Consistent with trends over recent years, the 2019 proxy season saw a continuing increase in shareholder activism and support for action on environmental, social, and governance (ESG) issues. Some 90 percent of the Fortune 250 and at least one-third of the companies in the S&P 500 were subject to a shareholder proposal this year.
To help you understand these developments, view the activity in your industry, and anticipate the kinds of requests that could be made of your company, we’ve created an interactive table of the resolutions filed in 2019 (below; best viewed on a laptop or desktop) and a briefing on key issues that includes additional data breakdowns.
Scroll past the data table for further insights on why resolutions are being filed and how to reduce the likelihood of being subject to one.
- The top seven resolution topics in 2019 were:
- Independent board chair
- Political contributions
- Right to act by written consent
- Sustainability reporting
- GHG reduction targets
- Board diversity
- Nearly 70 percent of resolutions submitted address risks related to environmental (E) or social (S) issues, significantly outnumbering more traditional governance (G) concerns.
- Focus on companies’ social impacts significantly outpaced environmental ones, accounting for 64 percent of E and S resolutions filed; this continues recent trends. However, climate change emerges as the top E and S issue if we consolidate the various resolution topics tied to it (such as GHG emissions, 2-degree climate scenarios, and renewable energy).
- While governance resolutions still outpace in vote support, some two-thirds of E and S resolutions are now withdrawn before reaching a vote, most often through agreements that commit to some form of company action.
- Across industries and topics, those resolutions reaching a vote are receiving more vigorous support. Nearly half received more than 30 percent of the vote in favor.
- Companies with low ESG ratings received the bulk of resolutions. For example, the average Bloomberg ESG disclosure score of a company receiving an E or S resolution this year was 28.6, nearly seven points lower than the 34.9 average Bloomberg score of S&P 500 companies overall.
The predictive value of shareholder resolutions
These days, market forces tied to evolving stakeholder expectations are driving business risk and opportunity, especially as related to ESG performance. Customers are seeking more sustainable product choices. Workers are favoring employers that offer opportunities to have positive impacts in the world. Investors are expecting greater transparency on an expanded set of enterprise risks. And many spoils are going to the businesses that respond first and best.
We find shareholder resolutions and other proxy season events provide a clear window into these emerging ESG priorities, allowing us to anticipate their implications for our own companies and plan accordingly. Because while there are certainly some niche issues raised, many of these topics do portend future mainstream practices. And activity on these matters continues to be at a high point. Some 90 percent of the Fortune 250 and at least one-third of the companies in the S&P 500 were subject to a resolution this year, with environmental and social issues receiving the lion’s share of that attention.
While they can be time-consuming to address, the ESG issues underlying shareholder requests can align with business priorities in surprisingly meaningful ways. In our work, we have seen companies uncover opportunities as that notably increased their competitiveness and access to capital as a result of engaging investor viewpoints that initially appeared at odds with business interests. For example, as ESG reporting frameworks are increasingly integrated into investment data platforms, certain levels of disclosure may be required to enable index funds and money managers to recommend and invest in your company.
Understanding filers’ priorities
For a perspective on what drives resolution filers, we turned to As You Sow, an organization with a mission to advance environmental and social responsibility through advocacy on behalf of the shareholders it represents. The organization was the most prolific resolution filer of 2019, tackling matters ranging from climate change to gender equity, and half of their resolutions were ultimately withdrawn as a result of constructive dialogues and commitments.
Danielle Fugere, As You Sow’s president, cites their engagement with McDonald’s on seeking alternatives to Styrofoam cups and with Abbott Labs in requesting a GMO-free option in their infant formula line as examples of past advocacy that benefited business through offerings that became popular with customers. This year, among other outcomes, they negotiated with Amazon to commit to reducing greenhouse gas emissions associated with delivery, and with companies ranging from Calvin Klein to Texas Instruments to address modern slavery in supply chains. Fugere described to us their strategy as active, long-term engagement on strategic matters:
“Companies should treat resolutions as an opportunity to see where things are headed, get ahead of their peers, and avoid litigation and reputation impacts. Many companies will look to us to understand where the world is moving, and rarely are we focusing on things that don’t ultimately become big issues. We have good, civil discussions in good faith. We try to meet with a company in advance and discuss the concern, and file a resolution when we feel it’s our only option because they won’t meet with us or when we continue to disagree about next steps. Nobody expects a company to change overnight. But we do want to see a company seriously engaging on developing problems that have significant potential financial impacts through concrete commitments, not token gestures.”
While a filer’s agenda will generally be clear, it can sometimes be harder to know how that relates to the priorities of others. In deciding how to respond to a resolution, it is valuable to reach out to a range of investors (including ones who are not currently shareholders) to gauge wider perceptions of the issue and preferences in how to address it.
Reduce your exposure
Of course, everyone would like to see a minimum of resolutions filed to begin with. To reduce the probability of receiving one, Fugere advises companies to monitor peer practices and proactively address industry-related issues in the news, as a company is more likely to be engaged if it lags its industry or is at risk of receiving negative public attention for its impacts.
We have found that other specific ways to detect concerns early and pre-empt costlier events such as responding to a resolution or addressing an issue under the duress of negative publicity include:
- Staying current in understanding the evolving ESG policies of your major shareholders and other investors.
- Conducting material issues analysis to identify and address key ESG risk factors.
- Evaluating relative to peers and improving your company’s scores on leading ratings such as MSCI and your Bloomberg ESG disclosure score. The Bloomberg ESG score, which measures transparency, is especially relevant, as disclosure is a common focus for resolution filers. The average Bloomberg ESG score of a company receiving an E or S resolution this year was 28.6, nearly seven points lower than the 34.9 average Bloomberg ESG score of S&P 500 companies overall. And more than twice as many companies with Bloomberg ESG scores under 40 received resolutions compared to those with scores above 40.
For more information on these trends and how FrameworkESG supports companies in tracking investor priorities, reducing risks and exposure, or responding to shareholder resolutions, among other ESG matters, please contact Chief Engagement Officer Sun McElderry.
Further reading on the 2019 proxy season
2019 Proxy Season Takeaways. Harvard Law School Forum on Corporate Governance and Financial Regulation, July 27, 2019.
2019 Proxy Season Review: Part 1—Rule 14a-8 Shareholder Proposals. Harvard Law School Forum on Corporate Governance and Financial Regulation, July 26, 2019.
Early Review of 2019 US Proxy Season Vote Results. ISS Governance, June 5, 2019.
Proxy Voting Outcomes: By the Numbers. BlackRock, April 2019.
Proposals For Political Spending Disclosure Make Headway This Proxy Season. CooleyPubCo, July 30, 2019.
A Banner Proxy Season for Political Disclosure and Accountability. Harvard Law School Forum on Corporate Governance and Financial Regulation, July 22, 2019.
2019 No-Action Letters Issued Under Exchange Act Rule 14a-8. US Securities & Exchange Commission, Division of Corporation Finance, accessed July 2019.