Readers, grab a cocktail and prepare to hear incredible but true tales from Clean Yield’s 2015 proxy season, a compendium of surprises both pleasant and unpleasant, some outright success stories, ironic twists, and at least one instance of bad luck. This year, we filed a total of eleven resolutions, three of which have been amicably withdrawn (to date). As the Law & Order voiceover says, these are their stories.
What Transpired Swimmingly…
Let’s start with undisputed Good Stuff. As we blogged in March, Citrix Systems and Expeditors International were both very receptive to our proposals to update their nondiscrimination policies to include gender identity protections. This was in marked contrast to the opposition Expeditors displayed a decade ago when asked to include sexual orientation in their policies — the proposal went to a vote three times — so we applaud the company’s change in thinking. Hats off to Seattle’s Pride Foundation for leading the Expeditors engagement.
We also had great discussions with ThermoFisher Scientific and McGraw Hill Financial about updating their political contributions transparency, which led to the withdrawal of our proposals at those companies. Both companies’ new policies will shed more light not just on any direct expenditures they make to candidates, parties, or ballot referenda, but on indirect spending as well, the so-called “dark money” that isn’t required to be reported by the contributor. According to an analysis by Public Citizen and Demos, corporations were the second largest source of Super PAC money in the 2012 elections, contributing $71.8 million through them, and that doesn’t even count money funneled through trade associations.
… And All the Rest of It
We had every reason to believe that this might be the year in which Google would likewise join the 140 companies that have adopted better political oversight and disclosure. It was only at last year’s shareholder meeting that CEO Eric Schmidt responded to a question by an attendee from Public Citizen with these words:
Let me summarize your request. We need to be more transparent? Is that right? We get it. We’ve heard that from a number of other shareholders, so let us come back with some ideas. We got a very clear set of messages from a number of shareholders about this transparency issue already.
We were further encouraged last September when Google discontinued its membership in the American Legislative Exchange Council (ALEC), a right-wing lobbying group Schmidt accused of “just literally lying” about climate change. But when nothing had happened by the deadline to file a shareholder proposal, we acted. After all, Google far outpaces its peer group in lobbying and political expenditures, according to the Center for Responsive Politics. And given how transparent the average homo sapiens has become to Google, a little reciprocity is to be expected.
Unfortunately, we were stymied due to a technicality so irritatingly legalistic we won’t even go into it. Long story short, if the company hasn’t moved by the fall, we’ll re-file.
We filed a related proposal at FedEx calling for more transparency around lobbying expenditures just a few weeks ago, so no news to share on the company’s response. FedEx spent a whopping $25.6 million in 2013 and 2014 on direct federal lobbying activities, and that doesn’t count its state lobbying budget. It’s also a member of ALEC.
Also filed under “Too Soon to Know Anything” is another late-season proposal co-filed with As You Sow Foundation at General Mills, designed to encourage the company to ban or minimize neonicotinoids in its supply chain. A growing body of evidence has implicated this widely used class of pesticides in the dramatic decline of bee populations.
Speaking of commonsense proposals, does it not seem that 21st-century corporate leaders should be held accountable for their companies’ sustainability performance? Especially when boatloads of evidence suggest that firms with strong ESG (environmental, social, and governance) performance may now be enjoying both financial outperformance and a lower risk? We put that question to Walgreens Boots Alliance in the form of a shareholder proposal recommending that sustainability performance be included among the criteria that top execs are evaluated on. The top six officers in the company collectively took home more than $36 million in 2014, a year in which 1) they faced public wrath for considering making their merger with Britain’s Alliance Boots an “inversion,” which would have forever diverted their corporate income taxes overseas; 2) they were relentlessly targeted by consumer protests drawing attention to toxic chemicals in their branded products’ supply chains; and 3) competitors like CVS, Walmart, and Target continued to best them in the depth and visibility of their sustainability programs. Alas, our fellow shareholders are still on a learning curve; the proposal received only 5.6% of votes cast. On the upside, however, we feel that WBA’s management at least heard our concerns clearly in our conversations, and our dialogue will continue.
|Company(company name links to proposal text)||Our “ask”||Result|
|AGL Resources||Adopt quantitative company-wide goals for reducing GHG emissions from operations and products.||29% vote|
|Citrix||Add gender identity protections to nondiscrimination.||Withdrew — agreement reached.|
|Energen||Report on actions to measure, mitigate, disclose, and set reduction targets for methane emissions.||29.4%|
|Expeditors International||Add gender identity protections to nondiscrimination.||Withdrew — agreement reached.|
|ExxonMobil||Increase capital distributions to shareholders (in lieu of continued capital expenditures on assets likely to become stranded).||Omitted by Securities and Exchange Commission.|
|Adopt and implement political contributions transparency policy.||Omitted by Securities and Exchange Commission.|
|McGraw Hill||Adopt and implement political contributions transparency policy.||Withdrew — agreement reached.|
|J.M. Smucker||Report on how company can increase its renewable sourcing and/or production.||TBD|
|ThermoFisher Scientific||Adopt and implement political contributions transparency policy.||Withdrew — agreement reached.|
|Walgreen Alliance Boots||Include sustainability as performance measure in senior executive pay.||5.6% vote|
Is It Hot Out Here, Or Is It Just Me?
We at Clean Yield Asset Management are transitioning our clients’ portfolios away from fossil fuel companies and are enthusiastic supporters of the fossil fuel divestment movement. Generally, we believe that divestment is a more powerful strategy to move carbon constraints forward, and it’s a financially prudent move for investors. But on occasion, we’ll use the holdings we still manage in fossil fuel companies and fossil-fueled electricity generators to file proposals that stand a chance of driving down greenhouse gas emissions.
Thus we signed on to a shareholder proposal filed by Calvert Investments at AGL Resources, calling upon the gas distribution utility to adopt company-wide goals for reducing GHG emissions from operations and products. The proposal received 29% support. And for the second consecutive year, we co-filed a similar proposal at Energen, an oil and gas company, with our friends at Miller/Howard Investments. It too asked for reduction targets but focused on plugging operational leakages of methane, a powerful greenhouse gas. Energen has been unwilling to engage, but we are hopeful that will change, given two years’ worth of strong votes. This year’s resolution also received 29% of votes cast.
We’ve also thrown our shares behind a proposal at J.M. Smucker Company, filed by Trillium Asset Management, designed to get the company to commit using more renewable energy to power its operations. Currently, Smucker has no renewable energy targets, even while it operates in several states with strong renewable portfolio standards and incentives for renewable energy investment. A report by the Carbon Disclosure Project found that four out of five companies earn a higher return on carbon reduction investments than on their overall corporate capital expenditures.
Last, and perhaps least, we signed on to a very promising proposal at ExxonMobil that was foiled by a mysterious SEC ruling. Conjured by our colleagues at Arjuna Capital and As You Sow Foundation, the proposal asked that the company increase its capital distributions to shareholders instead of continuing to invest massive amounts in projects likely to become stranded due to rising market and regulatory pressures associated with climate change. The SEC allowed an identical proposal to go forth at Chevron, but — erroneously, in our opinion — ruled that ExxonMobil’s existing process for balancing capital expenditures and distributions trumped the right of shareholders to vote for increased dividends in light of the concerns articulated in the proposal.
The live webcast of ExxonMobil’s annual meeting has just wrapped up as we write these words, and it ranked with the best of them. Asked why the company wasn’t investing in renewables, CEO Rex Tillerson responded, “Quite frankly, we choose not to lose money on purpose.” But solar and wind are now profitable, his questioner objected — to which Tillerson replied, without apparent irony, that this was so only due to the existence of government mandates and subsidies. But you receive subsidies, his questioner countered. Tillerson: “We do not receive subsidies; we operate under the tax code.”
Who, indeed, needs Alice In Wonderland when you’ve got climate activists in Dallas.
Shareholders at the meeting also enthusiastically voted down a proposal calling for the company to set company GHG reduction targets. In previous years, the proposal steadily earned more than 20% of the vote, but the level of support dropped this year below 10%.
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Tags: AGL Resources, Citrix, Climate Change, Energen, Executive pay, Expeditors International, ExxonMobil, Google, J.M. Smucker, McGraw Hill Financial, neonicotinoids, Political contributions, renewable energy, shareholder advocacy, ThermoFisher Scientific, Walgreens Boots Alliance