corporate leadership at The Conference Board, Inc. This post is based on a publication from The Conference Board, authored by Mr. Singer and Ramsha Khursheed. Related research from the Program on Corporate Governance includes Social Responsibility Proposals by Scott Hirst (discussed on the Forum here).

The Conference Board recently released a report that reviews the key environmental and social (E&S) proposals in the 2017 proxy season. The report provides details on some of the most prominent topics, including topics which received high levels of shareholder support and topics that have seen notable changes in support levels compared to previous years.

The report reviews the period between January 1 and June 30, 2017. Of the 465 voted proposals brought to shareholders at Russell 3000 companies 201 related to E&S issues, making up 43.2 percent of proposals brought to a vote during this period. The report finds the volume of E&S proposals has consistently gone up in the past five years.

Although proposals on E&S issues received average support of only 21.4 percent of votes cast in 2017, support levels for these proposals continue an upward trend. For instance, in 2016 these proposals received average support of 19.7 percent of votes cast. The number of E&S proposals that have won majority support has also increased over the last few years: six proposals passed in 2017, compared to four in 2016 and four in 2013. The E&S topics that had successful proposals this year were recently summarized in a column on Chief Executive.

The uptick in successful E&S proposals can largely be attributed to a shift in the voting policies of traditionally passive investors. Large institutional investors, such as BlackRock and Vanguard, are beginning to exert pressure on companies by supporting E&S proposals that call for greater disclosure of issues they deem material to shareholder value.

The following are the E&S highlights of the 2017 proxy season:

Proposals calling for the disclosure of corporate political participation and/or lobbying policy/payments continue to be the issue most frequently brought to vote for the past few years. Proponents say disclosure enables shareholders to evaluate whether a company’s lobbying is consistent with the company’s expressed business goals and objectives and whether it may present any risks, particularly reputational risk. The Center for Political Accountability, for example, has been leading a campaign since 2003 for disclosure and accountability in corporate political spending, and shareholder engagement has been central to the organization’s campaign. The 57 proposals that went to a vote in 2017 received average support of 25.8 percent of votes cast, up slightly from 2016 when the average support was 24 percent for the 67 proposals. While no proposals on this topic passed in 2017, two proposals received support of over 40 percent of for votes.

Proposals on this topic typically seek disclosure of payments to trade associations (such as the US Chamber of Commerce) used for lobbying as well as support for tax-exempt organizations that write and endorse model legislation (such as the American Legislative Exchange Council (ALEC)). For example, a shareholder proposal submitted at AT&T requested the company prepare a lobbying report. [1] Proponents of the proposal argued that AT&T’s recognition of climate change as a serious concern is at odds with the company’s position on the board of the Chamber of Commerce, which has publicly criticized the EPA’s Clean Power Plan and efforts to address climate change.

Shareholder proposals asking companies to disclose the business risks related to climate change reached historically high levels of support. This year 18 proposals on climate risk disclosure were brought to a vote, up from 15 in 2016. These proposals have now reached historically high levels of support—average support of 39.2 percent of votes cast in 2017, up from 27.5 percent in 2016 and 16.7 percent in 2015. In fact, of the six proposals on environmental and social topics that passed this year, three of them called for climate risk disclosure. All three of these proposals were submitted at energy companies and all had a public pension fund as the main proponent. Notably, the New York State Common Retirement Fund was the most frequent sponsor of proposals on climate risk disclosure, sponsoring almost one-third of proposals on this topic.

Recent activity related to climate change risk disclosure is contributing to shareholders’ increased interest in this topic. In 2010, for example, the U.S. Securities and Exchange Commission (SEC) published the Commission Guidance Regarding Disclosure Related to Climate Change, a document to help guide public companies on what climate change-related disclosures must be made. More recently, in April 2016, the international Financial Stability Board’s Task Force on Climate Related Financial Disclosure (TCFD) sought public comment on its goal for creating disclosure recommendations to help companies practice “more methodical, comparable and consistent disclosure on climate-related risks and opportunities.” In its June 2017 report the TCFD recommended that preparers of climate-related financial disclosures provide these disclosures in their mainstream financial filings.

Some of the largest passive investors, including BlackRock and Vanguard, are now looking at climate change as a major investment risk issue and are beginning to exert pressure on companies to disclose and manage their climate-related risks. [2] This pressure is having an impact: more than one quarter of S&P 500 companies now disclose climate change risks in their annual reports, up from only 5 percent just three years ago. [3] As evidenced by the historically high levels of support for proposals on climate change risk disclosure, shareholders are likely to continue to engage companies on this issue.

Shareholders are increasingly calling for companies to adopt policies and measures to enhance employee and board diversity. In 2017 shareholders voted on 14 proposals related to diversity issues, up considerably from the five proposals brought to a vote in 2016. Of the 14 proposals on diversity issues, eight proposals asked for the preparation of a report on the company’s steps towards increasing board diversity (up from six in 2016). One of these proposals went beyond board diversity and asked for the company to work towards ensuring both board and senior management diversity. Two proposals on the topic of board diversity passed in 2017.

While the SEC introduced a board diversity disclosure requirement in 2009, the rule does little more than require companies to disclose how they consider board diversity. Critics point out that the current requirement does not define diversity nor does it offer investors sufficient and meaningful information on board diversity. The SEC, however, is working on a proposal to revise the existing diversity disclosure rule. [4] Revised disclosure requirements on board diversity may help shine more light on significant diversity imbalances among company boards. With respect to gender diversity, for example, women occupied less than 18 percent of Fortune 1000 corporate board seats in 2015. And while there has been progress, the current level of female representation is only a few percentage points higher than it was in 2011. [5]

Proposals related to employee diversity showed slight increases in both volume and support levels, going up from 4 proposals voted in 2016 to 6 voted in 2017. Support levels also increased from an average of 24.5 percent of for votes in 2016 to 26 percent of for votes in 2017.

A shareholder proposal on the topic of gender pay gap was first put on the proxy ballot of a US company in 2015, and since then the topic of gender pay gap has become one of the most frequently voted E&S topics during the proxy season. In 2017, 13 shareholder proposals were brought to a vote calling for companies to prepare gender pay gap reports. These proposals, the majority of which were sponsored by individuals, received average support of 12.1 percent of for votes. The volume of proposals on this topic was significantly up from 2016, when only five gender pay gap proposals were brought to a vote that entire year, receiving average support of 15 percent of for votes.

When the first shareholder proposal on this topic was brought to eBay in 2015 the proposal received a mere 7.4 percent of for votes. One year later, in 2016, support for the proposal at eBay surged to 44.6 percent of for votes. The significant increase in support for the proposal can be in part explained by a recommendation from proxy advisor Institutional Shareholder Services suggesting investors vote in favor of the gender pay gap proposal at eBay, stating that the resolution “is warranted, as eBay lags its peers in addressing gender pay disparity at its company.” [6]

Compared to last year, the number of proposals calling for companies to increase activity on the “Holy Land principles” rose considerably, making this one of the top five E&S topics of 2017 in terms of volume. In the January-June period, shareholders voted on 12 proposals related to the Holy Land principles, up from eight proposals in 2016. Support levels for these proposals remain very low, with average support of only 3.4 percent of votes cast.

Proposals on the Holy Land principles generally call for American companies conducting business in Palestine-Israel to practice fair employment. The Holy Land principles were launched by Father Sean McManus in 2012 and are based on the MacBride Principles, which Father McManus also launched in 1984.

Proposals asking companies to publish a sustainability report continue to gain support. These proposals call for companies to publish annual reports disclosing their various short term and long-term efforts related to environmental, social, and governance issues. In the first half of 2017 shareholders voted on 10 proposals on this topic, compared to 13 in all of 2016. Support for this topic reached historically high levels in 2017, with average support of 31.5 percent of for votes, up from 26.3 percent in 2016. In 2017 four proposals received over 30 percent of for votes, including one proposal that passed at Pioneer Natural Resources with 50.6 percent of votes.

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The complete publication is available for download here. For details regarding how to obtain a copy of the report, please contact [email protected]


1AT&T 2017 proxy statement, p.22, https://www.att.com/Investor/ATT_Annual/2016/downloads/notice_2017_annual_meeting_proxy.pdf (go back)

2“Financial firms lead shareholder rebellion against ExxonMobil climate change policies”, The Washington Post, May 31, 2017, https://www.washingtonpost.com/news/energy-environment/wp/2017/05/31/exxonmobil-is-trying-to-fend-off-a-shareholder-rebellion-over-climate-change/(go back)

3Sustainability Practices Dashboard, The Conference Board, November 2016, http://www.conference-board.org/sustainabilitypractices(go back)

4https://www.sec.gov/news/speech/chair-white-icgn-speech.html(go back)

5Every Other One: A Status Update on Women on Boards from the Committee for Economic Development, The Committee for Economic Development, November 2016, p. 5.(go back)

6“A surprising number of investors voted for a gender pay gap measure at eBay”, The Washington Post, April 28, 2016, https://www.washingtonpost.com/news/on-leadership/wp/2016/04/28/a-surprising-number-ofinvestors-voted-for-a-gender-pay-gap-measure-at-ebay/?utm_term=.ccc279476bf5(go back)

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