As we’d predicted, votes in favor of “ESG” proposals - i.e, on the environment, on various “social issues” and on purely governance issues, calling for greater shareholder empowerment - such as lower thresholds to call a special meeting - and to have stronger comp claw-back provisions when there are snafus - and, ouch, to enable shareholders to act by “written consent” - continue on an ever-upward trend. Alliance Advisors’ excellent review noted that social issue proposals garnered 11 majority votes this season vs. just four wins in 2018 - on the topics of political spending and lobbying disclosure (4 proposals), board/executive/workplace diversity (4), opioid reports (2), and human rights (1). And, for the first time since 2013, two claw-back proposals secured majority support. Even more striking, we say, is the large number of ESG proposals that scored Votes-For in the mid to high 40% range, which we see as essentially a “win.” We bet the ranch that ESG issues will gain even more steam in 2020.
We had also noted that more and more top-companies were working to stay ahead of the curve on ESG matters, and to be far less reactive and much more proactive in their outreach to investors and in their proxy materials. And wow! Just a few weeks ago, all but a small handful of the CEOs on the Business Roundtable came out with a strong endorsement of the idea that ‘doing good’ where stakeholders are concerned is a key ingredient in ‘doing well’ as going concerns. The BRT statement on “the purpose of a corporation” is truly a game-changer where ESG proposals are concerned.
And wow again - the Council of Institutional Investors - normally among the strongest and most active proponents of ESG proposals - responded with a rather snarky rebuke, asserting that “we respectfully disagree with the statement issued by the BRT earlier today. The BRT statement suggests corporate obligations to a variety of stakeholders, placing shareholders last, and referencing shareholders simply as providers of capital rather than as owners.” But after some ‘clarifications’ from BRT members, both the BRT and the CII seem to be on board that yes, “creating shareholder value” must come first on the list - but can’t really be done over the long run if important concerns of stakeholders are not taken in to account. Still further…
Know this, and note well as you look forward to 2020: Virtually every big institutional investor out there - and the two big proxy voting advisors too - have been upping the ante big-time where companies’ ethnic and gender diversity and “sustainability” efforts and disclosures are concerned…
Even as we write this, big investors are increasingly bound and determined to register displeasure with ESG issues by withholding votes from one or two or three directors in 2020 at companies that don’t tackle them with the vigor they expect.
Now…to complete our little anagram - “AWAKEN” - and, ideally, to awaken you…
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