2011 Proxy Season Wrap-up
In August, we bade farewell to the 2010–2011 “proxy season,” the inside lingo for the annual cycle of filing resolutions, negotiating their withdrawal, and getting out the vote for the remainder that will appear on the spring proxy ballots.
“A good portion of our dialogues and resolutions resulted in agreements with companies to improve policies and provide more transparency,” said Matt Patsky, CEO of Trillium. “Both are helpful in assessing the environmental, social and governance (ESG) risks and their financial impact on shareholders.” Trillium’s ESG engagements addressed a wide range of concerns in 2011, including climate change and fossil fuel dependency, hydraulic fracturing, indigenous peoples’ rights, workplace discrimination, pollution at the community level, and a free and open Internet.
Industry-wide, average votes rose this year for resolutions addressing hydraulic fracturing, political contributions, climate change, and workplace discrimination policies. According to Institutional Shareholder Services, a division of MSCI, the average level of support for environmental and social resolutions “surpassed the 20 percent mark for the first time, while the number of proposals receiving less than 20 percent continued to decline.” Five received majority votes.1
Roughly half of our 2011 engagements focused on the environment or environmental health matters.
Concerned with the environmental health risks and water-intensiveness of hydraulic fracturing, Trillium filed a shareholder proposal at energy company Anadarko Petroleum (APC), which has large drilling operations in Pennsylvania. Following a productive dialogue, we withdrew it when the company agreed to expand and improve its public reporting on hydraulic fracturing.
Dialogue with Costco (COST), the warehouse-style consumer products retailer, produced a substantially improved seafood sustainability policy. Costco will stop selling twelve wild species identified as ‘at great risk’ by the Marine Stewardship Council, up from seven. Costco is also partnering with reputable nongovernmental organizations to come into compliance with best practice standards for shrimp and salmon aquaculture.
We withdrew a shareholder proposal at the food distributor Sysco Corporation (SYY) after the company agreed to participate in the Carbon Disclosure Project, the Carbon Disclosure Project Water Survey, and to fully develop its sustainability strategy to include water scarcity and sustainable agriculture.
Trillium worked to ward off the construction of the proposed Pebble Mine in Bristol Bay Alaska. Proposed by the U.K.-based Anglo-American (AAM.SW), Pebble Mine, if built, would be the largest open pit mineral mine in North America. It would generate billions of tons of mining waste to be held behind a massive system of dams in a highly earthquake-prone area – and one that happens to be the breeding grounds for the largest sockeye salmon run in the world.
Currently the Environmental Protecting Agency (EPA) is reviewing the proposed mine to determine whether it should veto the project under its Clean Water Act authority. In April Trillium organized a group of shareholders, representing $170 billion of assets under management, to publicly issue a joint statement calling for the agency to protect this vitally important national resource. Within 48 hours of posting, EPA staffers requested a meeting with Trillium.
Corporate Political Spending
In 2011, shareholders expressed their deep discomfort with corporate political spending more strongly than ever before. In the spring, forty-six percent (46%) of votes cast by Halliburton (HAL) shareholders supported our proposal for greater transparency and oversight at the energy services company, as did 44% of the vote at State Street (STT). And for the first time, a resolution of this type received a majority vote (at mobile phone company Sprint Nextel, courtesty of the New York City Employees Retirement System).
Early last August, Trillium was part of a shareholder group that reacted swiftly to the revelation that a number of Minnesota companies had given substantial contributions, via a business front group, to a gubernatorial candidate with extreme anti-gay views. As protestors demonstrated at its stores, Target Corporation (TGT) became the focus of a nationwide boycott that received generous media attention during a slow news month. Within days of the initial revelations, Trillium filed shareholder resolutions at Target, Pentair (PNR), Best Buy (BBY) and 3M (MMM) calling for a review of existing political donations policies and tighter oversight of the reputation and other risks incurring from them.
These companies’ ill-considered donations represented a betrayal, intentional or not, of these companies’ commitment to valuing diversity. They also illustrate the widening reach of corporations in the wake of Cititzens United, the 2010 Supreme Court decision that removed significant barriers to corporate political involvement. Except at 3M (where our resolution gained 31 percent of the vote), the resolutions were eventually withdrawn at all of the companies after they demonstrated that they had improved their oversight of political contributions and the procedures in place for vetting potential recipients. A multiyear national shareholder campaign coordinated by the Center for Political Accountability has resulted in the adoption of best practices in political disclosure by 88 companies, including more than 50 in the S&P 100.
Most experts expect “independent” groups’ political spending to reach record levels in 2012. Independent groups, many of which receive corporate funding, are not allowed to coordinate with campaigns, but enforcement is lax.
“Conflict minerals” are those whose proceeds finance fighting by armed groups in war-torn regions, particularly the Democratic Republic of the Congo (DRC). Trillium took part in a meeting with the Securities and Exchange Commission (SEC) to discuss proposed rules on conflict minerals mandated by the passage of the Dodd-Frank Financial Reform Act. Several of the recommendations we supported were included in the SEC’s recently proposed new rules.
In February, Trillium was part of an investor coalition representing nearly $200 billion in assets that released a statement calling on companies to condemn the use of minerals whose trade promotes the conflict in DRC, and take immediate steps to eliminate them from their supply chains. Trillium also lobbied for the passage of landmark legislation in California that will ban companies that do not comply with the SEC’s disclosure requirements for conflict mineral from bidding on state contracts. The legislation passed the Senate in June and is currently pending in committee.
Internet Privacy and Freedom of Expression
CenturyLink (CTL), the nation’s third largest telecommunications company, finally owned up to its responsibilities regarding Internet privacy and freedom of expression. Trillium’s well-supported 2009 and 2010 shareholders proposals (both received about 30 percent of the vote) had asked the company to report on how it would avoid violating Internet users’ privacy. (Comcast had done business with an online advertising company that secretly monitored Internet users’ browsing activities.) In exchange for the withdrawal of our 2011 resolution, CenturyLink agreed to incorporate privacy and freedom of expression responsibilities into its governing documents.
Trillium’s 2011 shareholder proposals on “net neutrality” at AT&T (T), Verizon (VZ) and Comcast (CMCSA) were excluded from the companies’ ballots with permission from the Securities and Exchange Commission, on the grounds that they focused on “ordinary business.” We were pleased, however, that U.S. Senators Al Franken (D-MN) and Ron Wyden (D-OR) wrote to SEC Chairman Shapiro to object to the decision, insisting that “whether the government will preserve and protect today’s free and open Internet is the telecommunications and free speech issue of our time.” We plan to re-file on net neutrality in 2012.
Workplace Protections for Lesbian, Gay, Bisexual and Transgendered Workers
In 2010, we worked with the Equity Foundation to file a shareholder proposal at Gardner Denver (GDI), asking the manufacturer to include sexual orientation and gender identity expression to its nondiscrimination policy; it garnered the support of 49 percent of shareholder votes. To our surprise, it was necessary to re-file the proposal in 2011, but the resubmission spurred the company to implement our proposal, which we then withdrew. In contrast, Lowes Corporation (LOW) responded very positively and quickly to our request.
1. ISS U.S. Proxy Season Review 2011: Environmental and Social.