Foundation supports As You Sow shareholder resolutions
As part of our effort to better align our investments with our mission, the Robert and Patricia Switzer Foundation is committed to engaging in shareholder resolutions that encourage companies to strengthen or adopt new policies and practices to improve environmental quality.
In November 2019, for the first time the foundation’s investment committee voted to support several shareholder resolutions advanced by As You Sow in our environmentally-related programs (Energy, Waste, Environmental Health, and Water). Founded in 1992, As You Sow is a non-profit organization that promotes corporate social responsibility through shareholder engagement work (https://www.asyousow.org/). The foundation has participated indirectly in shareholder engagement activities for many years by working with investment managers who prioritize ESG criteria.
What is Shareholder Engagement?
Shareholder engagement is the practice of being an actively influencing the activities or behavior of companies in which you own shares. Generally, the objective is to encourage businesses to adopt corporate governance and other business practices that align with certain values and aim to enhance the long-term value of the business. Typically shareholder engagement activity may include:
- Attending quarterly earnings calls and annual shareholder meetings
- Voting company proxy statements
- Filing a shareholder resolution
A shareholder resolution (or proposal) is a formal request from a shareholder (or group or shareholders) to the company requesting certain disclosures and/or policy changes. In order to file a shareholder resolution with a company, an investor must own at least $2,000 worth of shares for at least one year prior to the filing deadline. In addition, a shareholder can only file one resolution per company in a given year. Typically, a resolution is considered successful if it creates a dialogue with the company and eventual action to resolve the issues raised. In some cases, if that dialogue is positive, resolutions will actually be withdrawn and never appear on the proxy statement for a shareholder vote. Shareholder resolutions are typically non-binding, but those that obtain a strong amount of support from shareholders are often hard for the company to ignore. A resolution may only be re-submitted in a following year if the resolution gets at least 3% of shareholder support.
Shareholder engagement, specifically the practice of filing shareholder resolutions, is considered an important tool for investors focused on ESG issues. According to a 2018 report by The Forum for Sustainable and Responsible Investment, from 2016 through the first half of 2018, 165 institutional investors and 54 investment managers, collectively controlling nearly $1.8 trillion in assets at the start of 2018, filed or co-filed shareholder resolutions on ESG issues.
Of note recently, a 2017 resolution filed by shareholders of Exxon Mobil urging the company to provide more analysis of the risks posed to its business by climate change received greater than 60% support. Quoted in an article in The New York Times, Exxon Mobil CEO Darren W. Woods said that the board would consider the results given the high level of support from shareholders, despite the fact that the resolution is non-binding.
Shareholder resolutions to date
To date, the Switzer Foundation has co-filed the following shareholder resolutions, with results reported at the September 3, 2020 investment committee meeting included:
Company: Waste Management (Ticker: WM)
Company: Sempra Energy (Ticker: SRE)
BE IT RESOLVED: Shareholders request that JPMorgan Chase issue a report at reasonable cost and omitting proprietary information outlining if and how it intends to reduce the GHG emissions associated with its lending activities in alignment with the Paris Agreements goal of maintaining global temperature rise below 1.5 degrees Celsius.
Resolution Status: Almost passed, 49.6% support
Company: Bank of America (Ticker: BAC)
Resolution Topic: Climate Change
BE IT RESOLVED: Shareholders request that Bank of America issue a report at reasonable cost and omitting proprietary information discussing the range of risks associated with maintaining its current levels of carbon intensive lending.
Resolution Status: Agreement reached, withdrawn
Due to positive dialogue with the companies, two of the resolutions were withdrawn (which is considered a successful outcome). One of the resolutions did go to a vote, and received an exceptionally high level of support (49.6%). Another resolution was challenged by the company and ultimately blocked by the SEC. Proposals are often challenged, as companies may argue that a proposal includes micromanagement or redundancy (addressed by a different proposal already on the ballot). The SEC then reviews and decides whether the proposal should or should not be included on the ballot.
Building on this experience, in future years the investment committee will continue to consider supporting resolutions filed by our partners at As You Sow, alongside other strategies to ensure that our investments are aligned with our mission to improve environmental quality and advance social equity.