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Shareholder resolutions on the environment, sustainability, and labor standards found more support during the 2006 proxy season than in any year in the past, says one study.
Marie Leone, CFO.com | US
September 13, 2006
Social issues are gaining ground among the governance set.
More than one-quarter of the 179 social policy proposals voted on by shareholders this year received at least 20 percent support, according to data compiled through August 2006 by Proxy Governance Inc. This compares with just 12 percent of the proposals that received 20 percent support in 2005.
What’s more, about 38 percent of all social policy proposals fetched at least 10 percent support in 2006, compared to 29 percent that reached the that level in 2005. "In general, we're seeing more support for social concerns than in years past," said Scott Fenn, managing director for policy at Proxy Governance, in a press release. "The rising level of support for these issues indicates that some institutional investors are increasingly viewing various social issues as having a tangible connection to shareholder value."
Environmental proposals were the most popular topic voted on during annual meetings, accounting for about 30 percent of the social policy proposals presented in 2006. Proposals related to climate change were the leading environmental focus, with more than two-dozen resolutions filed, many at electric power companies, homebuilders, and big-box retailers, reported the proxy research firm.
Officials at Proxy Governance noted that several large public pension funds backed a campaign to ask companies to report on their climate change risks and liabilities, and this year average support for the campaign jumped more than six percentage points to above 17 percent. For example, at Standard Pacific, a resolution asking the homebuilder to report on its energy efficiency performance received 39 percent of votes cast.
The Standard Pacific campaign had success in coaxing shareholders—including those at four Midwest electric utilities—to withdraw resolutions in exchange for corporate action, which amounted to the power companies agreeing to prepare a climate risk disclosure report, noted the proxy study.
Disclosure of political contributions were the second most popular social policy issue of the current proxy-voting season. Proposals calling on companies to disclose and report on their political contributions accounted for nearly 18 percent of all social policy proposals voted on, according to the report. Of the 32 political contribution proposals voted on so far, 17 received more than 20 percent support, according to Proxy Governance.
In fact, a proposal at Amgen received 75.5 percent support after being endorsed by management, and was the only social policy proposal to receive majority backing. Similar resolutions also received significant support at Caremark (42 percent), Home Depot (34 percent), Marsh & McLennan (33 percent) and Verizon (33 percent). Average support for resolutions related to political contributions nearly doubled, to 21 percent in 2006, up from 11 percent in 2005.
Proxy Governance also points out that several companies, including Bristol-Myers Squibb, Staples, McDonald's, Southern Company, and General Mills, agreed to the disclosure of political contributions following discussions with the proponents.
Other top vote-getters on social policy issues this year included a proposal on global labor standards at Lear Corp. (49.8 percent support), and an environmental sustainability report proposal at Terex Corp. (48.4 percent support). Average shareholder support levels for labor standard proposals increased to 17 percent from 11 percent in 2005, while support for sustainability reports jumped from 18 percent in 2005 to more than 26 percent in 2006.