Proxy Preview 2017

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Executive Summary

Shareholder activists have filed far more resolutions in 2017 concerned solely with environmental and social issues at U.S. companies than at this point last year—a total of 430, up from 370 as of February 15. This is just shy of the record 433 in 2015, suggesting the year’s total will set another milestone. Corporate political activity and climate change remain the key issues for investors to consider in 2017 proxy statements, but resolutions about diversity on the board and in the workplace have surged past previous levels, as have those about pay equity.

Climate change proposals continue to ask about its strategic implications and how companies will adapt to physical changes, new regulations and new technologies. They also address methane leaks from U.S. energy production and
encourage more carbon tracking and goal-setting, but renewable energy proposals have been cut in half. New climate-related resolutions ask about high-carbon asset divestment and carbon finance risks. Other environmental issues include antibiotic resistance in the meat supply chain, the reduction of food waste and nanomaterials in infant

Political activity accounts for 21 percent of the total, down from 26 percent last year, and lobbying disclosure is still responsible for more proposals than election spending.

Proponents are upping the ante with many more resolutions about pay equity for women and minorities, buoyed by a majority vote at eBay in 2016 on gender pay equity and significant new tech company commitments on diversity. This year’s crop of 29 resolutions seeks more data and policies about equal pay, with an eye on new company reporting requirements slated for 2018.

The equal pay proposals are accompanied by equal employment opportunity data requests that simply ask for data on representation by job category, particularly in the financial sector where diversity is scarce. While equal rights for lesbian, gay, bisexual and transgender (LGBT) people remain on the agenda and are potentially under threat from the new presidency of Donald Trump, these resolutions have been surpassed in number for the first time by the concerns about representation for women and mi-norities more generally. There is, however, a new request about how anti-LGBT laws will affect companies— pending at Western Union.

In the human rights area, the Israeli-Palestinian conflict is again front and center and accounts for half the 40 proposals, with 21 from the Holy Land Principles organization, which recently saw its first success after Corning agreed to provide a breakdown of its Arab workers in Israel. New resolutions asking about indigenous rights policies at banks and energy companies connected to the controversial Dakota Access Pipeline face lengthy challenges that have yet to be decided by the Securities and Exchange Commission (SEC) staff, the arbiter of shareholder activity, alongside a new proposal about the Rohingya people at Chevron.

On the sustainable governance front, more proposals than ever are asking for board diversity (29) and some are delving down to small cap Midwestern companies alongside more usual targets. ExxonMobil gave proponents a victory when it added climate scientist Dr. Helen Avery to its board in January, prompting a significant withdrawal on board oversight, but more environmental board expert proposals are pending. On reporting, the number of filings has grown from last year’s dip and 24 ask about a laundry list of concerns from climate change to human rights and nutrition. Ten resolutions also seek links between sustainability metrics (mostly about the climate) and executive pay, while five more at mutual fund companies cast a skeptical eye on what the proponents say are major inconsistencies between company policies and their proxy voting decisions.

A few resolutions about fairness in financial transactions have been filed at Wells Fargo (about its sales fraud scandal) and may go to a vote, although the bank is not eager to see the issue raised.

The National Center for Public Policy Research (NCPPR) has two new ideas this year. It suggests companies face political risks from advertising in what it sees as biased mainstream media and asked for a report, but it did not pass muster at the SEC. The group also believes companies need to attend to their employees’ “religious freedom” rights, but faces many company challenges; these have yet to be decided.

The current tally: A total of 328 pending shareholder resolutions are covered in this report, alongside 41 which have been omitted after challenge at the SEC and 61 withdrawn by proponents—often after company accords. Last year in mid-February, there were 314 pending.

Companies have lodged many more challenges seeking to omit proposals at the SEC this year—114 compared with just 71 last year, although about the same as the 113 lodged in 2015. To date, the commission has rejected only four of the omission requests, far fewer than the 14 it threw out last year. This leaves just 52 still to be decided, 20 more than last year. Proponents have withdrawn 17 of these contested resolutions, more than the nine they had in 2016—sometimes after agreements and sometimes for tactical reasons because they have concluded they will lose. In sum, companies seem to have reawakened their legal departments to fend off resolutions. (See Appendix 1 for a list of reasons why proposals may be omitted.)

Overview and New Issues in 2017

This section provides an overview of the upcoming proxy season, paying particular attention to new issues and how ongoing campaigns are evolving. The main body of the report, starting on p.X, gives a detailed analysis for each category listed here. To mirror the broader discussion about “ESG”—environmental, social and governance issues—the bulk of the report is divided into these categories. For the governance area, we use the term “sustainable governance” to describe resolutions about how companies address a wide variety of sustainability concerns at the board level (through membership as well as committee structures and responsibilities) and in their overall reporting to investors. Finally, this forecast describes proposals from political conservatives worried about what they see as excessively liberal corporate actions.

Environmental Issues

Climate change and energy: The total number of proposals focused solely on climate change has dipped a bit from last year—82 compared with 94 at this point last year (and 82 in 2015), although the issue is woven throughout upcoming annual meeting agendas with other resolutions on sustainability reporting, executive compensation and board oversight and composition (separately covered in this report).

  • Twenty-five proposals ask energy extractors and utilities about the impacts of a warming planet and the strategic implications for their business models if governments insist on carbon reduction and if new technologies affect the competitive landscape.
  • Fifteen focus on familiar ground about the risks from using hydraulic fracturing to extract energy from shale deposits, emphasizing methane reduction as well as storage and transport risks.
  • Eighteen concern carbon accounting—tracking and setting targets to limit greenhouse gas emissions—aiming for science-based goals at big industrial electricity users and retailers. Notable developments are the SEC’s recent rejection of resolutions specifically seeking net-zero GHG targets as being too specific, as well as a separate focus on targetseeking in the tech sector.
  • Last year’s campaign on distributed, renewable energy has been folded into the more broadly construed climate strategy resolutions in 2017, cutting in half the number of resolutions about renewables compared with last year, although 10 still seek renewable energy use goals at retailers and utilities.

New wrinkles are most evident in a group of 14 more resolutions on the climate, addressing coal financing risks and asking for high-carbon asset divestment. Six concern deforestation and link it to human rights abuses, as they did last year. The slate is rounded out by an inquiry about the health risks of coal use and a range of risks from oil trains.

Environmental management: Recycling is still the dominant concern in the dozen proposals about environmental management, with a new angle at online and bricks-and mortar stores’ Styrofoam packaging. There is more this year on food waste and details about its carbon-emitting characteristics and cost to society in general.

Toxics: Just four resolutions seek reports about toxic materials, with a new approach that is trying to recruit home improvement retailers to the fight against lead contamination, and two that seek more information about nanomaterials in infant formula. Industrial agriculture: There are more resolutions this year about industrial agricultural issues, dominated by a widened effort by the Interfaith Center on Corporate Responsibility (ICCR), the long-time coordinator of shareholder resolutions from faith-based groups, to eliminate routinely used antibiotics from the meat supply chain to curb drug resistance that threatens human health. An early season vote at Sanderson Farms, a chicken processor which rejects claims of a problem, hit 31.5 percent. In another action early in the year, Tyson Foods prompted proponents seeking meatless protein strategies to withdraw their resolution when it acquired the firm Beyond Meat. Proponents won at Hormel Foods early on, as well, when it agreed to a new water stewardship approach and prompted the withdrawal of a resolution. But As You Sow has a new concern about the use of glyphosate (the main ingredient in the pesticide Roundup)—pre-harvest treatment that may leave residues in food, with a resolution at Kellogg.

Social Issues

Animal welfare: People for the Ethical Treatment of Animals (PETA) has come back to Laboratory Corp. of America with its questions about potential Zika virus transmission from research monkeys housed outdoors in Texas. It also seeks retirement options for SeaWorld Entertainment’s orcas although it is unclear if that proposal will pass SEC scrutiny. A new proposal about primates at research firm Charles River and its animal welfare violations is pending.

Corporate political activity: Proponents remain vigorous in their search for more corporate disclosure of lobbying and election spending and again have filed more proposals about lobbying than elections—with close to 100 resolutions on both subjects. The overall tally does not look likely to crack the high-water mark set by 139 resolutions filed in 2014, however. Most of the resolutions are resubmissions.

Proponents have seen an early season loss at the SEC, where Anthem convinced commission staff that intermediary group spending raised in both a lobbying resolution filed at the company this year and previous election spending proposals there made this year’s lobbying resolution inadmissible given modest earlier support levels. On the other hand, an agreement with Pfizer in which it agreed to consider boosting state-level renewable energy with its lobbyists cheered proponents who also have climate change concerns. A further comprehensive disclosure deal at Pinnacle West, whose Arizona utility subsidiary has been involved in alleged political shenanigans with the state utility commission, seems to be another victory for proponents, as well.

Decent work: Companies have been inundated with proposals about pay equity, in a major new feature of proxy season. Buoyed by success with resolutions about gender pay equality, proponents have filed 29 proposals in 2017 that seek reports or policies on equal pay and opportunity not just for women but also for racial and ethnic minorities. Ten more proposals address suppliers and working conditions, as well. Concern about the high economic and social costs of economic inequality is a key driver.

Proponents lost last year at the SEC on their new minimum wage principles resolution but have modified it this year and are trying again at five companies. Proponents seeking disclosure about companies’ track records on pay, broken out by job category, race, ethnicity and gender are looking forward to the March 2018 implementation of a new Equal Employment Opportunity Commission reporting requirement for companies that mandates this disclosure, but they would like to see the data now.

Diversity in the workplace: For the first time, there are more resolutions about equal employment opportunity for women and minorities than there are proposals seeking protections for lesbian, gay, bisexual and transgender (LGBT) employees, as the latter issue continues to gain acceptance. Last year’s push for more transparency in the financial sector, where underrepresentation persists, has expanded, with a dozen proposals mostly filed by Trillium Asset Management. A notable feature is the inclusion of minorities in what until now has been mainly a campaign about women.

On the LGBT rights front, though, the Trump administration has signaled that hard-won rights seem to be threatened. Already, the new Secretary of Education Betsy DeVos has said she will not defend Obama-era protections for transgender children in public schools, although the administration also said in late January that federal LGBT workplace protections will remain. Last
fall, NorthStar Asset Management started proposing that companies report on how new anti-LGBT state laws might affect
them and another of these new proposals is now pending at Western Union.

Equitable Finance: The Wells Fargo scandal about fraudulent sales tactics that prompted a $185 million fine in September inspired a resolution asking for a report on how it might avoid similar problems in the future, from the Sisters of St. Francis of Philadelphia. Another from the Rhode Island Pension Fund sought a report on student loan servicing at Navient, but the SEC said it was ordinary business and there will be no vote.

Health: Although proponents continue trying to persuade companies to explain more about their pharmaceutical drug pricing practices, they have struck out at the SEC this year and only two votes may occur (at AbbVie and Biogen) despite 10 filings on the subject that the commission has decided are too detailed. Last year’s new campaign to recruit drug companies in the fight against the opioid epidemic and water pollution resulting from discarded medicines also has run into trouble at the SEC, which agreed it concerns ordinary business. (Proposals last year were unchallenged and earned modest support.)

Human rights: The campaign for Palestinian workplace equality in the Middle East sought by the Holy Land Principles group has gone into high gear despite very low previous vote levels, with a total of 21 filings in 2017. The SEC has turned back an
attempt to allow a new type of resolution seeking not implementation of the principles but instead reporting on the workforce, agreeing both types are essentially the same issue. Corning has given the campaign its first win; it agreed to report on its workforce breakdown in the region. Another new and detailed resolution on operations in conflict zones in general is pending before Intel from Mercy Investments, and the plight of the Rohingya people in Burma is the subject of one more new resolution at Chevron.

Indigenous rights—The controversial Dakota Access Pipeline (DAPL), stopped by former President Obama and now approved by President Trump, caused proponents to file new resolutions about indigenous peoples’ rights at banks on project finance policies and at oil and gas companies operating or investing in projects on indigenous peoples’ lands. All the banks have SEC challenges that have yet to be decided, on multiple grounds, although proponents convinced Phillips 66 to strengthen its policy and withdrew.

Other—The rest of the human rights resolutions cover familiar ground, seeking human rights risks assessments and disclosure. The first vote on the human rights of farmworkers may occur, referencing the Fair Food Program at Wendy’s, although another new proposal on equal access for the poor to the Internet at AT&T has been omitted, as has a privacy protection resolution at the company. The SEC also said two prison companies need not include resolutions about their operational audits because they did not transcend ordinary business. NorthStar Asset Management withdrew after persuading American States Water to adopt a human right to water policy, while another similar measure is pending at California Water Service Group.

Media: The problem of fake news in social media is address in a new proposal to Alphabet and Facebook from Arjuna Capital; it seeks a report on the impacts of the phenomenon on society and the company.

Sustainable Governance

Board diversity: Investors have filed more proposals than ever seeking more diverse boards of directors—with the tally at 29 so far and more possible later in the year. New is a push from the UAW Retirees’ Medical Benefits Trust at ten relatively small Midwestern companies to adopt the so-called “Rooney” rule used to integrate National Football League coaches—which requires consideration of at least one minority candidate. Another new angle is at Costco, where NorthStar wants the board to reflect the demographics of company stakeholders. Oxfam America is trying to link concern about working conditions with board diversity but so far this new proposal has been coolly received at closely held Tyson Foods and got just over 2 percent
support; it is pending at Pilgrim’s Pride.

Board oversight: The most common request for board oversight is to add a director with particular expertise, most often on the environment. There are six such requests this year and proponents celebrated—and withdrew a resolution—when ExxonMobil added climate scientist Dr. Helen Avery to its board early this year. New angles include one seeking to tie an independent board chair to drug safety expertise at Merck and Zimmer Biomet Holdings, as well as one asking for a board human rights expert at Caterpillar.

Sustainability oversight and reporting: After a sharp dip last year in the number of resolutions filed asking for sustainability disclosure, the tally is edging upwards again, although it remains below previous levels. Two dozen resolutions seek disclosure, most (22) in sustainability reports. The number of withdrawal agreements has withered, so a relatively large proportion of these are likely to go to votes. Issues raised in the proposals are most commonly climate change, but range broadly, also mentioning safety, privacy, energy and waste, supply chains, stock exchanges, human and indigenous peoples’ rights, nutrition and water. Just five of the reporting proposals are resubmissions. A notable development is the acquiescence of Emerson Electric to produce a report, after a long campaign begun in 2011 that culminated in a 47.3 percent voting result last year that seems to have reached a level of support management could not ignore.

Pay links—Ten proposals seek links between sustainability metrics and pay—general ones at seven companies and climate-specific ones at ConocoPhillips and Devon Energy. NorthStar also is reprising its proposal to link diversity performance to pay at TJX.

Proxy voting—Five resolutions ask mutual fund companies to report on how they square corporate policies and approaches to climate risk with their proxy voting records that commonly oppose shareholder resolutions on these risks. This approach was started by Walden Asset Management a few years ago. Votes have not been above 10 percent and the SEC has allowed the exclusion of this sort of resolution in the past, but a few votes are likely this year since no challenges have emerged so far.

A new resolution from Trillium Asset Management takes a fresh approach, asking BlackRock to assess and explain any inconsistencies between its own policies and guidelines on LGBT workplace protections and voting on resolutions on the issue.


Twice as many proposals have emerged so far from political conservatives this year than last year at this time—with 18 filings to date. The main actor is still the National Center for Public Policy Research and SEC filings reveal its two new ideas. The SEC has rejected the first—that companies face political risks from using mainstream media for advertising their products since the media is biased—as ordinary business. The second proposition is that companies may be abrogating their employees’ religious freedom rights by requiring compliance with laws contrary to their beliefs, such as LGBT-protections or diversity promotion. The SEC has yet to respond to the challenges that argue this also is an ordinary business issue. David Ridenour, president of NCPPR, is also asking Boeing and about their human rights policies, borrowing from the liberal proponents’ language about country selection standards.




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