Ties to China Increasingly a Proxy Vote Issue in TMT

On the June 7 agenda for Comcast's shareholder meeting is an item brought by the National Legal Policy Center (NLPC) that the company annually report on "the nature and extent to which corporate operations depend on, and are vulnerable to, Communist China, which is a serial human rights violator, a geopolitical threat, and an adversary to the United States."

A nearly identical NLPC-proposed China audit was rejected by Disney shareholders at its April 3 shareholder meeting, along with shareholder proposals recommending reports on the company's political expenditures and its charitable contributions. At its annual meeting March 10, Apple shareholders strongly rejected a largely identical NLPC China audit, plus shareholder proposals on a report on racial and gender pay gaps at the company. And Boeing shareholders at that company's April 18 annual meeting were widely against a China audit also proposed by NLPC, and strongly rejected a political lobbying proposal but narrowly shot down a proposal that it report annually on race and gender pay gaps across the company.

"I chalk this up to the institutional investors having similar sentiments as corporate boards in not wanting to upset" Chinese President Xi Jinping and the Communist Party "to jeopardize their business and investments in China," emailed Paul Chesser, director-NLPC's Corporate Integrity Project. "But the voting outcomes don’t make us regret bringing the proposals," he said. "This is a critical issue that is not going to go away for Corporate America. Perhaps we will revisit the construct of the proposals, but we still foresee China and human rights still being an issue we will press in the near future." NLPC also sponsored China-related shareholder votes at GM and McDonald's this year.

The 2022 proxy season had one China audit shareholder proposal in the TMT space, with an unsuccessful vote at Verizon, per Proxy Monitor. Chesser said the Verizon proposal and a similar one at 3M inspired the NLPC effort this year.

Such China proposals are typically brought by conservative interests trying to give companies a hard time, said Rutgers Law School professor Matteo Gatti, a corporate governance expert. Pushing such proposals can be a way of building an audience, he said.

China is also cited repeatedly in a proposal brought by the Adrian Dominican Sisters that Amazon shareholders are considering, regarding giving "more detailed quantitative disclosures on removal or restriction of content and products on the Amazon.com platform" due to government requests particularly by authoritarian regimes. The proposal is among the 18 shareholder proposals to be decided at Amazon's May 24 shareholder meeting. Also on the Amazon agenda are shareholder proposals that it commission a report on whether its products and services, particularly Amazon Web Services, have surveillance or computer vision capabilities or contribute to human rights violations. It also seeks details on Amazon's policy for responding to U.S. government requests to take down content from its platforms. Verizon's meeting May 11 will include a vote on a nearly identical government takedown proposal.

The volume of shareholder proposals is growing due to increased shareholder activism and to the SEC's having narrowed the grounds for excluding proposals from the company’s proxy statement, the Conference Board said earlier this year. Climate proposals "are likely to continue to be a dominant theme," it said.

Numerous climate change proposals made the agendas for TMT companies' annual meetings this proxy season. Meta and Amazon have shareholder proposals on the companies doing reports on possible "misalignment" between their lobbying activities and positions and their Net Zero climate commitments. Boeing shareholders rejected a similar proposal about reporting how its lobbying activities "align with the Paris Agreement's ambition to limit global warming" and how Boeing plans "to mitigate the risks presented by any misalignment." Comcast shareholders will vote at the company's June 7 annual meeting on a proposal that it "issue near and long-term science-based GHG [greenhouse gas] reduction targets aligned with the Paris Agreement’s ambition of maintaining global temperature rise to 1.5°C and summarize plans to achieve them." Also up for a vote at Comcast are proposals including a report on its political contributions.

Also before Meta shareholders at the company's May 31 annual meeting are eight shareholder proposals, including ones on lobbying disclosures, government takedown requests and a report on how it could reduce how much it "will be a target of abortion-related law enforcement requests by expanding consumer privacy protections and controls over sensitive personal Meta user data."

Shareholder interest in more transparency on lobbying efforts and spending is "somewhat bipartisan," said Rutgers' Gatti. Such proxy activity skyrocketed after the U.S. Supreme Court's 2010 Citizens United decision, he said. Even if they don't pass, political spending disclosure proposals attract relatively high support among shareholders, Gatti said. Charter shareholders last week rejected a shareholder proposal submitted by Service Employees International Union Pension Plans Master Trust that the cable company annually prepare a report on its company policy and procedures on lobbying, both direct and indirect, and grassroots lobbying communications, plus all lobbying payments Charter makes and to whom. Verizon's meeting will have a vote on a recommendation the board adopt a policy "prohibiting political and electioneering expenditures."

Numerous upcoming shareholder votes will look at corporate governance. AT&T shareholders will vote May 18 on a proposal that the chairman and CEO positions be held by separate people. Paramount Global shareholders will decide the same issue at its May 8 annual shareholder meeting, as will Verizon shareholders at their meeting. Proposals before Netflix shareholders June 1 include an amendment of its bylaws so company directors can’t simultaneously sit on the boards of other companies.