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Shareholders press companies on climate change, political spending, diversity

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Shareholders press companies on climate change, political spending, diversity

Environmental risks, board diversity and corporate political spending were among the top issues on which shareholders asked companies to hold votes at their 2019 annual meetings, according to a new report.

As of mid-February, shareholders had filed resolutions on 386 environmental, social and sustainability issues, which is fewer than the 429 such resolutions investors filed during the 2018 proxy season, said the Proxy Preview, a collaboration among the Sustainable Investments Institute and shareholder advocacy groups Proxy Impact and As You Sow. Most companies hold their annual shareholder meetings in the Spring.

Shareholder resolutions are advisory in nature, but companies tend to pay heed to proposals that garner majority support.

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Shareholder rights advocates view the proxy process as a critical tool for getting emerging issues on the radar of company boards and management. But groups such as the Main Street Investors Coalition and the U.S. Chamber of Commerce contend that some activist investors have shifted the focus of the shareholder proposal process from improving business performance and financial returns to advancing social or political causes. Meanwhile, the SEC is mulling whether to tweak its shareholder process rules.

In 2019, shareholders introduced 93 political spending resolutions, up from 80 in 2018. The New York State Common Retirement Fund has filed resolutions with a number of companies, including CMS Energy Corp., Duke Energy Corp. and NextEra Energy Inc., to disclose their political spending. And shareholders of NRG Energy Inc. will vote April 25 on a proposal by New York City Comptroller Scott Stringer to have that company disclose its political expenditures. This will be the fourth consecutive year that NRG shareholders will have voted on that issue.

Shareholders put forward about 20 fewer climate-related resolutions for the 2019 proxy season than for the prior season, the report said.

"While there are fewer proposals, this is not because the issue is going away," Heidi Welsh, executive director of the Sustainable Investments Institute, said in a March 12 webinar. "Rather, it is now such a mainstream concern for investors and companies that a lot is happening in investor engagement outside the resolution process."

Some companies, including Exxon Mobil Corp., have challenged climate-related resolutions at the SEC. Taking a different strategy, Marathon Oil Corp. earlier in 2019 agreed to issue a climate change report in the coming year in exchange for shareholders withdrawing their related resolution. Other environmental issues shareholders raised include renewables, deforestation, water management and plastic pollution.

For its part, the SEC recently gave Devon Energy Corp. and J.B. Hunt Transport Services Inc. the green light to block shareholder resolutions to adopt greenhouse gas emissions reduction targets. But the agency rejected Anadarko Petroleum Corp. assertion that it does not need to hold a vote on a climate-related proposal As You Sow filed on behalf of certain stockholders.

Shareholders have introduced more than three dozen resolutions involving board diversity and board composition and oversight, the report said. Some of those proposals go beyond addressing gender diversity. As You Sow filed proposals on behalf of Amalgamated Bank with several companies, including Caesars Entertainment Corp., Eastman Kodak Co. and New Media Investment Group Inc., to include sexual orientation and gender identity in the definition of desired diversity for directors, the report said.

The SEC recently rejected Bank of America Corp. and Wells Fargo & Co.'s attempts to block Arjuna Capital LLC's proposal to disclose the median pay gap between their male and female employees. Wells Fargo's annual general meeting is scheduled for April 23, and Bank of America's annual meeting is on the following day.