Proxy Season Roundup
Occidental Petroleum and PPL
During Occidental Petroleum’s shareholder meeting on Friday, May 12, 2017, almost two-thirds of the shareholders (65%) voted in favor of a shareholder proposal seeking an assessment of Occidental’s energy portfolio for its long-term climate change impact consistent with the Paris Climate Agreement’s goal of limiting global temperature increases to two degrees Celsius. Significant support came from BlackRock, which voted for the resolution and noted on its website, “when we do not see progress despite ongoing engagement, or companies are insufficiently responsive to our efforts to protect the long-term economic interests of our clients, we will not hesitate to exercise our right to vote.”
By a vote of 56.8%, shareholders of the PPL Corporation asked the utility company to produce reports on how it will be affected by efforts to limit climate change, despite the board’s opposition.
The proposal asked PPL to publish, with board oversight, an assessment of the long-term impact on the company’s portfolio of “public policies and technological advances that are consistent with limiting global warming to no more than two degrees Celsius over pre-industrial levels,” including:
- How PPL could adjust its capital expenditure plans to align with a two degrees Celsius temperature rise scenario.
- Plans to integrate technological, regulatory and business model changes, such as electric vehicle infrastructure, distributed energy sources, demand response, smart grid technologies and customer energy efficiency, as well as corresponding revenue models and rate designs.
NOTE: Some companies are taking the lead on reducing carbon emissions. For instance, State Street announced that it has met its own environmental goals three years ahead of schedule, reducing greenhouse gas emissions and water use by 20% per person and diverting 90% of waste sent to landfills. In an interview with the Huffington Post, Rick Pearl, Vice President, Corporate Citizenship at State Street Corporation said:
Environmental issues are of increasing importance to our stakeholders, including employees, the communities in which we operate, clients and shareholders. From a business standpoint, more clients are expecting their financial service providers to offer products and services that address environmental issues and State Street’s asset management arm, State Street Global Advisors (SSGA) – has several (low-carbon ETF, green bonds, etc.). In addition, we have launched a program in our Global Exchange division that will help support clients in Environmental, Social and Governance (ESG) analysis and quantification of their investments.1
Proxy Access Majority Vote at Schwab
More than 61% of Charles Schwab Corp. shareholders voted in favor of a pension fund-led proxy access proposal submitted by CalPERS and NYCERS. The non-binding proposal would allow shareholders to nominate company directors.
Renault Shareholders Narrowly Approve CEO Pay Despite Government Opposition
Out of all Renault SA shareholders, 53% approved Carlos Ghosn’s seven million euro ($7.8 million) compensation for last year over the objections of the French government, which owns almost 20% of the stock and which argued that the automaker’s chief executive officer is overpaid, although it was cut by 20% last year.
An Unexpected Call for Disclosure of Corporate Political Expenditures from the Right
A shareholder proposal on the disclosure of lobbying priorities from the right-wing National Center for Public Policy Research’s Free Enterprise Project is an effort to push Caterpillar Inc. to lobby the government to drop health and safety protections. It submitted a shareholder resolution asking the heavy equipment manufacturer to report on how and why it chooses its lobbying priorities.2
“After eight years of President Obama’s regulatory overreach, high corporate taxation and executive actions that hampered growth and led to America’s worst economic recovery since the 1930s, we finally have a president willing to work with business leaders on a pro-growth agenda. President Trump is showing an eagerness to increase American manufacturing and bring jobs back to America,” said National Center General Counsel and FEP Director Justin Danhof, Esq. “Our shareholder proposal urges Caterpillar to capitalize on the current political climate to advance the company’s goals and improving shareholder value.”
NOTE: The labor group Change to Win (CtW) also submitted a shareholder proposal at the Caterpillar annual meeting. Theirs was to implement a stronger clawback policy. It received 121,854,679 votes in favor and 292,939,985 votes against. There were no votes of more than 25 million cast against three of the directors as well.
Shareholders Protest Pay, Directors at Mylan
Eighty-three percent of all Mylan shareholders voted against Mylanʼs executive compensation. (The vote is non-binding.) Board member Wendy Cameron, chair of Mylanʼs compensation committee, was voted against by 56% of the shareholders.
Mylan trumpeted in a press release last week that all of its board directors were ‟duly and validly elected.” Thatʼs because Mylan, now headquartered in the Netherlands, follows a Dutch rule where a supermajority is needed to remove a board member. One-third of votes were cast against re-electing board chair Robert Coury, who is getting a nine-figure payout for last year. CEO Heather Bresch had more than a quarter of votes opposing her.
Three investors – New York City Pension Funds, New York State Comptroller and California State Teachersʼ Retirement System – sent a letter3 to independent directors demanding a slew of changes, including the immediate resignation of Cameron.
The killer quote: ‟From the EpiPen price-hiking debacle, to allegedly overcharging the government for life-saving drugs, to paying chairman Coury nearly $100 million, this boardʼs oversight failures have hurt investors, consumers and American taxpayers. We need to see change.” – New York City Comptroller Scott Stringer.4
Institutional Investors Cast More No Votes on Directors
As with the increased support for climate change resolutions we reported on last month, the regulatory rollback from the Trump administration may be a factor in coaxing institutional investors to send a stronger message to underperforming boards. Bloomberg reports:5
Shareholders have withheld 20 per cent or more of their votes for 102 directors at S&P 500 companies so far this year, the most in seven years, according to ISS Corporate Solutions, a consulting firm specializing in corporate governance. While largely symbolic, the votes at companies such as Wells Fargo & Co. and Exxon Mobil Corp. are recognized as signals of displeasure and put pressure on boards to engage.
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While the Trump administration moves to reduce regulatory pressure on companies, big institutional investors are moving in the opposite direction. State Street Global Advisers and BlackRock Inc., for example, are increasingly taking an activist approach, calling for changes in diversity and corporate responsibility.
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State Street voted against 731 directors in 2016 and expects a similar number this year, after rejecting 538 in 2015, [Rakhi] Kumar said. No longer are investors just “checking a box” to support directors, she said. State Street is encouraging companies to refresh their boards to get new and more diverse members.
NOTE: BlackRock also voted in favor of eight shareholder proposals on board gender diversity in the United States and Canada. They said:
We’ve been particularly focused on increasing the number of women on US boards because progress in the US has been slower than in many other markets.
Board diversity, particularly in terms of gender, is important from a sustainable investment perspective, given that diverse groups have been demonstrated to make better decisions. In the board context, this appears to be because they are better able to consider, where appropriate, alternatives to current strategies – a proposition that can ultimately lead to sustained value creation over the long term.
1 http://www.huffingtonpost.com/entry/corporations-leading-on-environment-and-climate- change_us_592d71b9e4b07d848fdc0651
5 https://www.theglobeandmail.com/report-on-business/international-business/us-business/wall-street-investors-throw-their weight- in-corporate-votes/article35536516/