2021 Proxy Season Wrap-up

It’s been a year. Between a race reckoning, a global pandemic, an attack on the U.S. Capitol and the core tenets of our democracy, a lot happened. Something else happened this past year. Shareholders held corporations to account on these and other issues in ways we have never seen before.

Big, mainstream investors started to act like their proxy votes matter. We learned, unsurprisingly, that when enough investors act like proxy votes matter, people in power have no choice but listen.

We saw this at ExxonMobil’s annual meeting when a tiny hedge fund managed to flip three board seats to new outside directors with a more progressive view of climate impacts. One could debate how strong these new directors actually are on climate and how much of a difference this will make, but the point is that this happened because big institutional investors supported it with their votes. Between that, and the record number of majority votes on environmental and social proposals this year, companies received a clear message that shareholders demand action on environmental and social issues.

Beyond these headline-grabbing events, we observed a few other notable trends.

U.S. companies, which have long had a reputation for being poor at responding to ESG-related inquiries, increased engagement on ESG issues.

Any ESG data firm or investor who sends letters to companies will tell you that the response rate from U.S. companies has historically been dismal, but that has started to change. According to ESG data provider Sustainalytics, a decade ago only 10% of companies responded to Sustainalytics’ surveys and queries—now that number is around 60%. In addition to companies getting more responsive to ESG inquiries, they are also getting more proactive in discussing ESG issues. Just a few years ago, ESG information rarely made it into quarterly corporate earnings calls, but it is estimated that 25% of S&P 500 companies mentioned ESG in recent quarterly calls. These data points are consistent with what we have observed: companies are more inclined to respond to investor ESG questions and discuss ESG issues than ever before.

This trend was mirrored in our own engagement this year. While Clean Yield did file and co-file shareholder proposals on a range of important environmental and social issues, we also found more companies interested in engaging on ESG issues, responding to our letters and having meaningful dialogues. Many were also interested in proactively working with us to strike deals to keep our proposals off the proxy ballot.

Perhaps they are responding to what we have been observing: when proposals go to a vote, support is higher than in the past making them more difficult for companies to ignore. While many of Clean Yield’s engagements and proposals were resolved through dialogue and withdrawals, the few that did go to a vote received average support of 33% of shareholders, coming in above last year’s record of 31%.

These trends serve as the backdrop for this year’s proxy season wrap up, in which we highlight some of our company engagements—both in and outside of the shareholder resolution process. We hope to share insight into how shareholder engagement really happens, beyond the big votes and headlines.

Political Involvement and Democracy

Engaging with companies around their involvement in the political process and the health of our democracy continued to be a central engagement theme for Clean Yield this year. The January 6th attacks on the U.S. Capitol and the contagion of new voter suppression laws underscored the fragile state of our democracy and the role companies play in preventing or enabling its undoing. For the third year running, we filed a proposal at Loews Corporation (the holding company, not the DIY chain) asking the company to fully disclose its political involvement. The vote earned the support of more than 30% of Loews shareholders and resulted in the company expressing new interest in increasing its disclosure. We also co-filed a similar proposal (led by the Unitarian Universalist Association) at ExxonMobil (which earned 30% of the vote). The impetus for our request was magnified when, shortly after the annual meeting, Greenpeace exposed an Exxon lobbyist for undermining U.S. climate policy. Our work here is far from done.

This year, we expanded our work in this area to focus on the incongruencies between corporate political contributions and corporate values and commitments. Many companies paused political contributions after it came to light that they had funded politicians who had challenged the certification of the 2020 election results. We filed a proposal at Fedex (in partnership with Rhia Ventures) asking them to report on this misalignment, as well as the misalignment between the company’s commitment to supporting women in the workplace while funding anti-choice politicians. This proposal is expected to go to a vote at the FedEx annual meeting later this fall.

In partnership with our colleagues at Rhia Ventures, Trillium, and Whistlestop Capital, we sent letters to several other companies with ties to the election objectors to ask them to consider adopting a policy that sets bright line exclusions in their political giving. For example, companies committed to diversity could have a policy of not contributing to candidates or organizations that are promoting voter suppression laws that will disproportionately impact the ability of people of color to vote. The response from companies has been underwhelming—and raises concerns that despite commitments to reassess political involvement after January 6, little has changed.  We expect to focus more on this in the coming year.

Clean Yield also engaged with The Charles Schwab Corporation this year to raise concerns about its political ties. The company’s founder, Mr. Charles Schwab, is a significant Republican contributor and Trump supporter. While his personal contributions are outside the scope of the company’s control, they do reflect on the company. Further, according to public data, the company’s PAC made contributions to election objectors. While the company has since announced plans to close its PAC, it hasn’t offered additional transparency around the rest of its political involvement. Clean Yield had a few calls with the company to raise our concerns- we were told that the company had decided to shutter the Schwab PAC but was uncertain about the rest of its political involvement, much of which remains shrouded. The company seemed disinterested in increasing transparency around the balance of its political involvement. While raising these concerns as Schwab clients was fruitless, we are hoping that leveraging our rights as Schwab shareholders will be more fruitful. Watch this space.

Diversity, Equity, and Inclusion

Diversity was a big area of focus for shareholder advocates this year as investors tried to hold companies to account for the commitments they made following the murder of George Floyd and subsequent protests.

We co-filed a proposal at Johnson & Johnson (led by Trillium Asset Management) asking the company to perform an independent third-party civil rights audit. The proposal raised particular concern about how the company allegedly marketed unsafe talc products to Black and Brown women. After some dialogue, the proposal went to a vote where it received support of 33.9% of shareholders—strong support for a new proposal. We also co-filed a diversity data disclosure proposal at Home Depot (led by the Benedictine Sisters) which earned 35.8% support.

We engaged with Umpqua Bank around diversity both in its workforce demographics and training and, perhaps more importantly, in its lending. We exchanged letters or had calls with American Express and Visa around their use of mandatory arbitration in relation to workplace harassment and discrimination. Following the successful withdrawal of our diversity disclosure proposal at Tesla last fall, we continued to engage with Tesla around its diversity disclosure and performance.

In partnership with Rhia Ventures, we filed a proposal at Walmart asking the company to report on how the raft of enacted and proposed state laws affecting reproductive rights and care could impact its workforce—and what steps the company could take to minimize or mitigate these risks. We had one engagement call with the company in which we discussed the company’s reproductive healthcare coverage, but ultimately, Walmart was allowed by the SEC to exclude our proposal from the proxy ballot.

We also exchanged letters with Procter & Gamble about how it ensures that employees have access to comprehensive reproductive healthcare services. The good news is that Procter & Gamble has relatively strong programs in place, but we see some areas for continued improvement.

Climate Change

Clean Yield engaged in dialogue with many companies this year about plans to reduce emissions and develop pathways to net zero emissions. We filed a proposal at Hain Celestial with Green Century Funds and were pleased to withdraw in exchange for the company agreeing to set a science-based target that encompasses the company’s supply chain emissions. We also continued to engage with our REIT holdings about reducing their climate impact, including Mid-America Apartment Communities, which we have been engaging with over a period of years to get the company to report its Greenouse Gas emission (GHG) footprint and set meaningful climate goals.

Reducing Toxic Chemicals

Through our relationship with the Investor Environmental Health Network (IEHN) and ICCR, Clean Yield has engaged with companies around toxic chemicals in their products and supply chains. This year, we had productive conversations with Walgreens and Ahold about pesticides in their agricultural supply chain. Walgreens is currently working on educating and empowering its team of buyers to engage with suppliers around issues related to toxic chemicals. They hope that once they begin to change organizational culture around this issue, they can move toward measuring their chemical footprint and taking steps to reduce harmful chemicals on shelves. We plan to check back in with Walgreens later this year for a status update. Our conversations with Ahold highlighted the challenges presented by being a global company with many regional brands.

Check out the most recent shareholder proposals filed by Clean Yield here.

As you read through this year’s engagement activities, we invite you to reach out and let us know what grabs your attention or what issues you’re most excited about.