Our 2021 Special Supplement, available only at OptimizerOnline.com, featured nearly a dozen interviews with prominent shareholder meeting observers - all of whom - including us - predicted record-breaking success for ESG proposals this season - although we’re not sure that anyone recognized just how big it would turn out to be.
As we look ahead with 2022 in mind, we are convinced that we will be seeing more and more shareholder proposals next year than ever before - and many more “wins” by proponents than ever before - especially on ESG issues - and probably an upsurge of proxy fights too.
We also see a major “tipping point” where VSMs are concerned - not just due to the ability to reinstate in-person meetings in 2022 - but also due to some serious failures at many large-cap companies to successfully produce a satisfying experience at their VSMs. In far too many cases, large and mega-cap companies seriously disenfranchised investors in terms of their ability to participate as they were able to do at in-person meetings… all of which we will try to address in this issue.
Let’s begin this issue’s traditional meeting-season review with excerpts from Georgeson’s excellent “Early Look at the 2021 Proxy Season” report - comparing proxy voting results for Russell 3000 companies through July 1, 2020 to the 2021 numbers as of June 2. It notes a “Fundamental shift in investors’ view of climate risk…Notably, 12 of 33 environmental shareholder proposals that reached a vote have passed…a pass rate of over 36% [that] is double the number of such proposals that passed in the entire 2020 season.”
In early 2020 the OPTIMIZER had flagged “PLASTICS” as the newest, and, we predicted, soon to be recognized as one of the biggest environmental issues ever. As Georgeson noted “the proposal at Dupont regarding plastic pollution received more than 81% support…[where] a nearly identical proposal at Dupont received only 6% support in 2019” - which was, we would note, its first year out of the box… A truly stunning result this year, we’d say.
“Similarly” the Georgeson report continues, “a 2020 proposal at Bloomin’ Brands regarding emissions within the company’s supply chain received approximately 26% support [while] This year, a broader proposal that referenced supply chain emission concerns in the broader context of climate reporting received more than 75% support.”
Georgeson also noted that companies themselves “appear to be shifting their views concerning the materiality of risks presented by climate change. At both General Electric and Bunge Limited, the company recommended that shareholders vote in favor of proposals relating to greenhouse gas (GHG) emissions and deforestation risk respectively, resulting in near-unanimous shareholder support for the proposals. In response to the global Say on Climate campaign that emerged this proxy season, Moody’s and S&P Global each submitted management-sponsored proposals requesting that shareholders approve their respective climate transition plans. Both received shareholder support well in excess of 90%. Further still, the number of withdrawn environmental proposals nearly doubled, with 82 companies reaching agreements on the subject matter of proposals with proponents.”
“On the diversity front, both workforce and board diversity proposals received strong support, including one board diversity proposal at First Solar that received record-high support, in excess of 91%. Of the 91 workforce diversity-focused shareholder proposals submitted this season, only 13 have or will be voted upon; as of June 2, 12 such proposals have been voted upon, and six of those (50%) passed. In addition, while none of the racial equity audit proposals received majority support, half of those voted upon received support in excess of 30%, which is notably high for first-time proposals.” These proposals will continue to gain steam in 2022, we predict - as truly seems appropriate.
“Proposals seeking reporting on political contributions and lobbying payments were also prevalent this season and strongly-supported. Eight such proposals have passed – more than double the number that passed in the [entire] 2020 season. Notably, a political contributions proposal attracted record-high 79% of support at Chemed Corporation.”
The OPTIMIZER thinks that, hands down, the Exxon Mobil Meeting produced the most astonishing results of any meeting season your editors have ever witnessed: The ouster of three sitting board members by a new and tiny activist group - where Exxon had to pause the shareholder meeting for an hour - in order to accommodate last-minute vote switchers, which Exxon seemed to think, wrongly, would be in their favor. (We believe that a May 26 page-one New York Times article - the very day of the meeting - citing the cavalier and totally tone-deaf way in which the CEO repeatedly treated investors who had sought to “engage” and negotiate with the company - was the proximate cause of the last-minute vote-switching - which temporarily “swamped the system” - and was also the proximate cause of the management’s big and humiliating and, we say, well-deserved loss). But as Engine No. 1 noted in an interview following the meeting, “ExxonMobil was an obvious target in some ways. Even amongst the Oil Majors it is an outlier with respect to how little it has done to evolve its business in a changing industry and world…Ten years ago, ExxonMobil was the largest company in the world by market capitalization and the #1 company in the Dow Jones Industrial Average (DJIA). Today, its market capitalization has been cut in half and it has been kicked out of the DJIA; neither is true of its closest competitor, Chevron.”
We were further astonished by how long it took to declare a third dissident candidate to be a winner - and how much longer it took to certify the final result, where Engine No. 1 indicated it would have more to say but hasn’t yet…and also at the cost of the fight ($35 million for Exxon and $20 million for Engine No. 1 - before, we’d note, the costs involved in the long-drawn out recount).
Equally noteworthy, two shareholder proposals passed, against the recommendations of Exxon management, by impressive margins: One on lobbying disclosure, which passed with 56.1% in favor and one on “Climate Lobbying” that got a whopping 63.8% of the votes in favor. Another proposal, calling for a report on “Scenario Evaluation” garnered 49.4% of the vote, which we would consider a “statistical tie” - with over 2.8 billion shares in the quorum. In any event, investors should certainly expect the company to respond before next year with a properly responsive action plan…which we expect a properly chastened and much-enhanced board will do.
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