2013 Shareholder Engagement Wrap-Up

2013 Shareholder Engagement Wrap-Up

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In the 2013 proxy season, Clean Yield Asset Management filed shareholder proposals at five companies, co-filed proposals at two more and had productive dialogues with two additional companies. The table below encapsulates the subjects of these engagements and their results. 

Links to the text of the proposals are embedded in this article at www.cleanyield.com

2013 Shareholder Dialogues & Proposals

 

Company Our “ask” Result
CVS Caremark Enhance disclosure of political spending Shareholder proposal vote: 35.1%
3M Adopt policy to refrain from all political spending 6.4%
EQT Corporation Adopt policy to refrain from all political spending 2.9%
*ExxonMobil Adopt policy to refrain from all political spending 5.7%
McCormick Company Enhance disclosure and oversight of political spending Company agreed to enhance disclosure
AGL Resources Add “gender identity” to corporate nondiscrimination and non-harrassment policies 43.6%
*General Mills Address company responsibility for post-consumer product packaging

 

Shareholder proposal filed; vote scheduled for 9/24/13
* Wells Fargo Report on social and financial impacts of payday lending services SEC granted Wells Fargo permission to exclude shareholder proposal on the grounds that it pertained to “ordinary business” of the company
J. M. Smucker Enhance transparency of workplace policies concerning lesbian, gay, bisexual and transgender (LGBT) employees Dialogue with company

 

* Companies where Clean Yield “co-filed” proposals, joining in with other shareholders who took the lead in the engagement. For their work at ExxonMobil, General Mills and Wells Fargo, we would like to thank respectively Zevin Asset Management, As You Sow Foundation, and the Sisters of St. Francis of Philadelphia.
 

The Good News First 

As we’ve discussed previously in our newsletter, a record amount of money was spent in the 2012 electoral cycle, and much of it was laundered (for lack of a better word), as individuals and corporations gave to groups engaging in politics knowing that their identities would not be revealed. Because we believe that big money in politics exerts a corrupting influence on regulation and erodes civic participation and values, we’ve been active in efforts to roll back the rising tide of money in politics.

Our shareholder proposal at CVS Caremark calling for enhanced transparency and oversight of political contributions drew over 35% of the vote in May, but more importantly, it catalyzed a dialogue with management that actually led to enhanced transparency.. The company still isn’t all the way up to snuff, so we hope that this strong vote will lead to a few more breakthroughs that make it unnecessary to file the proposal again. (If you’re reading this, CVS, we’re looking forward to a policy clarification on whether you will make contributions to 501(c)4s, 527 committees, or pay special assessments to trade associations for political purposes….and exactly what role your board plays in this area.)

In fact, we’re looking for pretty much the same things from McCormick Company, the spice and specialty foods giant. This company’s transparency also improved since we began a dialogue with them last fall, but it is still short of best practices promulgated by the Washington-based Center for Political Accountability. Those standards have been adopted by over 100 major corporations. (In the spirit of transparency, the author of this piece sits on the Center’s board of directors.)

Pre-Accountability Era cartoon

McCormick’s political activities came to our attention when it was revealed that it had given money to forces fighting California’s Proposition 37, a ballot initiative that would have required labeling of products with genetically modified (GM) ingredients. This activity hadn’t been revealed by the company, but by pro-Prop 37 forces. No matter how you feel about GM foods, you have to question whether this is a smart business move by a company that is expanding its organic product lines. Under McCormick’s new policy, it will disclose payments of $25,000 or more in connection with any state ballot initiative. This is progress, but would it not be better for McCormick to stay neutral on ballot referenda entirely, or better still, actively work to develop a labeling scheme that it can support? We’ll be watching as labeling supporters take their campaigns to Washington and other states this fall

Our proposal at AGL Resources calling on the company to add “gender identity” as a covered category in its nondiscrimination policies was received indifferently by the company but not by its shareholders, 44% of whom voted in favor. Adding “gender identity” would close a loophole that can allow discrimination or harassment against transgender persons to take place, since the law in this area is inconsistent around the country. AGL, a natural gas distributor based in Atlanta, is behind the curve, as a majority of Fortune 100 companies have such policies, as do more than 40% of the Fortune 500. In fact, so does the City of Atlanta (just sayin’.) This month, AGL told us that notwithstanding the strong vote, it saw no need to change its policies. Frustratingly, the company has also not met with any LGBT (lesbian, gay, bisexual, transgender) legal experts despite our previous encouragement to do so.

On the other hand, our dialogue on LGBT issues with J.M. Smucker proved to be a pleasant surprise. Smucker’s had received a whopping 15 out of a possible 100 points by the workplace rating experts at the Human Rights Campaign (HRC), the prominent LGBT advocacy group. It turns out that Smucker’s policies are, if not perfect, pretty good. But since the company had been declining to fill out the HRC’s annual surveys and failed to list any of its policies on its website, it was not getting credit where deserved and simultaneously alienating LGBT customers and potential job applicants. Smucker’s has assured us they’ll be filling out the HRC survey the next time it comes around.

A Funny Thing Happened on the Way to the Corporate Ballot Box

As the table above reveals, a few of our proposals fell to the earth with a resounding thud.

At 3M, EQT, and ExxonMobil, we set out to test the proposition that shareholders might be ready to tell corporations to “just say no” to all forms of political spending, particularly after the formidable and ever-expanding amount of corporate spending in the 2012 elections. But our test balloon turned out to be a lead zeppelin.

We wondered how this could be, when Americans are so overwhelmingly negative about the level of money in politics. In one poll taken last year, 80-90% agreed, across party lines, with the following statements: there is “too much money in politics”; corporate political spending “drowns out the voices of average Americans”; corporations and corporate CEOs have “too much political power and influence”; and “corporate political spending has made federal and state politics more negative and corrupt.”

There’s no simple answer, but we’ll take a stab at it.

First, some investors were undoubtedly confused as to what we were seeking, confusing our proposal to stop political spending with a plan to stop both political spending and all forms of lobbying. (We weren’t taking aim at lobbying when it’s done openly and transparently; after all, we want government officials to hear what businesses think, especially when we’re sharing our own opinions.) 

Second, these resolutions had some terrific competition from two complementary, ongoing, and successful shareholder campaigns that have been addressing both political contributions and lobbying for several years. The above-referenced Center for Political Accountability has focused not on stopping corporate political expenditures, but on making them wholly transparent and overseen at the highest levels of the corporation. Over the past decade, that campaign has successfully persuaded over a hundred companies to provide greater disclosure of their political spending and to adopt board-level oversight. Those proposals average over 30% of the vote consistently.

Concurrently, a diverse group of shareholders has been pressing proposals focused on greater lobbying transparency, which also received strong support from shareholders.

It’s critical to remember that many large blocs of shares are voted by financial service firms that make large political contributions themselves. We suppose it is real progress that they are increasingly comfortable with disclosure, even if they are not ready to kick the political spending habit. Too many, we believe, bought into the argument that refraining from political spending would disadvantage their companies in the rough world of politics. We think that concern is overblown, given that our proposal wouldn’t touch companies’ huge lobbying budgets even if they stopped spending on elections.

Don’t Spend It All in One Place

This summer, a 69-year-old California woman told a Senate committee about the $500 Wells Fargo payday loan that ended up costing her $3,000 in fees. Horror stories like these made us only too willing to co-file a proposal at Wells Fargo pressing the company on this line of business. Unfortunately, Wells received encouragement from the Securities and Exchange Commission to omit the proposal from its ballot on the grounds that it tread upon the “ordinary business” of the corporation, a major no-no in our line of work.

Recycling Redux

Who should bear the burden of ensuring that disposable packaging is both recyclable and collected? Proponents of extended producer responsibility think manufacturers need to step up to the plate due to the environmental impacts and economic waste of uncollected and unrecyclable packing and paper. In late September, General Mills shareholders will have an opportunity to vote on a proposal we co-filed that calls for more aggressive action on post-consumer product packaging and for the company to participate in a system that will greatly increase packaging recycling. We’ll post the results on our website at www.cleanyield.com.

 

 

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