The 2021 proxy season—the period from roughly March through May when most companies hold their annual shareholder meetings—was perhaps the most productive ever for investors concerned about environmental and social issues. (The term “proxy” here refers to investment managers who, like ourselves, have our clients’ permission to cast shareholder votes on their behalf.) From big votes on climate, to a more activist approach to voting board members, to an increase in social issues on the ballot, investors and the companies they own arguably had more at stake this year than even before.
Recognizing the importance of this moment, we made a decision early this year to invest even more time and resources into proxy voting research, more than doubling the number of companies for which we did a deep analysis of board members, compensation, and other features prior to voting at their annual meetings. While we have always cast votes on behalf of all client holdings, this was the most thorough research we’ve yet done on many companies whose stock we did not originally buy on behalf of clients. We now have more insight than ever into the boardrooms of companies in oil and gas, multinational mass retail, fast food, and other businesses we might otherwise avoid as investments.
The result? Among the 81 companies for which we conducted a deep voting analysis, we had a 42% overall dissension rate to board voting recommendations. This included a 42% dissension rate on individual board members, a 57% dissension rate on executive compensation, and a 97% dissension rate on shareholder resolutions (counterbalanced by nearly 100% “yes” votes on typically proforma items like auditor reelections and European regulatory compliance). Some of the key issues we encountered included:
- Calls for emissions targets, particularly among oil companies, have become vocal and widespread. We voted for shareholder resolutions that would require companies to set targets limiting emissions, and/or report on the business impacts of not doing so, at Chevron (which received 61% support overall), ConocoPhillips (59% support), Exxon (64% support), Phillips 66 (79% support), and Shell (30% support). We similarly voted for shareholder resolutions advocating emissions targets at GM (results not yet available) and Union Pacific (32% support). At Exxon (64% support) and Phillips 66 (62% support), we voted for resolutions seeking more transparency on climate lobbying, and at Exxon we additionally voted for a resolution seeking a report on how the company’s environmental expenditures align with its publicly declared environmental values (5% support).
- In a trend we expect to see more of in the future, we saw two companies put their own climate transition plans up for a shareholder vote. We supported Unilever’s ambitious climate transition plan (which received nearly 100% support), while we voted against Shell’s plan because it was not aligned with the goals of the Paris agreement (although the plan still received 89% support). At T. Rowe Price, we voted for the large investment manager to produce a public report on its own proxy voting record on climate-related issues. Finally, in Exxon’s dramatic and widely publicized showdown with activist shareholders seeking to refresh its board in order to develop a long-term climate transition strategy, we voted for all four proposed new board members, of whom at least three have now been elected.
- As Exxon shows, shareholder activism has begun to extend to board member elections. As a firm that has taken an activist approach to voting board members for nearly two years, this is a trend we feel well-prepared for. In 2021, among the reasons for our “against” votes on 42% of directors we researched, 26% included a lack of gender or racial diversity. At the same time, we supported shareholder resolutions pushing diversity, equity or inclusion reporting requirements at Abbott (38% support), Amazon (44% support), FirstSolar, Johnson & Johnson (34% support), JP Morgan (40% support), Paypal and Union Pacific (81% support), in an attempt to build transparency and force more diverse hiring and equitable practices at those companies. And at Amazon (26% support) and Wal-Mart (12% support), we voted for public reporting on how wages align with those companies’ publicly stated positions on racial justice.
- Drug pricing and COVID-19 came to the fore this year as issues for companies that had worked on vaccines and/or therapies for the novel coronavirus. We voted for resolutions requiring companies to publicly report on how their receipt of public money for developing COVID-19 drugs would affect future pricing decisions and ensure equitable access for all at Johnson & Johnson (32% support), Merck (34% support) and Pfizer (28% support).
- Among big tech companies such as Amazon, Facebook and Google, we voted for digital rights resolutions to nominate civil and/or human rights experts to the boards of Facebook (4% support) and Google (10% support). We voted to combat platform misuse and child exploitation at Facebook (17% support), and to increase transparency around the use of customer data at Amazon (35% support). We also supported resolutions pushing Amazon (33% support) and Google (12% support) to examine and address the risks of anticompetitive practices.
- One trend that took us by surprise was a spate of resolutions urging companies as varied as BlackRock, Chevron, Facebook, Google, and Salesforce to restructure as public benefit corporations. With 1% support at most companies, such resolutions are unlikely to receive widespread shareholder support at this time, but we will continue to advocate for this formal model that allows companies to deliver value not only to executives and shareholders, but to employees, local communities, customers and the environment.
Among other themes, we continued to support resolutions pushing for general lobbying and political contribution disclosure, similar to those we have supported in the past. We voted for resolutions at McDonalds pushing the company to report publicly on the impacts of sugar and animal antibiotics on public health (both received 11% support), and at Home Depot for the company to report on prison labor in its supply chain (13% support). At Google, we cast a rare “against” vote on a shareholder resolution designed to force the company to stop donating money to progressive causes (the resolution received less than 1% support). As always, we voted for resolutions calling for independent board chairs, and likewise for those pushing for greater shareholder rights, including the ability for a smaller number of shareholders to call special meetings and act by written consent.
This year’s strong majority votes for many climate-related resolutions, fueled by the belated (but still welcome) support of massive investment firms like Vanguard and BlackRock, are big news for the fight against climate change. We believe they can help build momentum for companies to develop serious plans for carbon neutrality, with detailed emissions targets. Support for diversity and equity proposals in the 30-45% range also virtually ensures return votes in future years, putting pressure on companies to make change now. Earlier-stage efforts, like those to promote digital rights, are still gaining momentum, but any resolution with greater than 10% support all but requires management to develop a strategy to address it. If we find the strategy lacking, we will continue to amplify our calls for change.
