Forget Game of Thrones. The real drama this year concerned the fate of Clean Yield’s shareholder proposals and the outcomes of our dialogues with corporations. We’ve been in talks with HBO — for what seems like forever — about a pilot (working title: Proxy Apocalypse), but since nothing’s been signed, we’re still at liberty to review what worked this year and what didn’t. Plot spoilers ahead.
(Note: The table below provides links to all of the shareholder proposals referenced in this article.)
Don’t Listen to Stephen Colbert, Either
In typically hilarious fashion, Stephen Colbert recently opined that melting Antarctic glaciers means it’s time to just give it up on climate change. (“The entire country will become an uninhabitable wasteland–not just Baltimore.”) But when we got done laughing, we re-embraced the premise that we can forestall at least the worst consequences that future generations, if not ourselves, will face. There’s little that tiny baby feet and hands can’t talk a grownup into doing.
Looking at any diversified stock portfolio, there are many angles one can take to combat climate change as a shareholder activist. One can knock heads with fossil fuel companies directly, pressure companies across other sectors to directly reduce their emissions, or look at the indirect carbon footprints of companies via the emissions of their suppliers. When we looked at our holdings, we realized we had some good opportunities in that last category, specifically around the hot issue of palm oil’s contribution to deforestation.
Because what better way could there be to combat climate change than by focusing on a widely used food and personal products ingredient? This will make more sense if you’ve read our piece, The Last Place You Might Look: Palm Oil Bears Heavy Responsibility For Climate Change, but if you haven’t, here’s the quick distillation: palm oil’s exploding popularity is driving deforestation and biodiversity loss in Indonesia, which ranks third among nations for greenhouse gas emissions (GHG). Palm plantations are rapidly expanding in Latin America and Africa as well. Forests are critical “carbon sinks” and are home to 80% of the world’s terrestrial biodiversity. The palm oil supply chain is also rife with labor abuses and land grabs.
Many companies have adopted palm oil supply chain policies in recent years. However, prevailing standards have not been adequate to keep up with the rate of deforestation and human rights abuses, so the “ask” of companies is that they adopt additional, stronger, and time-bound criteria.
We filed a shareholder proposal at J.M. Smucker (SJM), maker of eponymous jams, and the corporate parent of Folgers and Dunkin’ Donuts coffees, Jif peanut butter, and Crisco. Smucker’s management was pleased to engage with us, and the result was a greatly strengthened policy published in July in its 2014 Corporate Responsibility Report. The same was true at Pepsi (PEP), where we co-filed a proposal submitted by the Domini Social Equity Fund.
We’re hoping that the third time will be as charmed at Sysco Corporation (SYS), where we have co-filed a resolution with the Sisters of St. Joseph of Stevens Point, Wisconsin.
|EQT Corporation||Enhance disclosure of political spending activities||Withdrawn|
|Cisco Corporation||Enhance disclosure of political spending activities||TBD|
|Intuit||Enhance disclosure of political spending activities||TBD|
|AGL Resources||Add “gender identity” to corporate nondiscrimination and non-harrassment policies||37%|
|Energen Corp.||Report on methane emission mitigation efforts||27%|
|J. M. Smucker||Strengthen palm oil procurement standards||Withdrawn|
|PepsiCo||Strengthen palm oil procurement standards||Withdrawn|
|Sysco Corporation||Strengthen palm oil procurement standards||TBD|
|Clarcor||Produce sustainability report||40%|
|Procter & Gamble||Report on environmental consequences of using uncrecyclable packaging||TBD|
|Walgreen||Link executive pay to sustainability performance||TBD|
Having done our small part to increase the earth’s carbon-absorption capacity, we looked for opportunities to limit GHG emissions as well. This can be a challenge, because most of the companies we hold are already taking at least some action to reduce their carbon emissions. So when colleagues at Miller/Howard Investments filed a proposal at Energen Corporation (EGN) and called for co-filers, we were all over it. Over a 20-year period, methane’s impact on temperature is 86 times stronger than carbon dioxide’s, and the oil and gas industry accounts for 70% of energy-related methane emissions. Calling on the natural gas company to report on its plans to “measure, disclose, mitigate, and set reduction targets for methane emissions resulting from all operations under its financial or operational control,” the proposal received 27%.
If You Can’t Beat ‘Em, Shine a Flashlight on ‘Em
Clean Yield continues to gnaw away at the root of all evil–the love of corporate money by politicians. Two years ago, we filed a proposal at EQT Corporation (EQT), a Pittsburgh-based natural gas company, asking the company to look into the feasibility of going cold turkey on all forms of political spending. Only 3% of EQT’s shareholders loved this idea as much as we did, so for 2014 we filed a much-modified proposal that called for more transparency of EQT’s political spending. We were then pleased to learn that in the interim period between our filings, EQT had in fact implemented most of the transparency requests we were asking for. Champagne for everyone!
The purpose of the political transparency proposals is to shine a light particularly on “dark money” corporate donations that go to Super PACs, so-called “independent” expenditure committees and trade associations’ political spending pools. Corporations are not otherwise required by law to make these disclosures, leaving shareholders unable to assess the nature and extent of companies’ spending. However, shareholders have persuaded 117 publicly traded companies to adopt greater disclosure standards.
We have two such proposals currently on the table at Cisco (CSCO) and Intuit (INTU), where we hope to find as much traction as we did at EQT. Those proposals will be voted upon in early 2015.
LGBT Equality in the Workplace
It took two consecutive shareholder proposals in 2013 and 2014, but the Atlanta-based natural gas company AGL Resources finally decided this summer to change its nondiscrimination policies to include protections against bias based on gender identity. Common sense has a way of prevailing when company policy is lagging local law. It couldn’t have hurt that in both years, roughly 40% of votes cast supported the proposal.
Will Walgreen Pull Itself Up by its Bootstraps?
American taxpayers breathed a sigh of relief in August, when Walgreen Company (WAG) announced it would not take advantage of its impending merger with the British drug store chain Alliance Boots to pursue a tax inversion that would allow it to reincorporate in Switzerland, where Alliance Boots is headquartered. According to Americans for Tax Fairness, an inversion would have cost the U.S. Treasury up to $4 billion in taxes over the next five years.
We sighed, too, even though the focus of the Singing Fields Foundation/Clean Yield proposal at Walgreen’s is on another matter entirely: to encourage the board of directors to include sustainability as a performance measure in the evaluation of senior executives’ compensation. It seems Alliance Boots’ sustainability policies in such areas as water management, energy usage and materials leave Walgreen behind. For more, see Jonathan A. Scott’s accompanying article in this newsletter.
Tagging Along Has Its Rewards
In several engagements this year, we leveraged client shares in companies by co-filing proposals initiated by colleagues in the field of socially responsible investing. In such situations, the “lead” filer often does most of the legwork, but the co-filers’ additional shares signal the company that the lead filer is not alone in its concern.
As noted above, in 2014, we co-filed proposals at Energen, Pepsi, and Sysco and Cisco (because we can’t resist homonymic filings). We also co-filed at Clarcor (CLC) and Procter & Gamble (PG). A hat tip and sincere thanks to the lead filers of these proposals, respectively: Miller/Howard Investments, Domini Investments, the Sisters of St. Joseph, Newground Investments, Walden Asset Asset Management, and As You Foundation.
The Clarcor filing called on the industrial air filter manufacturer to produce an annual sustainability report. Such reports are standard for large companies but are also a growing trend at small caps like Clarcor. A Walden press release noted, “Since Clarcor manages more than 60 subsidiaries, investors would like assurance that all pieces of the business are managed synergistically as opposed to being left in silos.” In response, Clarcor’s proxy statement huffed, “Our Board of Directors is responsible to the shareholders of the company as a whole, not for ensuring that the Company conforms its practices to the philosophies of certain shareholder groups.” Forty percent of the vote was then cast in favor of the proposal. That’s quite an interest group. (Did we mention that Clarcor’s all-white male board could use some diversity? Maybe a more heterogeneous group would be inclined to consider minority-held views more seriously.)
At Procter & Gamble, we’re asking for a report assessing the environmental impacts of the company’s continuing use of unrecyclable brand packaging. The proposal will be voted on in 2015. A similar proposal at Mondelez International (Cadbury, Triscuit, Nabisco, and much more) received more than 28% of the vote earlier this year.
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Tags: AGL Resources, Alliance Boots, Cisco Corporation, Clarcor, Climate Change, corporate political contributions, Energen Corp., EQT Corporation, Intuit, J.M. Smucker, LGBT, methane emissions, palm oil, PepsiCo, Procter & Gamble, shareholder activism, shareholder advocacy, Stephen Colbert, sustainability reporting, Sysco Corp, tax inversion, Walgreen