Shareholder activists make inroads

Jul 28, 2022

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By Jordan Wolman and Debra Kahn

Presented by

THE BIG PICTURE

A chart showing this year's ESG resolutions.

There's been a record number of corporate shareholder votes this year on resolutions focused on environmental, social and governance issues. Investors throughout the 2022 proxy season have taken votes on 282 ESG-related resolutions, with 34 resulting in majorities, according to As You Sow, a nonprofit shareholder advocacy group.

As You Sow said at least two dozen more votes are possible by year's end, putting 2022 on pace with last year's 39 majority votes on ESG-related proposals.

Activist shareholders won majorities across the business landscape. Apple Inc., McDonald's Corp. and Home Depot, for instance, backed racial justice and civil rights audits. Walt Disney Co. and Lowe's investors supported proposals requiring reports on pay disparities on the basis of race, ethnicity and gender. And climate-related resolutions drew majority support from investors at Chevron Corp., Travelers Co. Inc., ExxonMobil Corp. and Boeing Co., among others.

Not reflected in the figures — but just as significant, activists say — are the 268 proposals that were withdrawn this year. That number largely represents agreements that shareholders were able to reach with companies outside of the resolution process — and those are even better than majority votes, according to Ceres, a Boston-based nonprofit that works on business sustainability.

"There's a dramatic increase in success if you define success as commitments," said Rob Berridge , Ceres' senior director of shareholder engagement. "And I would define success as commitment, because that's what investors want."

A chart showing withdrawn resolutions by year.

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Though the proportion of withdrawals is similar to past years, the sheer number is higher because of the record 610 resolutions filed this year, said Heidi Welsh, the executive director of the Sustainable Investments Institute, a Washington, D.C.-based nonprofit that tracks shareholder activism.

"I do think this means that many companies were willing to discuss the issues with proponents, and the result of this engagement was win-win on both sides," Welsh said.

There could be a few reasons why this year saw so many resolutions filed. Welsh said it's partly because the Securities and Exchange Commission in the Biden era has blocked fewer proposals than in the past – but that's not the whole picture.

"My thesis is that more proposals are occurring largely because of political dysfunction coupled with sustained investor concern," she said. "This reflects capital market priorities: The market is demanding answers that politicians are not providing."

Ceres tracked climate-related proposals specifically and found that 228 were submitted this year, up from 151 in 2021. Fifteen of them passed, while 107 of them were withdrawn in exchange for commitments, up from 69 last year. But the ones that went to a vote only received 31.6 percent support, on average — down from last year's 42 percent, but up slightly from 2020's 30.8 percent.

An average of 46.4 percent of shareholders supported plastics-related resolutions this year, according to Proxy Preview, a shareholder resolution tracking project by As You Sow, Sustainable Investments Institute and Proxy Impact. That's down from 54.1 percent last year but still well above the 22.2 percent support in 2018.

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"What we're seeing is moving from niche activist investors really concerned about these issues to more mainstream financial parties recognizing that the risks are spread throughout the economy. It's not just Exxon that's vulnerable to climate change," said Glen Dowell , a professor of management at Cornell University. "It's now BlackRock and other massive players saying we need to know these things. The parties [companies] are dealing with are more mainstream and powerful so it's harder to fight. It's a bad look to fight."

Still, resolutions coming up for a vote — including ones generating support — may not necessarily make meaningful change.

"Majority votes don't always translate into action," Dowell said. "These are not binding. These can be ignored — and they sometimes are."

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Welcome to the Long Game, your source for news on how companies and governments are shaping our future. Team Sustainability is editor Greg Mott , deputy editor Debra Kahn and reporters Lorraine Woellert and Jordan Wolman . Reach us all at gmott@politico.com , dkahn@politico.com , lwoellert@politico.com and jwolman@politico.com .

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As a broad-based coalition of 26 leading businesses and institutions representing multiple sectors across the U.S. economy — environmental advocacy, manufacturing, utilities, agriculture and food, energy and resources, automotive, chemicals, and financial services— the CEO Climate Dialogue recognizes this urgency and urges the Biden administration and Congress to reenergize the climate conversation and to prioritize the enactment of market-based climate policies, like an economy-wide price on carbon, that are needed to meet the scope and scale of the climate crisis.

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