May 11, 2021

Shareholder Advocacy Update: Veris Clients Leverage their Equity Ownership to Advance Diversity, Racial and Social Justice, and Environmental Stewardship

By Pat Addeo and Karen Walls

Our shareholder proxy engagement initiative with Aperio and As You Sow this 2020 – 2021 proxy season once again demonstrated that engagement with corporations on ESG issues is an effective tool for bending the arc of capitalism to benefit all stakeholders. This year was a transformational year and shareholders took little time to address issues concerning COVID-19 and the social justice and wage inequities many in our country experienced. The Trump administration also proposed and then enacted changes to the SEC shareholder engagement Rule 14a-8 before the election of a new administration.

Highlights of this Year’s Veris Shareholder Resolutions

Veris clients signed onto 101 shareholder engagement opportunities this proxy season. Top resolutions our clients engaged in focused on Diversity, Equity and Inclusion, as well as the Environment and Climate. Resolutions targeted Amgen, Netflix, Facebook and UnitedHealth Group to urge greater disclosure on diversity data as the groundwork for measuring a company’s progress in hiring, promoting and retaining employees of diverse backgrounds and gender.

The resolution with UnitedHealth Group requested a report on the company’s diversity, equity and inclusion plan and was successfully withdrawn as an agreement was reached with the company.

Shareholders signed Environmental resolutions for Amazon and Walmart in pursuit of better sustainable packaging policies for plastics. These resolutions were filed and are still pending.

SEC Update

The beginning of 2020 started with a group of Veris clients making their voices heard at the SEC in Washington D.C. to oppose the proposed SEC Rule 14a-8 that called for major restrictions on proxy voting shareholder rights for individual shareholders. The changes to the rule, which were signed into legislation and take effect starting in 2022, increase the requirement for the number of shares owned and the years owned over a 3-year tiered system. Investors must own a minimum of $25,000 of company shares for one year, $15,000 for two years or $2,000 for three years. The thresholds were also raised for resubmission of previously submitted proposals if they did not gain sufficient shareholder support.

Despite the passing of the rule, there is optimism that President Biden is working to take action to overturn the changes and has signaled his support and priority for ESG resolutions. Veris has signed-on to a letter being issued by US-SIF that urges Congress to vote yes on the SJ Res 16 and HJ Res 36 that will nullify the 2020 changes to Rule 14a-8 and revert the shareholder proposal rules back to what they were before September 2020.

Cultural Issues

This year is proving to be a transformational year in terms of cultural issues. Injustices to people of color have propelled the Black Lives Matter Movement. There has been an increase in hate crimes towards Asians and Asian American communities and individuals in the United States. As You Sow introduced “The Racial Justice Scorecard” to track and hold corporations accountable for their policies and initiatives promoting Racial Justice. The pandemic has brought to light the issues of wage disparity, and health and benefit insecurities. Corporate political activity, workplace diversity and board diversity practiced by big corporations are under increased scrutiny.

Climate change and the environment are and will continue to be at the forefront of concerns for clients and shareholders. The U.S. has re-entered the Paris Climate Accord and we expect more government involvement in changing the landscape, but shareholders will still be extremely active in this space.

2021 Outlook

The power to create change with a united collective voice is the benefit of joining shareholder campaigns. We encourage our clients who can participate to join us next proxy season. With the events of the past year, we expect to see an increase in resolutions related to racial justice, diversity in the workplace, board member diversity, corporate accountability and ESG data reporting and transparency. Environmental resolutions will push corporations to report on how they are transitioning to a net-zero carbon plan. Also, we expect continued campaigns to reduce pollution and plastic waste and drive companies to create more sustainable packaging. Social issues will target workplace diversity, wage injustice, health and retirement benefits, safe workplace and supply chain conditions and fair pay.

Veris continues to work with US SIF on initiatives that urge government and businesses to be proactive on various ESG issues. We signed onto three recent letters issued by US SIF:

  • A letter to President Biden with an investor policy recommendation to create a White House Office of Sustainable Finance and Business.
  • A letter to the Biden Administration to advance the policy proposals included in US SIF’s “Toward a Just and Sustainable Economy.”
  • A letter urging the Congressional Review Act to disapprove of the SEC’s shareholder proposal rule amendments.

Veris also reaches out to our clients as we sign on to these letters to call their state representatives and senators to voice their concerns.

We look forward to working with you to create change in the 2021-2022 Proxy Season that begins in the Fall of this year.

Veris WP
March 23, 2020

Veris Fights for Shareholder Engagement

Members of the Veris team, along with Veris supporters Laurie Emrich, Ellen Remmer, Caroline Gabel and Jed Sturman, recently met with the SEC to discuss rule changes that will severely restrict shareholder activism. The meeting was one of the only in-person conversations between the SEC staff and investors. This blog discusses the proposed changes.

Big Changes Afoot

The SEC is proposing a new system that will significantly limit the opportunities for non-institutional clients to exercise their shareholder rights in publicly traded companies, according to an analysis from Veris.  

Collectively, the changes would prohibit many Environmental, Social and Governance (ESG) shareholder proposals from being considered or reconsidered. We believe the new rules may also hinder activist shareholders from accomplishing the dual goals of shareholder engagement and portfolio diversification.

Not surprisingly, many public companies and the Business Roundtable support the winnowing of shareholder proposals, yet most companies wouldn’t be significantly impacted. Large companies predominantly receive the majority of shareholder proposals, but even that is infrequent. On average, public companies are presented with a shareholder proposal once every seven years, according to Veris.

At Veris, we believe shareholder engagement has been very productive and effective. It brings clients into the capital markets to make their voices heard. Often, our data and research motivate companies to implement new policies, even if the resolution fails. When we engage with companies early on, corporate accountability increases. Focusing on ESG-related risk that might otherwise be ignored, we believe, ultimately improves financial performance.

It is our role – working with clients and like-minded investors – to demonstrate leadership and promote change. We will continue to collaborate with US SIF and the SEC to uphold the current rights of shareholders. We will strive to maintain a fair balance between investors and company interests. As is important, we strongly believe the rights of individual investors should not be adversely affected.

Investors Who Oppose The SEC’s Changes

Laurie Emrich, Global Fund For Women

I am a long-time advocate working in social justice philanthropy. One of my SEC-related goals is to expand shareholder access and to increase diversity – to give more people a seat at the table. The SEC’s proposed changes will shut down access from shareholders and stakeholders. Instead, the SEC should advocate for more access and more voices. Interestingly, the Business Roundtable and global leaders in Davos this year supported increased corporate social responsibility and inclusion of a much broader range of stakeholders. Importantly, that includes local community members impacted by corporate actions. Unfortunately, the SEC’s proposed changes would take these ideas in the absolute opposite direction – and as such, are unacceptable.

Ellen Remmer, Senior Partner, The Philanthropic Initiative

As a former Madoff investor who was unwittingly defrauded, I wanted to become a more educated investor. Being involved in shareholder engagement has helped me achieve that objective, and it is incredibly powerful. It helps us understand more about our portfolio and a company’s values and priorities. As someone committed to educating investors about gender and climate risk, I believe active engagement promotes a stronger capital system. The SEC proposal works against that.

Caroline Gabel, CEO, Shared Earth Foundation

I very much want my family’s philanthropy and investments to reflect our values. In leading the Shared Earth Foundation and as a member of Rachel’s Network, I support active shareholder engagement. I’m strongly opposed to loss or threatened loss of our voices as shareholders. I don’t believe shareholders should be disenfranchised at the ballot box. 

Jed Sturman, Owner TD Athletes Edge and Consultant, Partner for Growth

As someone who works in private equity and has an MBA, I am troubled by short-term corporate thinking. I would like to see shareowners create long-term shareholder value. Shareholder engagement assures that companies understand shareowners’ desires and needs – and not just the perspective of board members.

 

The information contained herein is provided for informational purposes only and reflects the opinions of the author’s which are subject to change without notice.  Comments provided by Veris clients should not be construed as an endorsement of Veris or a statement of their experience with Veris.

Veris WP