New Year's Resolutions
If there’s a theme tying together our shareholder engagements this year, it’s aptly summarized in a New Yorker cartoon showing a corporate executive reminding his colleagues at the conference room table, “Let’s never forget that the public’s desire for transparency has to be balanced by our need for concealment.”
Come to think of it, that’s every year’s theme. As active investors placing place careful bets on selected companies (as opposed to passive indexing, which mimics the general direction of the market) we’re in the information gathering business. We ‘crunch’ financial data, then integrate it with environmental, social and governance (ESG) data and analysis to determine which companies belong in our portfolio and when it’s time to sell. Our field is in a fascinating developmental stage because corporate divulgence of ESG data is largely unmandated and thus highly variable in content. This has created a vigorous debate about which ESG indicators are the most valuable to investors and society, and a worldwide movement to require corporate ESG disclosure by law.1
Transparency is not usually an end in itself. As Louis Brandeis famously said, sunlight is the best disinfectant. At a more utilitarian level, what gets measured (in order to be reported), gets managed.
It is now the case (and may always be so) that the mandated disclosure already on the books falls behind ESG investors’ demand for more data, particularly on emerging issues. Take for example hydraulic fracturing, a method of natural gas drilling that has received growing attention only in the last couple of years for suspected linkages to drinking water contamination and related environmental impacts. Citizens groups are pushing for legislation that would require the disclosure of the specific chemicals used in “hydrofracking fluids.” A level playing field would be the ideal solution, but in the meanwhile, our shareholder resolution at Anadarko Petroleum gets at this issue by requesting a report on the known and potential environmental impacts of Anadarko’s fracturing operations, and for a discussion of steps it might take above and beyond current regulatory requirements to reduce or eliminate hazards to air, water, and soil quality from fracturing operations.
With some notable exceptions2, corporations often prefer concealment, and so Trillium’s 2011 resolutions, listed below, reflect just how often we focus on the need for more transparency. The resolutions at ConocoPhillips, ExxonMobil, Dominion Resources and Duke Energy pose a $64,000 strategic question (“What’s the financial risk to shareholders of your company’s reliance on fossil fuel development projects that are becoming increasingly expensive in light of tightening state and federal regulations?”), while others are fare more specific (Home Depot: “What do your workplace diversity statistics look like?”).
St. Jude Medical is being asked to commit to publishing a sustainability report describing the company’s ESG performance, with a focus greenhouse gas reduction targets and goals.
2011 Shareholder Proposals Sponsored by Trillium Asset Management
|Climate Change||Dominion Resources,
|Report on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and
|St. Jude||Issue a sustainability report describing the company’s ESG performance, including GHG reduction targets and goals|
|Environmental Health||Coca Cola, Dentsply||Report on alternatives to Bisphenol-A|
|Environmental Justice||Chevron||Add environmental expert to Board of Directors|
|PPG||Disclose environmental impacts at community level|
|Equal Employment Opportunity||Home Depot||Disclose workplace
|Inclusive LGBT Workplace Policies||Gardner Denver||Ensure nondiscrimination policies cover lesbian, gay, bisexual and transgendered workers|
|Media Responsibility||AT&T, Comcast, Verizon, CenturyLink||Implement “net neutrality” principles (free and open Internet)|
|Tar Sands||ExxonMobil, ConocoPhillips||Report on financial risks of tar sands oil extraction|
|RBC||Financial risks of lending to
oil sands operators
|Hydraulic Fracturing||Anadarko||Environmental impacts from hydraulic fracturing operations|
|Political Contributions||Ford Motor, State Street Bank, Halliburton, Pentair, 3M, IBM, Best Buy, Target||Provide comprehensive disclosure
of all contributions used for
|JP Morgan||Initiate a review of the company’s role on the Board of the U.S. Chamber of Commerce|
Bold indicates a “lead filing” where Trillium acts as a primary engagement contact with a corporation. All others are proposals that we have co-filed with other concerned investors who provide leadership.
The companies above may or may not be on our current buy list. Inclusion of holdings in this article is not meant to be a recommendation to purchase these securities. Trillium’s investment team and process continuously and regularly supervise holdings to determine entry and exit prices for all holdings.
You can find the full text of our proposals on our Resolutions page and more specific information about each issue via the search function available at the top of each page on the site.
Footnotes (return to text by clicking reference):
2. For example, in 2004 The Gap published what the As You Sow Foundation described as a “warts and all” report disclosing considerable noncompliance with wage, hour, and overtime rules, and evidence of environmental, health and safety violations. “The report was recognized as a new benchmark for disclosure, even by critics of the company,” As You Sow wrote in Toward a Safe, Just Workplace: Apparel Supply Chain Compliance Programs (2010). Merck is one of a rising number of companies setting an example with greater transparency of its political contributions.