Proxy Season Brings Slew of Lobbying, Environmental Disclosure Proposals

The use and success of shareholder proposals is becoming more commonplace, said Marcel Kahan, New York University law professor. Twenty or so years ago, few passed and most that did were ignored by company boards, he said. The numbers of those adopted and implemented are growing, meaning likely increased use of shareholder proposals in the future, he said.

Such shareholder proposals typically come from gadflies of small retail investors, or sometimes nonprofit organizations or pension funds with shares in the company, said Yaron Nili of University of Wisconsin Law School. Big institutional investors rarely initiate such proposals, potentially out of concern about being seen as overly aggressive, or perhaps because they have direct communications with boards that small investors don't, Nili said.

Proposals on corporate governance are more likely to be supported by big investors and have decent success rates, Nili said. Charter Communications' shareholders will vote April 26 on a shareholder proposal brought by the New York State Common Retirement Fund -- the pension fund for state employees -- on a policy that the board chairman be independent, with the policy to be phased in for the next CEO transition. "Given the dynamic and competitive environment in which we operate, the Board believes that the right leadership structure may vary as circumstances warrant," the company said in the Charter proxy statement outlining its opposition to the proposal.

Charter shareholders also will decide on a proposal that it annually disclose the report it files with the U.S. Equal Opportunity Commission and put out a climate-related financial risk report that includes its greenhouse gas emissions and plans for reducing them. AT&T shareholders are proposing it change its executive compensation calculation methodology by including executive pay ratios "and voices from employees," and that the board commission "a racial equity audit" looking at civil rights and nondiscrimination matters at the company. Boeing shareholders will vote on proposals that the company make more disclosures of its charitable contributions and reduce the threshold for the percentage of shareholders needed to call a special shareholder meeting.

Companies with shareholder proposals seeking more lobbying or political spending disclosures include Alphabet, AT&T, Boeing, Disney, Dish and Charter. Multiple communications companies also had lobbying proposals on their 2021 proxies (see 2104230017). Overall support for shareholder proposals on corporate political activity has been growing, the Conference Board said earlier this year.

Environmental and social proposals (E&S), such as calls for more board diversity or environmental disclosures, are starting to get some increased support from big institutional investors, Nili said. The 2021 proxy season had record support for environmental and social shareholder proposals, Matteo Tonello, Conference Board managing director-environmental, social and governance research, blogged last week. He said major institutional investors, particularly those with large passive index funds, "have embraced these shifts ... and that is coming through in their support for E&S shareholder proposals." He said the COVID-19 pandemic and current White House administration also drove the increased support for E&S items.

One of the rare board-supported shareholder proposals will be at Boeing's April 29 shareholder meeting, with a vote on a recommendation that the company detail if and how it met the Net Zero Benchmark of the Climate Action 100+ initiative. In its proxy statement, the company said it's already working on a goal of net-zero operations and supporting the commercial aviation industry doing likewise, and the called-for report "will further demonstrate our commitment to transparency in this area and to our work with all stakeholders to build a more sustainable future together for aerospace."

Verizon shareholders also have before them a proposed annual disclosure that itemizes and specifies all its charitable donations, an annual disclosure of "the general nature and extent to which corporate operations involve or depend on Communist China," an Association of BellTel Retirees recommendation that the company seek shareholder OK of particular terms of senior executives' severance or termination compensation packages, and a proposal by retiree group Chairman Thomas Steed that Verizon broaden its senior executive clawback policy and report to shareholders about clawback deliberations by board members.

Beyond lobbying, Alphabet will have 10 other shareholder proposals on its proxy, which hasn't been issued, said the Investor Alliance for Human Rights. They include a recommendation it undertake a human rights impact assessment before replacing use of third-party cookies with Federated Learning of Cohorts, more disclosure of how Alphabet uses algorithmic systems to target and deliver ads, and commissioning of a report looking at the siting of Google Cloud Data Centers in countries with significant human rights issues and its strategies for mitigating the related effects.

Two of the six shareholder proposals were adopted at Apple's shareholder meeting last month, despite the board urging "no" votes. Also adopted were recommendations for a third-party audit to analyze Apple's policies and practices and how they impact the civil rights of its stakeholders.

Apple shareholders also cleared a recommendation that the board prepare a public report assessing the potential risks to the company on the use of concealment clauses, which are employment or post-employment agreements limiting the ability to discuss workplace acts such as discrimination and harassment.

Disney shareholders last month approved a report on median and adjusted pay gaps across race and gender, but proposals voted down included a recommendation to lower the stock ownership threshold to call a special meeting of shareholders, a report on human rights impacts, and a workplace nondiscrimination audit and report.