Governance dominates corporate shareholder votes, ahead of environmental, social issues

Ellen Meyers, CQ-Roll Call on

Published in Business News

The findings come as the U.S. proxy season is underway, with the bulk of shareholder meetings taking place by the end of June. Major companies including The Home Depot Inc., AT&T Inc., Inc., Google parent Alphabet Inc., Caterpillar Inc. and Delta Air Lines Inc. will hold votes in the coming weeks on non-binding resolutions related to ESG issues, from ramping up emission reduction targets to improving treatment of their workers.

Of the 548 resolutions that investors of Fortune 250 companies will vote on through the end of June, nearly two-thirds are related to governance issues, according to Proxy Monitor, an initiative run by conservative think tank Manhattan Institute that tracks proxy votes. More than 200 proposals focus on social and environmental policies.

Despite the governance emphasis, activist investors have some success with not only getting their environment and social proposals on the ballot, but also passing them.

Most recently, a proposal from shareholder advocacy group As You Sow to call on The Boeing Co. to align its full scope of greenhouse gas emissions with the Paris Agreement garnered 91 percent of votes cast. Johnson & Johnson shareholders passed a resolution from Mercy Investment Services to have the company conduct a third-party racial equity audit, with more than 62 percent of votes cast in support.

“More and more investors are focused on ESG risks and demanding accountability on these issues by the board through swift, determined and strategic actions,” according to Stefanie Chalk, Dan Lambeth and Pru Bennett of advisory group Brunswick Group LLP.

“The days of management carrying on regardless are over,” they said in a memo. “Companies that cannot demonstrate how they have engaged on, committed to improving, or made real progress on ESG issues that are deemed critical to their industry’s license to operate should expect to come under fire during this [annual general meeting] season.”

Policy-oriented proposals are also getting a boost thanks to recent guidance from the SEC that’s bolstering activist ESG-focused investors’ chances to get companies more focused on environmental and social issues.


Companies seeking to avoid shareholder votes on ESG issues face a higher burden to have the SEC grant their requests after the agency’s staff issued a legal bulletin on no-action requests under a provision known as Rule 14a-8 authorized by the Securities Exchange Act of 1934.

The agency, led by Gary Gensler, said it will be more likely to require companies to hold shareholder votes on public policy issues such as the environment and worker arbitration than it was during the Trump administration as part of its repeal of three legal bulletins issued from 2017 to 2019.

In March, Renee Jones, the director of the SEC’s Division of Corporation Finance, said that agency staff would conclude companies must give shareholders a vote on topics on social issues regardless of the issue’s significance to a particular company.

Under this practice, the agency will consider the broader social policy significance, displacing a prior focus on evaluating each social proposal’s significance to the company, Jones said. This will mean more uniform decisions on socially based proposals.

Jones said while SEC rules allow for the exclusion of proposals that micromanage the company, proposals can call for details on company activities, contain time frames for action, or request particular methods without running afoul of the micromanagement restriction.

“We expect the level of detail included in a proposal to accord with what investors need to assess an issuer’s impacts, progress towards goals, risks or other strategic matters that are appropriate for shareholder input,” she said.

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