The 2016 Proxy Season: Your Final Exam

two girls taking a test with one looking over the shoulder of the other for the answers

A not-uncommon anxiety dream (at least for this writer) involves taking an exam for which one has not studied. Welcome to a waking version of this dream. In lieu of reading a straightforward article about Clean Yield’s shareholder engagements during the 2016 proxy season (like last year’s), readers can enrich their knowledge of our activities and the larger field of shareholder advocacy by taking this sham exam. The answer key is at the bottom of the page.
1. This year, the most popular corporate engagement topics among shareholder activists (like ourselves and other investment firms, pension funds, labor unions, foundations, and religious investors) were:

  1. Stop worrying about popularity and go do your homework!
  2. Replacing casual Fridays with clothing-optional Mondays
  3. Environmental issues (33% of the 370 environmental and social proposals filed), followed by corporate political activity (29%), human and labor rights (18%), and diversity (9%)

2. For the past few years, what proportion of all shareholder proposals on environmental and social topics have been withdrawn, usually because the proponents reached an agreement with the corporation leading to positive change?

  1. Three-thousandths of a dram
  2. 1%, attributable to a number of very suspicious power outages that happened to coincide with important conference calls
  3. About 40%, which speaks very well of this largely underappreciated means of elevating corporate performance

3. Which topic did Clean Yield focus on this year in its corporate engagement efforts?

  1. Transparency of corporate spending on political contributions and lobbying
  2. Trying to get companies to tie their CEO’s pay to their performance on sustainability matters
  3. Getting corporate buyers of palm oil to commit to sourcing that commodity sustainably, to stop deforestation in Indonesia
  4. Engaging in dialogue with multinational companies to find out how they’re protecting their LGBT workers in countries that would never, ever air RuPaul’s Drag Race
  5. Imploring Viacom to cancel RuPaul’s Drag Race
  6. All of the above, except “E”

4. Which companies committed to greater disclosure of their political spending, prompted by Clean Yield shareholder proposals?

  1. Corning, Lincoln National and Southern Company
  2. Philip Morris and British American Tobacco, our favorite companies, after we quietly transitioned all client holdings out of socially responsible companies into ones with homicidal business models
  3. Option “C,” because every question must have an Option C

5. Didn’t you forget something?

  1. A political spending transparency proposal is also going to a vote at Google on June 1
  2. We’ve filed a similar proposal at FedEx that’s off-season, so the results aren’t in yet. This will be the second year for that proposal, which focuses on the company’s lobbying expenditures.
  3. Both “A” and “B,” because we’re very forgetful

Fun fact: FedEx spent nearly $26 million in 2014 and 2015 on direct federal lobbying activities, and that doesn’t even count state expenditures like the $500,000 shed in California alone during the same time period. We don’t know the full amount FedEx spent in other states, because state-level disclosure requirements are really uneven (hence the resolution).
6. The campaign to encourage greater disclosure around corporate political spending and lobbying has resulted in:

  1. Rabid opposition from The Wall Street Journal and other conservative outlets
  2. Adoption of greater disclosure, accountability and oversight by over 150 companies (according to the Center for Political Accountability)
  3. Numerous companies cutting ties from the right-wing American Legislative Exchange Council, the group responsible for promoting the “Stand Your Ground” laws implicated in the death of Trayon Martin, and other regressive policies
  4. Prominent corporate exits from the U.S. Chamber of Commerce due to its obstructionist positions on climate change regulation
  5. The filing of 130 proposals in 2016
  6. All of the above. No joke!

7. This year, Clean Yield filed proposals at three companies (Chipotle Mexican Grill, Discovery Communications and Walgreens) calling on them to integrate sustainability performance metrics into CEO pay packages. Which of the following statements about this effort is not true?

  1. Studies vary on how widespread this practice is, but it appears to be growing in popularity
  2. None of these companies wanted to implement our proposal (yet!), but given that Unilever’s CEO pocketed an additional $700,000 bonus in 2013 for delivering on his sustainability obligations that year, you’ve got to wonder if chief execs won’t become more open-minded to the idea.
  3. The proposal received respectable levels of support (23% at Chipotle, 9.5% at Discovery), which is pretty darn good in this business.
  4. Chipotle pays muy grande salaries to not one, but two chief executives. Since 2011, shareholders have paid them $210 million in compensation while remaining in the dark as to how much the company has invested in food safety initiatives.
  5. The average CEO makes $30 million a year.

Fun fact: Insiders at Discovery Communications control about 55% of the votes cast. If you factor them out of the equation, support for our resolution was more like 22% than 9.5%.
Not very fun fact: Because Walgreens buried its deadline for accepting shareholder proposals in an irregular SEC filing, we had to file the proposal from the floor of the annual stockholder meeting. This meant that it received approximately zero votes, since virtually all of the shares had already been voted. Those zero votes can really depress your averages! But we’re still in dialogue with Walgreens and believe our cause is far from lost.
8. We filed a proposal at DuPont this year, asking them to adopt a policy to address the impacts of their supply chain on deforestation because:

  1. “DuPont” is easy to spell, if you can remember to capitalize the “p.”
  2. The company is a large user of soy and palm oil, both of which contribute to deforestation when not cultivated sustainably, but lacks transparency regarding its purchasing policies for these and other commodities.
  3. Deforestation is a major driver of climate change, biodiversity loss, droughts, soil degradation, land conflicts with local communities.
  4. All of the above
  5. B and C
  6. I before E, except after C

Fun fact: The DuPont proposal received 23% support from shareholders. We also withdrew a palm oil-related proposal at Whole Foods after the company agreed to clarify its policies and continue dialogue, and we engaged with Church & Dwight, Pepsi, and Sysco on palm oil, in collaboration with other shareholders.
Fun fact: DuPont will be merging with Dow Chemical, assuming it passes regulators’ antitrust investigation. The plan is to merge and then subdivide into three companies. Then like a fractal, those three companies will subdivide into three companies, and so on.
Answer Key

  1. C is the correct answer.
  2. C.
  3. F. We’ve never actually seen RuPaul’s Drag Race.
  4. A.
  5. What was the question?
  6. F.
  7. E is not true, but it looks plausible, doesn’t it? In 2014, the average CEO made only $13.5 million.
  8. E and F are correct. DuPont is not easy to spell, because the full name of the company is E.I. du Pont de Nemours and Company. (Give us a break, Dupont!) Dow and DuPont really are going to merge and then tri-divide, but the rumours of perpetual fractalization could not be confirmed at press time.

If you scored 8 out of 8, congratulations! You are certified to attend a shareholder meeting and pose uncomfortable questions to management.
If you scored 4-6, you are a highly gullible person with a precarious grasp of reality.
If you scored 1-3, not to worry. In a dream, the printed word is always illegible.

2016 Shareholder Proposals

 TopicCompany (Company name links to proposal text)Result
Political contributions transparencyCorning Inc.Withdrew — agreement reached
Lincoln NationalWithdrew — agreement reached
Southern CompanyWithdrew — agreement reached
Alphabet (formerly Google)TBD [update: 9.8%]
Lobbying transparencyFedExTBD [update: 31.6%]
Link CEO Pay to Sustainability PerformanceWalgreens Boots Alliance – 2016 proposal<1% (see article )
Chipotle Mexican Grill – 2016 proposal23%
Discovery Communications – 2016 proposal9.5%
Deforestation impactsDuPont23%
Palm OilWhole Foods MarketWithdrew — agreement reached
Church & Dwight (co-filed with Congregation of the Sisters of the Sorrowful Mother of Brown Deer, Wisconsin)Withdrew — agreement reached
Forgo high-carbon projects to return capital to shareholdersExxonMobil (co-filed with Arjuna Capital)4%