President-elect Obama should move swiftly to restore shareholder rights and to advance corporate responsibility regarding CEO pay, global warming, the current financial crisis and other matters, according to a statement issued today by the 500-member Social Investment Forum (SIF), the U.S. membership association for socially and environmentally responsible investment professionals and institutions.
Titled "New American Leadership for Environmentally and Socially Responsible Investing and Corporate Responsibility," the Social Investment Forum's letter to the Obama transition team calls for:
Restoring shareholder access to the corporate proxy ballot so that long-term shareholders have a say in the nomination of corporate directors and in protecting shareholder value. As the statement explains: "In 2007, the SEC issued rulemaking proposals to limit shareholders' access to the proxy ballot to nominate corporate directors and floated proposals to limit shareholders' ability to file advisory resolutions. While SIF and other concerned investors were able to block further action related to weakening shareholder rights to file advisory proposals, the SEC did move forward on limiting access to the proxy to nominate directors. We believe the SEC should engage in new rulemaking that reverses this decision."
Overturning efforts to undercut the consensus view that fiduciary duty may compel fiduciaries to consider environmental, social and governance (ESG) factors. "In October 2008, the Assistant Secretary of Labor for the Employee Benefit Security Administration took the unfortunate step of issuing two bulletins modifying the Department of Labor's official view on fiduciary duties. We call on the President-elect and the incoming Administration to reject the outgoing Assistant Secretary's guidance and instead provide fiduciaries with clear, consistent and unambiguous guidance that adheres to the contemporary and principled understanding of fiduciary duties.
Requiring publicly traded companies to report on environmental, social and governance issues that, if not managed properly, can harm shareholder value and public welfare. "Though the SEC requires disclosure of financially material issues, to date this requirement has not been enforced when it comes to reporting on environmental and social issues that may pose significant risks and therefore have material financial impact. In addition, we believe the financial materiality standard is insufficient to ensure regular and consistent disclosure of long-term social and environmental risks. In our experience, many of these risks are inherently long-term and difficult to address in a short time frame ..."
Ending the SEC Division of Corporate Finance practice of automatically issuing No Action letters omitting shareholder proposals that ask management to undertake a risk assessment or review the financial implications of environmental, community, public health and human rights concerns and issues. "In fact, we ask that the SEC restore, within the first hundred days of the new administration, the right of investors to propose and vote upon resolutions asking a company to evaluate how such specific risks may affect the company's business."
Reforming executive compensation policies and practice. "In order to hold compensation committees more accountable, we support an annual nonbinding shareholder vote on the executive compensation plan as described in the proxy for all publicly held companies. Shareholders have demonstrated a strong desire for this kind of accountability: more than 100 "Say on Pay" resolutions were offered by shareholders in 2008, and they averaged voting support of over 43%. We strongly support the advisory vote as one important tool for investors to hold companies accountable on executive compensation. Simply put, executive compensation has to be better aligned with the interests of shareowners, long-term corporate performance and the public."
Providing for socially responsible investing options in the federal government's retirement plan, thus allowing federal employees an investing option already available to many individuals in the private sector.
Creating an Office for Innovation in Corporate Social Responsibility to enhance and coordinate interagency CSR activities, allowing the federal government to become a state-of-the-art leader in CSR across its vast domestic and international arenas of influence. "SIF believes the time has come for the U.S. government to promote corporate social responsibility more comprehensively and effectively in alignment with public policy objectives in both the domestic and international arenas. We ask the Obama Administration to appoint an Office for Innovation in Corporate Social Responsibility (CSR) to enhance and coordinate CSR activities across the government, at home and abroad, and to actively pursue policies and initiatives to strengthen the CSR commitments of the private sector. We suggest this office be based in the Domestic Policy Council and work closely with the National Economic Council and the National Security Council to ensure appropriate interagency coordination on both the domestic and international fronts."
Other recommendations in the SIF letter includ: