Nearly two-thirds of our proxy voting activity occurs in the approaching second quarter of the year. In terms of what we can expect, in the US at least, ISS (the leading provider of proxy voting services) suggest that 2018 promises to continue the recent trend of social and environmental shareholder resolutions overshadowing governance and compensation-related proposals. Political spending, board and workplace diversity, and climate and sustainability are expected to be key themes.
Social and environmental proposals outnumber governance and compensation proposals
Source: ISS Analytics – An overview of US shareholder proposal filings, Feb 26, 2018 – Based on an analysis of 450 proposals filed at Russell 3000 companies
As shareholders, we are happy to support social and environmental-related shareholder resolutions where there is a strong case that the resolutions will provide a better understanding of the companies we invest in. Or even make them better investments.
There is a mug on my desk that says ‘capitalist with a conscience’. Note the capitalist bit. We ‘do’ ESG because we believe it is in the best interests of our clients. And that means we don’t just support every nice sounding environmental and social-related shareholder resolution that is proposed. Investors need to encourage companies to make the right sorts of disclosures, which investors will genuinely find useful, or make changes that will enhance the company’s prospects. In contrast, investors should be aware of the potential to overburden already stretched management teams with bureaucracy and unnecessary costs.
Our experience is that quite often the companies that are targeted with environmental and social-related resolutions are the same companies that are the most progressive in their ESG behaviours. Why do they get targeted then? Because the resolution proponents know that these companies take their various stakeholder relationships seriously – they have a ‘way in’. Is that fair though?
Of course, that’s not always the case. There is also the issue of companies being disingenuous in their responses to shareholder resolutions that have merit. The US oil majors recently published their responses to requests from shareholders to formally consider the risks of a carbon-constrained future. As we said here, ‘Don’t expect anything too telling, especially from the US majors.’ We were right!
We’ll never get to know how shareholders (you know, the owners…) of ING Groep viewed the recent Supervisory Board proposal to make a share award to the CEO in recognition of the excellent work he is doing. Reconciling being ‘the 44th best paid out of the 50 companies in the Euro Stoxx 50 index’ with ‘widely regarded as one of the top performing bank chief executives in Europe’ against ‘instant backlash from politicians, who are gearing up for local elections next week’ was always going to be challenging. We will just have to wait and see whether or not paying Mr. Hamers in line with his European peers turns out to be in investors best interests.