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
- Investors seek greater climate action in 2021 Proxy Season (Source: Ceres)
- Shareholder Voting: Vote for Racial Justice, Climate Action, And Corporate Accountability (Source: YieldPositive)
- Majority Action issues proxy guide on companies’ climate-change actions (Source: Pensions & Investments)
FYI
- James McRitchie’s letter to the Securities & Exchange Commission, November 2018 – worth reading as background.
- The Olena Berg profile published in The New York Times (August 1993) is a look at a fascinating operative in the investing world and in the public sector who helped to shape today’s corporate proxy season environment.
- Fascinating look at Evelyn Y. Davis – 2018 The Washington Post obit: https://www.washingtonpost.com/local/obituaries/evelyn-y-davis-activist-shareholder-and-queen-of-the-corporate-jungle-dies-at-89/2018/11/05/b95f82c6-e10e-11e8-8f5f-a55347f48762_story.html
- What is the Avon Letter? Brief summary: https://blog.bdti.or.jp/en/2014/12/20/avon-letter-historical-background/
- Lewis Gilbert obit – 1993 – The New York Times – good history of activism in proxy season: https://www.nytimes.com/1993/12/08/obituaries/lewis-gilbert-86-advocate-of-shareholder-rights.html