Risk & Compliance

Shareholder Social Proposals Gain

Proposals on such things as pollution and political contribution are growing.
Stephen TaubSeptember 13, 2004

Social and environmental issues are increasingly joining the mainstream of shareholder activist issues.

The total number of shareholder proposals at U.S. companies involving social issues, for instance, surged by nearly 50 percent, to 207 from 141, during the Jan.1 through Aug. 30 proxy season proxy season, according to the Institutional Shareholder Services (ISS) roundup of the season.

The most popular topics were resolutions on international operations and labor, followed closely by political contributions and then energy and the environment.

Proponents also filed many more proposals than were recorded but withdrew them after reaching agreements with company management, according to the roundup. What’s more, vote results were much stronger.

Thus, while socially oriented proposals usually receive less than 20 percent support, this year at least 22 socially oriented shareholder proposals passed the 20-percent mark, with several final vote results still pending, according to the ISS.

Activists also found an increased willingness on the part of some corporations to reach consensus, ISS points out. “In the wake of the corporate scandals and reforms that have followed, some corporate leaders have come to the view that social and environmental issues merit the same level of discussion and disclosure as other aspects of corporate governance,” it added.

In fact, the ISS pointed out that while management typically opposes socially responsive shareholder resolutions, two corporations this year departed from that practice. For example, Fifth Third Bancorp refrained from making any vote recommendation on a shareholder resolution on equal employment opportunity and sexual orientation, while Coca-Cola supported a shareholder proposal for a report concerning the impact on HIV/AIDS, tuberculosis, and malaria and malaria on business strategy.

Of 44 proposals on international operations, codes of conduct, and human rights standards, 16 specifically called on companies to review or amend their workplace codes of conduct, according to the ISS. The resolutions focused on implementation of codes based on International Labor Organization (ILO) conventions, including the prohibition of child and forced labor, the protection of freedom of association and collective bargaining rights, and nondiscrimination. “Like last year, proposals this season reflected a continued emphasis on independent compliance monitoring,” according to the roundup.

Of the 34 environment and energy proposals appearing on ballots this year, the single largest category consisted of “sustainability reporting.” “Proponents urged companies to increase long-term shareholder value by maximizing the “triple bottom line” of social, environmental, and economic performance,” the ISS report added.

Resolutions on greenhouse gas emissions and renewable energy sources appeared on the ballots at nine companies, calling on them to report on their reaction to the pressures to reduce emissions.

Shareholders of General Electric, PG&E, Pinnacle West, and Ameren Corp. also made proposals asking for reports on the potential pollution and security risks resulting from the companies’ nuclear power operations, according to the ISS.