Data released by the Social Investment Forum and collected by Institutional Shareholder Services (ISS) show that 27 percent of the proposals on social and environmental issues that came to votes on 30 June were supported by more than 15 percent of the shares voted.
There is a clear trend of increasing support from US corporations for proposals that come to votes, including those focusing on disclosure of political contributions, fair employment policies and environmental issues including sustainability reporting.
“By contrast, only 15 percent of the social issues proposals that came to votes in 2004 and 2005 surpassed this level of support,” says Meg Voorhes, the director of the ISS Social Issues Service. “In fact, as best we can tell from Social Issues Service records back to 1973, this is a record year for the proportion of proposals getting support of 15 percent or more.”
So far in 2006, social proposals coming to a vote totaled only half the number of actual shareholder resolutions filed. This is due to effective discussions taking place between socially responsible shareholder advocates and companies. Most withdrawals reflect the fact that management either has agreed to take concrete steps sought by shareholders or to commence exploring possible actions on these issues. This year Wal-Mart, TD Ameritrade, Viacom, General Motors, Home Depot, Lowe’s, Apple, AT&T, Caterpillar, General Dynamics, Ford, Mattel, Goodyear, Coca-Cola and Staples entered into agreements with shareholder advocates.
“Mutual fund and institutional investors committed to working on social, environmental and governance issues continue to be a force in reshaping the practices of corporate America through the shareholder proxy process,” adds Tim Smith, the president of the Forum and the senior vice president at Walden Asset Management. “Not only are we seeing higher and higher levels of investor support for shareholder proxy resolutions, we also have more and more corporations deciding to sit down and meet with proponents to seek a win/win agreement on the issues as well as taking steps to improve their practices. Mutual funds and institutions that are willing to use their voice and influence as shareowners for positive change are seeing specific substantial results; they are clearly making a difference in company decision making.”
Of the 26 proposals by campaigns urging companies to provide information on political contributions, all but three received support of 10 percent or more, which ensures that may be re-filed again under SEC rules. This year, ISS supported these types of resolutions on a case-by-case basis, which helped boost votes in favor. Green Century’s proposal for Amgen received a high vote of 67.1 percent. Proposals also did well at Abbott Laboratories, AT&T, Bellsouth, Chevron, ExxonMobil, IBM, Monsanto, Pfizer, Target, Chubb, Verizon, Wachovia and Wal-Mart. Withdrawals at Bristol-Myers Squibb, Coca-Cola, Eli Lilly, McDonald’s, Southern and Staples occurred after the companies agreed to provide all the requested information.
Of the 77 shareholder proposals related in some way to the environment, 46 came to votes, including 10 proposals relating to greenhouse gas emissions, energy efficiency or climate change. The Nathan Cummings Foundation, Sierra Club and New England Friends filed proposals asking four companies to report on energy efficiency plans in light of growing public pressure. In a record-breaking vote on climate change, investors supported the proposal at Standard Pacific by 39 percent. Another high vote receiver was Trillium’s resolution asking Dominion Resources to report on and reduce its greenhouse gas emissions; it received 22.6 percent support. In addition, the Sisters of St. Dominic withdrew a resolution asking General Motors to reduce greenhouse emissions because the company increased its reporting on this subject.
The New York City pension funds are pushing companies to develop, implement and monitor a code of conduct for all operations and suppliers. This year’s resolutions were based on the eight core conventions of the International Labor Organisations and the UN Norms for Transnational Corporations. Of the 13 resolutions voted on, three received double-digit support, including 49.8 percent at Lear. A proposal by As You Sow asking Time Warner to develop a vendor code of conduct received 21 percent of the vote. Proponents withdrew 10 of the global labor proposals, including seven withdrawals by the New York City pension fund after winning substantial concessions. Avon Products, Chico’s, Ford Motor, Limited Brands, Mattel and Timberland all reached such agreements. Another global labor withdrawal was negotiated by Domini at Apple, where the company unveiled a comprehensive code.
Many US companies have yet to produce sustainability reports. Most resolutions ask companies to use the Global Reporting Initiative as a guideline. This year, out of the 18 resolutions asking for sustainability reports, half of the companies agreed to produce or assess the costs and benefits of producing sustainability reports. Of the nine remaining proposals, five companies received votes over 20 percent, with Terex receiving a vote of 48.4 percent. Other high votes include Wendy’s, Dean Foods and Safeway, and General Dynamics. Proponents withdrew sustainability report requests at American International, AT&T, Black & Decker, Caterpillar, Chesapeake Energy, Chubb, Illinois Tool and Marsh & McLennan.
In 2006, companies with all-male boards were questioned and challenged to change their board selection criteria by the mutual fund firm Calvert and church-affiliated institutional investors. After successful negotiations, only three of the 14 resolutions came to a vote. Calvert withdrew resolutions at six companies that agreed to amend their official criteria for board selection to include diversity: Astoria Financial, Cheesecake Factory, Commerce Bancorp, Danaher, Panera Bread and TD Ameritrade. Church groups reached agreements at American Greetings, Overseas Shipholdings and Viacom.
Of the five proposals for non-discrimination policies in the work place voted on in 2006, all received double-digit support. A resolution asking Exxon to amend its company nondiscrimination policy to include sexual orientation received just under 35 percent support. A similar first-year proposal at Leggett & Platt also did well, winning 24.7 percent. Investors also showed strong support for proposals asking companies to report their EEO policies in regard to women and racial minorities. At Home Depot, a second-year proposal along these lines, prompted by the company’s reversal of a 2001 decision to provide statistical data to shareholders on its work force by race and sex, won 35.9 percent, up nearly 6 percent from 2005. At Lockheed Martin, a similar proposal from religious investors won 25.1 percent the first time out. Resolutions were withdrawn at 14 companies after managements agreed to amend their policies or showed they already followed the requested practices.
Investors continue to strongly support proposals asking companies to adopt comprehensive human rights policies or to report their implementation procedures. Votes for such proposals were significantly higher this year, earning 23-25 percent, at Boeing, Chevron and Halliburton, up from 11-15 percent from the previous year. Religious investors continue to lead the charge in this area.