By Jerilyn Klein Bier
Proxy season doesn't kick off for several more months, but it's likely to be a productive one.
Shareholder advocates, still pumped from 2011's record-breaking season, have been actively leading corporate dialogues and drafting shareholder resolutions. Dialogue has led some corporations to begin taking voluntary initiatives to improve governance disclosures. On the resolutions front, the already hot-button issue of political spending is expected to nab extra attention in the upcoming presidential election year. And momentum from Occupy Wall Street is likely to linger even if no one is camping out in city parks and public squares.
Remember when the financial crisis of 2007-08 first "connected the dots" for investors? "That feeling of first hopelessness, and then anger, is back with folks," says Mark Schlegel, CFA, co-founder of Moxy Vote LLC.
MoxyVote.com, the Richmond, Va.-based company's social networking site, enables individual investors to link their brokerage accounts for automatic delivery of proxies, align themselves with dozens of organizations that offer expert opinions, cast ballots, and ban together with other investors. Schlegel says it has been gaining 5,000 to 10,000 new users per month, and that thousands of ballots have been cast through the site since it launched two years ago.
Looking ahead, governance issues are expected to be the biggest focus of the 2012 proxy season. "Say-on-pay will be front and center if Occupy Wall Street has legs through spring," Schlegel says.
Roughly 40 corporations failed to receive greater than 50% of shareholder support for executive pay packages in 2011, the first year this was required under the Dodd-Frank Act. Meanwhile, 72% of directors said their boards would review pay plans even if executives win more than 50% support, according to a PricewaterhouseCoopers survey released in October.
Resolutions regarding corporate political donations, which have no limits per a 2010 Supreme Court ruling, will also be a front-burner topic this election year, Schlegel says. Resolutions calling for greater disclosure appeared on more than 30 corporate ballots and received an average 33% of shareholder support in 2011. Voluntary corporate disclosure for political spending is becoming much more mainstream, according to a Center for Political Accountability report.
Schlegel expects financial companies, whose problems were beginning to fade into the background, will receive renewed attention. He also thinks environmental resolutions will to continue to pick up steam. Five years ago, this was more of an issue for fringe groups, but a record-breaking number of victories during the 2011 proxy season shows it's now striking a chord with mainstream investors. They're recognizing that environmental issues are truly business issues, he says.
Indeed, shareholder activists this year saw their voices heard more strongly than ever. According to the Sustainable Investment Institute, a non-profit organization in Washington, D.C., 21 resolutions received more than 40% of shareholder support and five received majority support.
Fracking, Food And So Much More
Andrew Behar, CEO of As You Sow, also expects to see a greater number of environmental resolutions and stronger shareholder response in 2012. The social and environmental advocacy non-profit will re-file resolutions with Duke Energy and FirstEnergy, the nation's largest coal utilities. "Last year it was financial risks. This year it's commodity, construction and compliance risks," he says.
Hydraulic fracturing, or fracking, also remains a big issue for As You Sow, which plans to file fracking-related resolutions with Exxon Mobil Corp. and Ultra Petroleum Corp. and co-file one with Chevron Corp. In addition to pushing for greater disclosure regarding environmental concerns, As You Sow will continue to press for answers regarding fracking's social impact on communities.
The influx of fracking workers to energy boomtowns has resulted in an increase in crime, traffic accidents, drug and alcohol arrests, hospital outpatient volume, prostitution and other social problems in some of those communities, according to various reports. As You Sow is asking companies to address the financial risks associated with these issues.
As You Sow is also engaging in dialogue with companies about nanomaterials being included in food products through preservatives, colorings and flavorings. "They sort of snuck into the supply chain," says Behar. It's continuing to address companies' use of can linings and cash register receipts coated in bisphenol A (BPA).
The Interfaith Center on Corporate Responsibility, comprised of nearly 300 organizations with collective assets totaling over $100 billion, in the upcoming election year expects to see an uptick in resolutions asking companies for better disclosure of political spending and lobbying activities.
Financial companies, in general, will be receiving much attention from ICCR members. Bank resolutions related to transparency in the repurchase market (involving BNY Mellon, JP Morgan Chase & Co. and Citigroup) and foreclosures (Bank of America Corp.) will be part of the season's lineup. A resolution with McGraw-Hill Cos., parent of Standard & Poor's, asks for improved transparency in the credit rating process.
However, the overall trend at ICCR--which hopes to leverage the long-term relationships members have built with companies they engage with--is moving towards fewer resolutions and more frequent and productive dialogues. "Our members have been occupying Wall Street for decades," says executive director Laura Berry.