Springtime in North America – A Time Featuring Corporate-Investor Engagement and Proxy Voting on Critical Issues

April 20 2021   Spring is in the air!  Proxy Season 2021 getting underway.  So how did we get here?  Some history and springtime news. 

by Hank Boerner – Chair & chief Strategist – G&A Institute

Springtime comes to the USA and and the Northern Hemisphere countries with pretty flowers in bloom, trees budding, the onset of warmer weather.  And…

Asset owners and their managers participating willingly or reluctantly in the peak months of corporate proxy voting season in North America.

Typically, the corporate issuer develops the resolution(s) for voting by the shareholder base – for example, election of slate of nominees for the board and approval of the outside auditing firm.

And then… there are the resolutions prepared by the shareholders, and these are usually not to board and executives’ liking.

Thought you might be interested in some of the history of shareholder activism.  In the earlier days of shareholder activism certain “gadflies” would offer up their resolutions for inclusion in the voting (typically then, by individual investors).

Brothers John and Lewis Gilbert and a few others of similar thinking would gin up their resolution drafts and then face the challenge by the target company could be expected.

Some still around remember the ever-present at annual meeting Evelyn Davis, a Dutch Holocaust survivor with strong feelings and lots to say about how companies she invested in were being managed .

The Gilbert siblings operated “big time” in proxy season; they owned shares in 1,500 companies and attended at least 150 corporate annual meetings each year. T

They were often characterized as showmen (kicking up a storm at companies like Chock Full o’ Nuts and Mattel and other companies’ meetings.) Right after WW II John Gilbert got the SEC on the shareholders’ side; the regulatory agency started to require that companies include relevant shareholder resolutions in the annual proxy statement (of course certain conditions applied then and now).

Over time, this process became more sophisticated as many institutional owners put corporate equities in portfolios and steadily a certain number became activist investors. (

It really helped that the US Department of Labor leveraging ERISA statutes and rules  reminded US institutional investors that their proxy was an asset and voting was a clear responsibility of the fiduciary-owner.

In 1988, Assistant Secretary of Labor Olena Berg reminded pension fund managers of the “Avon Letter” that posited that corporate proxies are a pension plan asset and should be taken seriously and voted on.

One of today’s proxy voting / corporate governance experts with wide recognition and respect is California-based James McRitchie (principal of Corpgov.net).

In a communication to the US SEC in November 2018, he explained that he and other investors engage companies on ESG issues “to enhance their long-term value and to ensure corporate values do not conflict with the long-term interests of a democratic society.”

He suggested: “Corporations should welcome shareholders into the capitalist system as participants in major decision.”

In proxy season 2021, the “crisis stories” of 2020 and earlier years continue as public dialogue at least in the form of shareholder requests / demands / expectations of the companies that are in the portfolio on important societal issues.

Climate change action, racial justice/injustice, diversity & inclusion, inequality – these are high on the list for this year’s voting.

We have selected three Top Stories for you on the themes of 2021 voting. The not-for-profit Ceres organization, long active in ESG proxy voting issues, highlights the focus on science-based emissions reduction plans, and corporate policies aligned with the goals of the 2015 Paris Agreement. There are 136 climate-related shareholder-sponsored resolutions submitted to public companies as of April 2nd for 2021 voting.

The good news is that a number of these have been resolved in investor-corporate dialogues at Domino’s Pizza, Citigroup, JPMorgan Chase, and other firms. Others were withdrawn at Duke Energy, CSX, and Valero.

Climate-related themes for resolutions include “Banking on Low Carbon”, “Carbon Asset Risk”, and “Say on Climate”.

Long-time shareholder activist Tim Smith is Director of ESG Shareowner Engagement at Boston Trust Walden and member of the Ceres Investor Network. Ceres continues to track such resolutions and information is available at www.ceres.org.

The authoritative Pensions & Investments publication shares news about a new website — Majority Action’s “Proxy Voting for a 1.5 C World”.

Four key sectors are in focus: electricity generation, oil & gas, banking, and transportation, with summaries of corporate current emission targets, capital allocations and policy activity relate to climate change. (Reaching net-zero emissions by 2050 is an example of issue in focus.)

The web site offers recommendations for voting against director nominees at companies failing to implement plans “consistent with limiting global warming” by industry/sector.

In banking the web site names Wells Fargo, Goldman Sachs, and JPMorgan Chase. Issues in focus overall include Climate Change, Community Development / Investment, Gender Equality, and more.

Third – the Yield Positive web platform offers excellent background on shareholder resolutions and the current state of affairs following the dramatic events of 2020 – racial inequality highlighted by the killing of George Floyd; worker health and safety protections in the Covid pandemic; climate change issues – with examples of the resolutions coming up for vote in 2021.

These include Home Depot – Report on racism in the company; Target – Report on/end police partnerships; Wells Fargo – report on financing Paris Agreement-compliant GHG emissions cut, and more.

The 2021 spring season of corporate proxy voting and then the voting at company issues to Fall 20231 will be closely followed by business media and of course, the global investing community. We will continue to share news and perspectives about this annual exercise of “shareholder capitalism”.

TOP STORIES – April 2021

It’s Proxy Season 2021: Investors Focus on Climate Action

FYI

 

Selling in the Agora or Connecting Online – Consumer Products Companies Adapt to Growing Demand for Sustainable Products

June 20 2021  – Here we go shopping!

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Selling “at retail,” both direct to consumers and through business partners to consumers in both digital and physical spaces, is a rapidly- changing (every day!) area of the North American economy.

Think of the upheavals in the once-staid and steady consumer retail marketplace in recent years.

Tiny Amazon came to life in summer 1994 in Washington State founded by a former Wall Streeter, Jeff Bezos. The first products offered were books (with human editors writing summaries!).

By 2020, the company had reached annual revenues of US$386 billion (up $38% over 2019) with net profits of US$21 billion (up 84% over 2019) – with an amazing array of products moving to consumers.

Amazon was the “go-to” retailer for many people in the sheltering-in-place days of the Covid pandemic. Need “it”? Chances are Amazon’s “got it” as the company’s inventory of products and methods of delivery have been dramatically expanding. And disrupting many other retailing organizations.

The largest U.S.-headquartered, “location-based” as well as remote order retail organization selling direct to consumers is Walmart, with 11,443 stores, 404 distribution centers and 2021 fiscal year sales of $559 billion worldwide.

Consider that Walmart is the largest retailer on the globe — including being the #2 digital retail marketer. All this from small beginnings as storefront stores in Arkansas founded by Sam Walton and family in 1962. By 1967, there were 24 stores with a healthy $12 million in annual sales.  Walton Stores morphed to “Wal-Mart Stores”.

Walmart today is also a business disrupter for many other retailing organizations and for companies in the middle all along the value chain from farm-to-factory-to-shelf and table. But there are other disrupters as well in the digital retail marketing space.

Top web-based retailers today include Apple (at #3, just passed by Walmart), Dell, Best Buy, Home Depot, Target, Wayfair, Kroger, and Staples.

In 2020, the U.S. Department of Commerce estimated that retail sales topped $4 trillion in the United States. While e-commerce grew by 44% to become $1-in-$5 of all retail sales, “in-store” sales still dominated the retail space.

There are more than one million retail establishments across the breadth of the U.S., and even the 50 top retailers with online presence operate stores (a hybrid model).

Fixed-space retailing is still very popular with consumers – “wandering the Agora” has been a favorite pastime for many of us since the classical times in ancient Greece and down through the ages.

The Athens agora was an important city and just part of the agora of settlements in Greece; this was the center of economic activity and the consumer marketplace for goods…as well as for sharing ideas.

Today’s huge malls are a sort of equivalent but minus the philosophers holding forth.

What about large consumer products companies selling to consumers in domestic and global marketplaces, mostly through value chain partners ranging from Walmart and Amazon to supermarket chains?

How are these companies managing their way through the embrace of sustainable products by a growing number of consumers?

We have selected three firms to look at this week who are leaders in terms of their corporate ESG profile: Kellogg’s, Colgate-Palmolive, and PepsiCo. Some top lines for you:

Kellogg’s is partnering with 440,000 farmers in 29 countries to promote climate, social and financial resiliency (this is the “Kellogg’s Origin” program). The company’s Kashi subsidiary began to partner with local growers (wheat, corn, rice, sorghum) to help transition from traditional farming to organic farming. The food manufacturer / marketers’ programs are outlined in the story from Baking Business (see link below).

Colgate-Palmolive is reporting on its corporate sustainability journey with updates on its “purpose” progress – re-imagining a healthier future for all people, their pets, and our planet.

News: 99 percent of Colgate-Palmolive products launched in 2020 have improved sustainability profiles – that should be attractive to this large company’s customers.

PepsiCo is a large multinational enterprise marketing beverages and snacks around the world. The company is coming out in support of the idea of better “environmental labelling,” as the European Union considers as part of its “Farm-to-Fork” strategy a sustainable food labelling framework. PepsiCo is generally on board, says its director of environmental policy, Gloria Gabellini, with the idea that consumers have the right to expect transparency from the producers.

And so – for consumer purchases in the digital space or taking place in a fixed location (the venerable physical storefront) – consumer products companies are recognizing the shift underway with many more buyers seeking “sustainable” products (especially for consumables).

These food, beverage, personal products, and related products are disrupting their own businesses to remake the model.

Think of retailing – including wandering the Agora of the 21st Century – as an ever-changing economic activity.

Free-range chicken for dinner tonight, anyone? Even farming practices considered “old” or traditional are coming back into vogue for consumers.

TOP STORIES

Corporate Progress

G7 Developments

The “G7” are heads of governments of the leading economies of the world – United States of America, France, Germany, United Kingdom, Japan, Italy, and Canada.

These sovereigns represent about 60% of global net wealth and almost half of global GDP. The European Union has representatives at the G7’s annual summit. G7 decisions influence the major economies of the world. So – these steps need to be monitored going forward:

CEOs & Business Leaders Speak Out on Voter Rights – Corporate Citizenship, USA-style On Display

April 14 2021

By Hank Boerner – Chair & Chief Strategist – G&A Institute 

Corporate America and “Corporate Citizenship” – Today, that can mean lending the CEO and company voice to address critical societal issues in the United States of America.  Some applaud the move, while others attack the company and its leader for their position on the issues in question.   

In this context, powerful messages were delivered today from the influential leaders of the US corporate community – clearly voicing concern about the American electoral process and the rights of all qualified voters in the midst of mounting challenges to the right-to-vote. 

What the CEOs, joined by other influentials in the American society, had to say to us today:

As Americans we know that in our democracy we should not expect to agree on everything.

However – regardless of our political affiliations, we believe the very foundation of our electoral process rests upon the ability of each of us to cast our ballots for the candidates of our choice.

We should all feel a responsibility to defend the right to vote and oppose any discriminatory legislation or measure that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.

Who is saying this? A list of bold name signatories in an advertisement that appears today in The New York Times and The Washington Post – these messages (these above and more) splashed across two full pages (a “double truck” in newspaper language) with a dramatic roster of prominent names from Corporate America. And prominent accounting and law firms with bold name corporate clients. And not-for-profits. And individuals. Celebrities.  People and organizations that every day in some way touch our lives. 

This advertisement certainly continues to set the foundation in place for pushback by powerful people and organizations as various state legislatures take up electoral voting measures. And pushes back against the “Big Lie” that the November 2020 elections at federal, state and local levels were widely fraudulent.

The names on the two pages jump out to capture our attention: Apple. American Express. Amazon. Dell Technologies. Microsoft. Deloitte and EY and PwC. Estee Lauder. Wells Fargo. BlackRock. American Airlines and JetBlue and United Airlines. Steelcase. Ford Motor and General Motors. Goldman Sachs. MasterCard. Vanguard. Merck. Starbucks. IBM. Johnson & Johnson. PayPal. T. Rowe Price. And many more.

CEOs including Michael R. Bloomberg (naturally!). Warren Buffett. Bob Diamond, Barclay’s. Jane Fraser, Citi. Brian Doubles, Synchrony. Brian Cornwell, Target. Roger Crandall, Mass Mutual.

Luminaries joined in as individual in support of the effort: David Geffen. George Clooney. Naomi Campbell. Larry David. Shonda Rhimes. Larry Fink. Demi Lovato. Lin-Manuel Miranda. Many more; think about the influence of their influencers in our American society in 2021.

And we see the names of these law firms: Akin Gump. Arnold Porter. Milbank. Morgan Lewis & Bockius. Fried Frank. Cleary Gottlieb. Holland and Knight. Ropes & Gray. (If you are not sure of who these firms and many more law firm signatories are, be assured that in the board room and C-suite and corporate legal offices these are very familiar names).

And the “social sector” institutions/organizations signing on include leaders of the Wharton School, Morehouse College, Spelman College, University of Pennsylvania, Penn State, NYU Stern, United Negro College Fund, Hebrew SeniorLife, and Council for Inclusive Capitalism.

The New York Times covered the story of the advertising message in an article in the Business Section – Companies Join Forces to Oppose Voting Curbs (bylined by Andrew Ross Sorkin and David Gelles). Subhead: A statement that defies the GOPs call to stay out of politics.

The effort was organized by prominent Black business leaders including Ken Chennault, until recently the highly-regarded CEO of American Express, and Ken Frazier, the also-widely-admired CEO of Merck.

Recall that Senate Minority Leader Mitch McConnell corporations said that corporations should “stay out of politics”. The recent State of Georgia legislation addressing voting rights was a trigger for prominent corporate leaders (such as heads of Coca Cola, Delta Airlines, both headquartered in Atlanta) to criticize measures that could deter or inhibit minority voter populations from exercising their rights.  Leader McConnell reacted to this. 

The Times quoted Kenneth Chennault: “It should be clear that there is overwhelming support in Corporate America for the principle of voting rights…these are not political issues…these are the issues that we were taught in civics…”

Also made clear: The CEOs, social influential and thought leaders including celebrities involved in the ad message effort were non partisan and not attacking individual states’ legislative efforts.

Remember The Business Roundtable’s recent re-alignment of the groups mission statement to focus on “purpose”? According to the Times report, the subject of the ad effort was raised on an internal call and CEOs were encouraged to sign on to the statement; many CEOs did.

Where does this go from here? Corporate executives are speaking out separately on the legislative measures being discussed in individual states that appear to or outright are clear about restricting rights of minority populations. That happened in Georgia recently. Coca Cola and Delta Airlines were hit with criticism; those companies were not signatories on the ad today. Home Depot (also HQd in Atlanta) waffled; the company is not represented on the signatory line nor was there public criticism of the legislature’s effort.

Perspective: While corporate citizenship has been an area of focus and public reporting for many years at a number of large cap public companies, the glare of publicity centered on the question of “what are you doing to help advance society on critical issues as a corporate citizen” is more recent.

The spotlight is intensifying on voting rights (as we see today) and also on climate change, diversity & inclusion, human capital management (especially in the Covid crisis), investment in local communities, in supporting public education, in hiring training & promotion of women and minorities, doing business with nations with despot leaders (think of Burma/Myanmar), equality of opportunity for all populations…and many other issues.

And so today’s advertising splash with CEOs especially putting their stake and their company’s stake in the ground on these types of issues is something we can expect to see continue and even expand in the coming weeks.

The division lines in the USA are certainly clear, especially in politics and public sector governance, and we are seeing that corporate leaders are responding to their stakeholders’ expectations…of being “a good corporate citizen”.

And it’s interesting to see the perspectives shared that even the meaning and understanding of the responsibilities of the “corporate citizen”) is defined along some of the lines that divide the nation.

Interesting footnote:  Clearly illustrating the political and philosophical divide, the members of the Republican Party who are organized as the opposition to the GOP today — The Lincoln Project — called on followers to sign on to an email that singles out JetBlue (one of the ad signatories) for contributing to political campaigns of what the Lincoln Project calls “seditionists”.  These are elected officials who “support voter suppression”. Says the project: If enough of us make it clear that we won’t stand inequality, voter supression and sedition, we will make a difference.

The battle lines are clearly drawn in voting rights issues. 

The advertisement today:

April 14 2021 – The New York Times and The Washington Post messages:

 

 

 

 

Conversation with Professor Baruch Lev at NYU: Is Accounting Outmoded?

The book: The End of Accounting.

July 17, 2017

by Hank Boerner – Chairman and Chief Strategist – G&A Institute

Questions:  Is Accounting as we know it now outmoded … beyond Its usefulness to investors? We share with you today the views of a global thought leader on Accounting and Corporate Reporting — Dr. Baruch Lev of Stern School of Business at New York University.

Professor Lev’s shares his views of the vital importance of intangibles to investors, with his call for far greater corporate transparency being needed … including his views on the importance of CSR and sustainability.

His latest work:  The End of Accounting – and the Path Forward for Investors and Managers — authored by Dr. Baruch Lev and Dr. Feng Gu of the University of Buffalo/ SUNY.  The professors’  important new work is the result of three years of research and collaboration, In the book they that suggests new approaches are needed to reform “old” accounting practices to provide more information of value to investors, who are mostly ignoring corporate accounting.

And as read the book, we were thinking:  what about ESG – CSR – Sustainability – and other new approaches that do focus on many intangible aspects of corporate operations?  We had a conversation with Dr. Lev and share his views on this and more with you today.

After reading the book, readers may ask:  Is this about the “The End of Accounting?” Or, “The Beginning of Really Useful Financial Information for Investors?”  My view:  It’s both!

And we discuss needed reforms in corporate reporting, for you to think about:  Are U.S. public companies prepared to publish the authors’ recommendations for a Resources and Consequences Report for investors’ benefit?  Read on to learn more…

And for sustainability / CSR professionals: This is an important new work for your consideration that focuses on the importance of intangible information for investors to help guide their decision-making.

First, some background:

Accounting as we know it has been around for 500+ years. Fra Luca Bartolomeo de Pacioli, the Italian mathematician (c 1447-1517) set out the principles of the double-entry bookkeeping system for the merchants of Old Venice in his 1494 work, Summa de Arithmetica, Geometria, Proportioni et Proportionalita, a very important textbook of the day.

This “Father of Accounting” put forth the important concepts of ledgers, journals, credits and debits (and the balancing of same); A/R, A/P, Cost Accounting and much more. His is a rich legacy in the accounting and business worlds. **

But now, Professor Baruch Lev posits in his work with colleague Professor Feng Gu, we really need to reform this five-century-old approach to how we account for the financials and think and act way beyond the traditional.

Their Recommendations:

Let’s begin with the corporate “intangibles” – some investment professionals still speak of a company’s ESG / Sustainability / Responsibility strategies, programs and actions, achievements, and the burgeoning reportage of same (data & narrative) as addressing the intangibles (and not “the tangibles,” represented by the financial data).

But many analysts and asset managers look far beyond the financials to help determine the valuation of a public issuer. For example, veteran financial analyst Stephen McClellan, CFA, formerly VP and head of research for Merrill Lynch and author of the best seller, “Full of Bull,” has told conference audiences that as much as 80% of a corporate valuation may be based on the intangibles.

Writing for investors, Professors Lev and Gu put forth their suggestions for dramatic accounting and corporate reporting reform. They “establish empirically” in their work that traditional corporate accounting is failing investors and reforms are needed.

Their recommendation: have companies publish a “Resources and Consequences Report” with five main elements:

  • Development of [Corporate] Resources;
  • Resource Stocks;
  • Preservation of Resources;
  • Deployment of Resources;
  • Value Created.

Some of the information could be financial, as in today’s disclosures. But other information could quantify data, and there could be qualitative information as well. (Sounds like we are looking at some of the sustainability reports of corporate sustainability leaders?)

The elements of the report the good professors recommend:

Development of Resources: Detailed descriptions for investors of the company’s important internal research efforts, the R&D advances, the further development of present technologies to leverage to create value, etc. After “proof of concept,” how does the R&D contribute to the value of the company?

Resource Stocks: The company’s intellectual properties, the assets that are the foundation of investor value. (Patents, trademarks, processes, etc. — all “intangibles” that are in fact very tangible to investors.)

Preservation of Resources: The safety/security of such things as a company’s digital assets, IT, IP, and so on; are there cyber attacks? Was there damage – to what extent? What does the company do about these attacks? How does the company manage and secure its acquired knowledge?

Deployment of Resources: As the company creates “value,” how are the strategic resources deployed? How does the company use its intellectual assets?

Value Created: Here the professors would like to see reported the dollar results of all of the above. Companies would describe the changes in Resource value(s), and describe the nature of value (for a company with a subscription model, what is the value of the individual subscription; what is the value of a brand, etc.)

Notes Dr. Lev: “We suggest and demonstrate a new measure: adjusted cash flows.”

Highlights of our conversation:

G&A Institute: Your new book offers very powerful arguments for fundamentally changing present-day corporate accounting and the way that investors do or do not pay attention to that accounting in their analysis and portfolio decision-making. There are a lot of vested interests in the present system; can the accounting and corporate disclosure and reporting systems be changed to reflect your recommendations?

Dr. Lev: Things change very slowly in accounting policies and practices. The systems is changing, in that public company managements are disclosing a considerable amount of information that is beyond that required for SEC filings, in the areas that we touch on in examples in our book. So there is progress. But not fast enough, I believe, to really serve investors.

G&A Institute: The SEC months ago published a Concept Release requesting public input on the present methods of corporate disclosure. We were encouraged to see more than a dozen pages in the document devoted the question of ESG metrics, sustainability information, and the like. Your thoughts on this?

Dr. Lev: We have not seen any further communication on this and there are no rules proposed. Will the new administration take any of this seriously?

Observes Dr. Lev: There are now many corporate financial statements that virtually no one understands. There is great complexity in today’s accounting. When we look at the US Environmental Protection Agency and environmental rules, we see that once rules are in place, they are constantly debated in the public arena. Unlike the EPA situation, there is presently no public interest in debating our accounting rules.

G&A Institute: Well, let me introduce here the subject of the SASB approach — the Sustainable Accounting Standards Board (SASB). Of course, the adoption of the SASB approach by a public company for adopting to their mandated reporting is voluntary at this time. What are your thoughts on this approach to this type of intangibles disclosure?

Dr. Lev: Well, the SASB recommendations are built on top of the present approach to accounting and reporting. In effect they leave the financial reporting system “as is,” with their rules built on top of a weak foundation as we outline in the book. I’ve said this at the SASB annual conference and my comments were very well received.

I did point out that the SASB approach is quite useful for investors. But the demand for voluntary disclosure by companies could create an invitation for lawsuits all over the world, if certain disclosures were made regarding a company’s environmental impacts.

G&A Institute: Well, aren’t investors seeking information such as environmental performance, as well as related risk, opportunity, more of the “E” of ESG strategies, performance, and metrics?

Dr. Lev: It depends on the setting. Our book was in process over a three-year period. My co-author and I devoted an entire year to analyzing hundreds of quarterly analyst (earnings) calls. Keep in mind that an analyst may have just one opportunity to ask the question. There were no — no — questions ever raised about ESG performance, corporate sustainability, and related topics. We reviewed, as I said, hundreds of earnings calls, with about 25-to-30 questions on each call.

G&A Institute: What kinds of questions may be directed to corporate managers on the calls about intangible items?

Dr. Lev: There were questions about the R&D efforts, the pipeline for example for pharma companies. Customer franchise was an important topic. Changes in U.S. patent law resulted in much more information being disclosed by the U.SPatent Office related to the filings. The entire argument made for patent filing, for example, and this is a subject the analysts are interested in.

G&A Institute: Are there any discussions, analyst and corporate, about ESG/sustainability?

Dr. Lev: Yes, these questions are mostly in the one-to-one conversations. A challenge is that in my opinion, the ESG metrics available are not yet at investment-grade. There is a good bit of investor interest and discussion with companies about sustainability. The factors are quite relevant to investors. But the “how-wonderful-we-are” communications by large public companies are not really relevant to investors.

G&A Institute: What kinds of information about the CSR or environmental sustainability intangibles, in your opinion, is of importance to investors?

Dr. Lev: Think about the special capabilities of the public corporation. The organization typically has special capacity to do good. Not just to donate money, which is something the shareholders could do without the company. But to share with the stakeholder, like a community organization, the special know how and other resources to make good things happen. The world really expects this now of companies. Call it Corporate Social Responsibility if you like.

The Cisco Example

Explains Dr. Lev:  Cisco is a fine example of this. The Company has a Networking Academy, and they invite people to enroll and take free educational courses to learn more about networking. There have been millions of people graduating from this academy and receiving certificates. Cisco management leverages its special capacity in doing this. And it is a good idea if you think about the impact of this far-sighted approach to generate more interest in and business with Cisco.

The Home Depot Example

Another example he offers is Home Depot. The company teams with an NGO – Kaboom — to build playgrounds for children. In terms of special capacity, HD does provide materials, but also provides company legal talent to help situate the playgrounds in the neighborhood. That is far more than throwing money at a community need.

Dr. Lev Observes:  I think one of the issues is that the terminology is not clear. CSR — what is it? Good or bad for investors? Having good ideas and special capabilities is key, I think.

We asked about Dr. Milton Friedman’s Views on CSR

G&A Institute: This brings us to one of your former colleagues, Dr. Milton Friedman of the University of Chicago, who famously wrote in a New York Times magazine article that CSR is, in effect, hokum, and not the business of the company. Shareholders well being should be the main focus, and through dividends and other means, if a shareholder wants to give the money away, they can do that…not the company.

Dr. Lev: I was a student of Dr. Friedman and later a colleague at the University of Chicago after I got a Ph.D. He was a brilliant man. In my opinion, he was the greatest economist of the 20th Century and I put him on a pedestal. He liked to introduce a subject and then generate great debate on his suggestions, which he felt people could accept or reject. That, I think, is the case with his famous commentary on CSR. See, we are still debating his views today. He was proved right so many times during his time.

G&A Institute: Let’s conclude this talk with a question: Do you see a value for investors in accepting, or better understanding, such terminology as CSR and sustainability and sustainable investing?

Dr. Lev: Yes, these are important approaches for companies and investors. Four years ago I devoted a chapter to CSR in my book, “Winning Investors Over.” My views are fully set forth in the recent article, “Evaluating Sustainable Competitive Advantage,” published in the Spring 2017 issue of Journal of Applied Corporate Finance.

Notes Dr. Lev:  About “CSR” — there are other terms used, of course. Varying titles are very confusing. It is not always clear what CSR or sustainability may mean. For example, the Toyota Prius is a good approach to auto use. Is manufacturing that car “good CSR,” or just good business? A measure of sustainability? CSR is hard to define, sometimes. Good corporate citizenship is good for business and good for society, I believe.

G&A Institute: Thank, you Dr. Lev, for sharing your thoughts on accounting and the reforms needed, in your book and in this conversation.

# # #

Footnotes:

The book:: The End of Accounting – and the Path Forward for Investors and Managers … by Dr,Baruch Lev (Philip Bardes Professor of Accounting and Finance at the NYU Stern School of Business and Dr. Feng Gu (Associate Professor and Chair of the Department of Accounting and Law at the University of Buffalo).

Published by Wiley & Sons, NY NY. You can find it on Amazon in print and Kindle formats.

# # #

Dr. Baruch Lev is the Philip Bardes Professor of Accounting and Finance at New York University Leonard Stern School of Business; he teaches courses in accounting, financial analysis and investor relations. He’s been with NYU for almost 20 years.

Dr. Lev is author of six books; his research areas of interest are corporate governance, earnings management; financial accounting; financial statement analysis; intangible assets and intellectual capital; capital markets; and, mergers & acquisitions.

He has taught at University of Chicago; the Hebrew University of Jerusalem; Tel Aviv University (dean of the business school); University of California-Berkeley (business and law schools). He received his Bachelor of Accounting at Hebrew University; his MBA and doctorate (Accounting/Finance) are from the University of Chicago, where he was also a professor and (student of) and then academic colleague of Nobel Laureate (Economic Sciences-1976) Dr. Milton Friedman (1912-2006).

# # #

Dr. Milton Friedman’s article — “The Social Responsibility of Business is to Increase its Profits”; published in The New York Times Magazine, issue of September 13, 1970. The commentary for your reading is here: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

# # #

** Thanks to the “International Accounting Day” account of Luca Pacioli’s life, his work and his legacy. There is information available at: http://accountants-day.info/index.php/international-accounting-day-previous/77-luca-pacioli

We’re a Long Way from NYC’s Stonewall Inn, But Still a Ways to Go for Corporate LGBT Policies, Says Investor Coalition

by Hank Boerner – Chairman, G&A Institute

We’ve come a long way since the gay & lesbian communities mobilized and began in earnest their civil rights campaigns of the 1970s and 1980s and into the1990s. It was the New York City Police Department’s wrongheaded “raid” on the Stonewall Inn in Greenwich Village neighborhood in June 1969 that provided the important spark for the long-term, winning campaign by LGBT community for equal rights and equal protection under the laws of the land. “Stonewall” became a rallying cry for the next installment of the continuing “journey” of the civil rights movement in the United States.

The 1960s/1970s were the era of civil rights protests — we were involved in or witnessed and were affected by the civil rights / voting rights movement; the counter-culture “revolution” (remember the hippies?); the drive for adoption of the ERA (Equal Rights Amendment to the Constitution); and the anti-war movement protests against the conflict in Vietnam.  These were catalysts as well for the LGBT equal rights warriors of the decades that followed the 1969 Stonewall protests.

Finally, in recent years, after years of campaigning by LGBT advocates, most states have been adopting protective measures to protect the LGBT community.  Same gender marriage is a reality in many U.S. jurisdictions.

On November 7, 2014 The New York Times carried an update — it was a “milestone year” for LGBT rights advocates, the publication explained.  Voters in the 3Ms — Maine, Maryland and Minnesota – favored same-sex marriage; the first openly-gay US Senator (Tammy Baldwin) was elected by Wisconsin voters.

Still, there was vocal and often fierce opposition to same-sex marriage and equal protection under the law for LGBT citizens.

About LGBT Policies and the US Corporate Community

Many large companies (estimate:70 companies in the S&P 500 Index to date) have adopted non-discrimination policies to protect LGBT employees in the United States, says the 2014 Corporate Equality Index (a national benchmarking tool of the Human Rights Campaign).

We see these policies and programs for inclusion described in the many sustainability and responsibility reports we examine as exclusive data partner for the Global Reporting Initiative (GRI) for the United States of America.

Still, legal protections for LGBT citizens are not sufficient in numerous US jurisdictions. “Homophobic” policies and attitudes still reign in too many US cities and states and local communities.

And policies, attitudes, practices in other countries?  Well, that’s really a problem, say sustainable & responsible investment advocates — and steps are being taken to address the situation.

The S&R investment advocacy campaign is focused on the LGBT employees of US firms working overseas.  In countries like Russia, one of the world’s largest industrial economies, which has harsh anti-LGBT policies. The US investor group points out that 79 countries consider same sex relationships illegal; 66 countries provide “some” protection at least in the workplace; and in some countries, homosexuality is punishable by death.

In a business environment that continues to globalize in every aspect, with American large-cap companies operating everywhere, the investor coalition is calling on US companies to extend their LGBT policies on anti-discrimination and equal benefits policies to employees outside the United States. A letter was sent by the coalition to about 70 large-cap companies (the signatories manage US$210 billion in assets.

Shelley Alpern, Director Social Research & Shareholder Advocacy at Clean Yield Asset Management explains: “Today, most leading U.S. corporations now have equitable policies on their books for their [American-based] LGBT employees. Ther’s a dearth of information on how many extend policies outside of the U.S. In starting this dialogue, we hope to identify best practices and start to encourage all companies to adopt them.”

The objective of the shareowner advocacy campaign is to stimulate interest in the issue and create a broad dialogue that leads to greater protection of LGBT employees of US companies operating outside of the United States.

Mari Schwartzer, coordinator of shareholder advocacy at NorthStar Asset Management compliments US firms with effective non-discrimination policies and states:  “While we are pleased that so many companies have adopted non-discrimination policies in the USA which incorporate equal protections for LGBT employees, the next phase of implementation is upon us — we must ensure that international employees are receiving equal benefits and are adequately protected.  Particularly those stationed in regions hostile to LGBT individuals…”

Signatories of the letters sent to companies include these sustainable & responsible investing advocates:  Calvert Investments; Jantz Management; Miller/Howard Investments; Office of the Comptroller of New York City; Pax World Management; Sustainability Group/Loring, Wolcott & Coolidge; Trillium Asset Management; Unitarian Universalist Association; Walden Asset Management; Zevin Asset management.

Companies contacted include:  Aetna, AIG, Allstate, Altria, Amazon, American Express, Apple, AT&T, Bank of America, Baxter, Best Buy, Boeing, Cardinal health, Caterpillar, Chevron, Cisco, Citigroup, Coca Cola, Colgate Palmolive, Costco, CVS Health, Delta, Dow Chemical, DuPoint, EMC, FedEx, Ford Motor, General Electric, General Dynamics, General Motors, Goldman Sachs, Google, HP, Home Depot, Honeywell, Human, IBM Ingram Micro, Intel, J&J, JPMorgan Chase, Lockheed Martin, McDonalds, McKesson, Merck, MetLife, Microsoft, Morgan Stanley, Oracle, PepsiCo, Pfizer, P&G, Prudential, Sears, Sprint, Starbucks, Target, Texas Instruments, United Continental, United HealthGroup, United Technologies, UPS, Verizon, Visa, Walgreen, Walt Disney, Walmart, Wellpoint, Wells Fargo.

Summing up the heart of the issue for investors (and corporate employees):  “Corporations must take the extra step to ensure consistent application of LGBT-inclusive workplace policies throughout their operations, regardless of location,” said Wendy Holding, Partner, the Sustainability Group of Loring, Wolcott & Coolidge.