The Media – And Sustainability & CR Thought Leadership, For Both Topic-Focused and Mainstream Media Coverage

by Hank Boerner – Chair, G&A Institute

The “media” that we choose to get our news, commentary, research results, even crossword puzzles, movie reviews, the latest scientific papers and maybe information about what our friends are up to (such as “social media”) are usually self-selected.  

We tune in to what we want to read or watch or listen to…for information / education / entertainment…and it also helps to define us in many ways.

So here at G&A Institute as we broadly monitor for content related to both our day-to-day and long-term focus areas (the list of topics and issues is long), when we see these things pop up in “not-the-usual places,” we are cheered.

This weekend, for example, we picked up on the following, which were encouraging in that senior management publications are read beyond the folks involved in sustainable investing and corporate sustainability or ESG issues and topics.

In Focus:   MIT Sloan Management Review

This is the publication of the prestigious Massachusetts Institute of Technology’s MIT Sloan School of Management.  “Share Your Long-Term Thinking” was one feature article. Companies need to be more forthcoming about their strategies for long-term value creation when they communicate with investors — especially about ESG issues, write authors Tim Youmans and Brian Tomlinson.

Their observation is that over the past five years, CEOs have faced mounting pressure to produce short-term profits. CEOs do think about the long-term, have long-term plans (detailed and extensive) and these typically are closely held.  Result: corporate strategy and practice are not captured in investor communications.

They then offer six reasons why long-term plans should be disclose and how to do that.  One of these is to help investors understand ESG issues through the eyes of management — because a majority of investors see ESG factors as financially material and expect sound management of material ESG factors to deliver better performance over the long-term. 

Tim Youmans is engagement director for Hermes Equity Ownership Services and Brian Tomlinson is research director for the Strategic Investor Initiative at CECP.

They conclude for the magazine’s audience (aimed at corporate executives and senior managements in the main): “The long-term plan is a new tool in the regular sequence of periodic corporate-shareholder communications and represents an unprecedented opportunity for leading companies and investor together to drive sustainable value creation and help to clarify the role of the corporation in a sustainable society.”

That is not all for the MIT Sloan Management Review audience in the Spring 2008 issue.

“Why Companies Should Report Financial Risks From Climate Change” is another feature — this from Robert Eccles and Michael Krzus.  They  focused on the Financial Stability Board’s Task Force on Climate-related Disclosures [recommendations].

“Investors and the rest of the world is watching to see how companies will respond to the TFCD recommendations” — the ask here is that company managements will expand their disclosure to report on the risks and opportunities inherent in climate change in such documents as the 10-k.

Boston Common Asset Management LLC and ShareAction organized a campaign with institutions representing US$1.5 trillion in AUM participating to pressure financial institutions (especially banks) to implement the recommendations.

Companies should follow the recommendations, authors Eccles and Krzus argue, because this could lead to evolving better strategies to adapt to climate change — and be able to explain these strategic moves to the their investors.

They focus on the oil and gas industry, looking at disclosures in 2016 by 15 of the largest industry firms listed on the NYSE.  A few have made good progress in adhering to the TCFD recommendations (so there is not a “blank slate”); there is work to be done by all of the companies in enhancing their disclosures to meet the four top recommendations (in governance, strategy, risk management and metrics and targets areas).

Their article is an excellent summation of the challenges and opportunities presented for such companies as BP, Chevron, ExxonMobil, Sinopec, Statoil, Total, and others in oil & gas.

Bob Eccles is a well-known expert in corporate sustainability and sustainable investing and is visiting professor at Said Business School at the University of Oxford. Mike Krzus is an independent consultant and researcher and was a Fellow of G&A Institute.

Wait, there’s more!

The magazine’s columnists had important things to say as well.

Kimberly Whitler and Deborah Henretta penned “Why the Influence of Women on Boards Still Lags,” applauding the rise of the number of women on boards and offering two important criticisms — the growth rate is slowing and boards do that do have female members often limit their influence.

Although there are measurable positive results of female board inclusion — they cite Return on Equity averaging 53% higher in the top quartile than in the bottom — women still are not making more rapid inroads with fewer reaching the most influential board leadership positions, even with more women on boards than 10 years ago.

The authors set out ways for making more progress in board rooms.  And they advise: “For real, lasting change that wins companies the full benefits of gender-diverse decision-making, boards need to look beyond inclusion — and toward influence.”

Kimberly Whitler is assistant professor of business adminstration at the University of Virginia’s Darden School of Business; Deborah Henretta is an independent board director on the boards of Dow Corning, Meritage Homes Corp, NiScource Inc and Staples (she was a Proctor & Gamble executive).

There is much more for executives and board members in the issue, which has the overall theme of: “In Search of Strategic Agility – discover a better way to turn strategy into results.”

The content we outlined here is powerful stuff (our own technical term) to crank into corporate strategy-setting, and savvy execs are doing just that, as we see here at G&A as we pour through the more than 1,500 corporate reports we analyze each year with titles such as Corporate Sustainability, Corporate Responsibility, Corporate Citizenship, Corporate Environmental Sustainability, and more.

And so it is very encouraging when we wander beyond the beaten path of reading the reliable staple of sustainability-oriented and CSR-oriented media to see what the senior management thought leadership media are doing!

We recommend that you read through the Spring 2018 Strategy magazine from MIT Sloan.  Link: https://sloanreview.mit.edu/

The Role of Individual Investors in Prompting Governance Reform via the Proxy Process

guest commentary by Tim Smith – Walden Asset Management

We have all read a great deal about the concern that companies, the [US] Chamber of Commerce and SEC Commissioner Gallagher have about the “highjacking” of the proxy process.

Particular anger is aimed at John Chevedden, Bill Steiner  and James McRitchie who file multiple resolutions on governance reforms — like majority vote, annual election of directors, changing different classes of shares with unequal voting rights, right for shareholders to call a special meeting and separate Chair and CEO, among others.

Mr. Chevedden is criticized for some of the language in his resolution texts as well as his seeming unwillingness to change false and misleading statements in the whereas clauses . In fact, 4 companies sued him this year to block resolutions he submitted either for himself as a shareholder or for colleagues like James McRitchie.

But it seems much of the frustration is not aimed at him but at the strong positive votes for such reforms  supporting many of these proposals . On many governance issues he coordinates and files, votes are in the 30 to 40 % range AND as you will see below many get well over 50%. Few are low level vote getters.

So while questions can be raised about the style of Mr. Chevedden’s engagements, few can argue that they don’t touch a nerve and get a positive investor response .

That leaves one questioning why SEC Commissioner Gallagher sees this as an abuse and believes there should be an increase in the value of shares held for a proponent to US$200,000 or “even better $2 million.”  Of course, such a change would virtually wipe out the role of small individual investors in the proxy process.

Another way to view it is that these are valuable governance reforms being tested by individual shareholders who could certainly brush up on the facts in their whereas clauses and open up engagement with companies — but nevertheless add real value to an ongoing debate about best governance practices and actually stimulate numerous reforms by companies .

Why is a resolution filed by a major pension fund or investment firm on the same topic any more meritorious than one by an individual shareholder?

The votes seem to indicate that proxies are voted on the issue — not the proponent.

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–Timothy Smith, Senior Vice President and Director of Environmental Social and Governance Shareowner Engagement Walden Asset Management .

Boston, MA 02108 – Tel: 617-726-7155

tsmith@bostontrust.com

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FYI – Samples of Votes With Over 50% – Companies Receiving Resolutions from John Chevedden:

 

Costco Wholesale Corporation (COST)
Simple Majority Vote
James McRitchie
65%

Brocade Communications Systems, Inc. (BRCD)
Special Meeting Kenneth Steiner 60%

Allergan, Inc. (AGN)
Independent Board Chairman
John Chevedden
50%+

BorgWarner Inc. (BWA)
Simple Majority Vote
John Chevedden
79%

Brink’s Company (BCO)
Annual Election of Each Director
William Steiner
78%

Bristol-Myers Squibb Company (BMY)
Simple Majority Vote
Kenneth Steiner
85%

Chipotle Mexican Grill, Inc. (CMG)
Simple Majority Vote
James McRitchie
75%

Duke Energy Corporation (DUK)
Special Meeting
John Chevedden
60%

iRobot Corporation (IRBT)
Simple Majority Vote
James McRitchie
82%

PPL Corporation (PPL)
Special Meeting
William Steiner
59%

NextEra Energy, Inc. (NEE)
Simple Majority Vote
Myra K. Young
73%

Alexion Pharmaceuticals, Inc. (ALXN)
Pill
John Chevedden
91%

Ferro Corporation (FOE)
Simple Majority Vote
Kenneth Steiner
99%

Neustar Inc (NSR)
A
nnual Election of Each Director
John Chevedden
86%

Staples Inc. (SPLS)
Independent Board Chairman
John Chevedden
50%+