Introduction

Overview and New Issues in 2020

This section provides a look at the main issues raised in each of the topics covered in this report, giving special attention to new issues and also company efforts to block proposals under SEC rules. Hanging over the proxy season this year are proposed controversial rule changes that are likely to have a significant impact on future proxy seasons, although they would come too late for this year. (See Executive Summary above and SEC Proposed Rules Changes (p. 14) for more on the proposed rule changes.)

Environment

Climate change is once again the dominant environmental topic in 2020. The topic of climate change makes up the vast majority of resolutions filed on environmental issues and undergirds many other corners of shareholder activity. In all, there are 93 proposals about the environment.

Climate change: The number of proposals specifically concerned with climate change stands at 64 this year, up a bit from 60 last year at this time but down from 83 in 2018. Climate change comes up frequently in other proposals about sustainability disclosure and lobbying. Proponents seek information about how companies plan to address carbon asset risks and disclose what they are doing to retool for a low-carbon economy. A shift in 2020 focuses on what proponents call “Paris-compliant transition planning.”

Investors are taking to the courts to force inclusion of climate-oriented proposals, whatever the SEC’s view, with a new suit from an individual proponent in Montana at utility Northwestern, which follows a lawsuit last year from the New York City pension funds at TransDigm, in which the company ultimately agreed to include the proposal.

Carbon asset risk—Proponents continue to grapple with recent restrictions on what the SEC thinks can be considered when it comes to greenhouse gas (GHG) accounting. Half the proposals on climate ask about goals and reporting. Resolutions on GHG emissions invoke the Paris climate treaty and its aim to keep global warming to 1.5°C or less, and new iterations are less specific than in the past.

A more broadly framed subset of these proposals focuses on transition planning for a low-carbon economy and Paris treaty alignment. These “transition” proposals note needed changes in both operations and investments.

Additional proposals ask six utilities how they will handle stranded assets that now use fossil fuels, such as coal-fired plants, while a new proposal asks Chevron and ExxonMobil to support a carbon pricing model for emissions reductions. As You Sow has withdrawn one proposal after an agreement at Duke Energy, and the others are pending but all face SEC challenge.

Extreme weather such as flooding that can create contamination from petrochemical plants came up for the first time in 2019, and the request for a report is newly pending at Chevron and Phillips 66 and resubmitted at ExxonMobil, where it earned 25 percent last year.

Five resolutions about coal, oil and gas seek reports; all are pending. New this year is a proposal from Proxy Impact about risks associated with natural gas drilling offshore the Israeli coast, at Noble Energy.

There are more resolutions this year at banks that finance fossil fuel projects. They ask companies to report on financing oil sands projects (JPMorgan Chase) and the risks from financing high carbon projects and whether they keep track of the carbon footprints of projects they finance (five more banks).

Renewable and efficient energy—Only three of 11 proposals seeking reports on energy efficiency and renewable energy goals are still pending. Withdrawals take most of these resolutions off annual meeting agendas because companies accede to requests asking how they are saving money with energy efficiency and renewable energy. Still pending are proposals at HD Supply, Home Depot and Steel Dynamics. A new proposal asks ExxonMobil to install electric vehicle charging stations but it has been challenged at the SEC as being an ordinary business issue.

Deforestation—Four resolutions address deforestation that occurs in food commodity production, but Green Century Funds has already withdrawn two at Archer Daniels Midland and Tyson Foods after the companies agreed to more disclosure. A proposal from SumOfUs at Yum Brands seeks more sustainably sourced commodities; it earned 32 percent last year.

Environmental management: Twenty-nine proposals ask about waste and hazardous materials management (including plastics), industrial agricultural practices and water. Nineteen are pending, nine have been withdrawn and one has been omitted so far. Most companies are new recipients and challenges are scarce.

Waste—Proposals seek reports on plastics pollution at seven companies, reprising last year’s request about plastic pellets (“nurdles”) used in industrial processes. A new proposal asks about single-use plastic bags at Walmart. Four more seek reports about recyclable packaging (or its dearth); As You Sow withdrew one of these at Starbucks when it agreed to offer washable ceramic mugs for in-store customers (a similar proposal earned 44.5 percent last year at the company). A resubmitted proposal about food waste that survived a challenge last year and earned almost 26 percent is before Amazon.com. A new request at TJX asks about its chemical footprint and contends the company is falling behind peers in its reporting.

WaterAs You Sow is leading the charge on water disclosure requests this year, with proposals seeking reports on water use risks at five energy companies where the question is usage in arid regions; this is an expansion of earlier water proposals, in a new sector, and all are pending. A detailed request for metrics at chicken processor Sanderson Farms received 11.1 percent support, after the company said it has responded to the CDP water survey—even though it has not. The resolution was withdrawn at Skyworks Solutions, a semiconductor maker, after an agreement was reached.

Agriculture—Three out of nine planned resolutions on industrial agricultural issues are still pending, while three have been withdrawn. The resolutions seek reports on antibiotic use and animal feed (two withdrawals, two pending), and As You Sow has withdrawn a resolution at Kellogg on suppliers’ pesticide use after the company agreed remove all pre-harvest glyphosate from its supply chain by 2025. Still pending is a proposal that will go to a vote in the fall at Kraft Heinz; Green Century seeks a report on how it is developing meat-free protein products.

Social Issues

Animal welfare: It is not clear that any of the three resolutions about animal welfare outside the industrial food system will go to votes. There is a pending SEC challenge from TJX to a resolution seeking an animal welfare policy; a somewhat similar fur-related resolution there was omitted last year. PETA has withdrawn a dolphin cruelty proposal at SeaWorld Entertainment, while another PETA request about wild animal displays at hotelier Marriott International faces an additional challenge.

Corporate political activity: A mainstay of proxy season is the controversial subject of corporate political influence spending in elections and lobbying and a total of 77 resolutions have been filed on the subject this year. Forty ask for more oversight and disclosure of lobbying, 34 seek the same about election spending, one is about both, and two more are on related matters. The overall tally on the two issues is down after an election spending surge last year. Companies remain happy to put in place oversight policies, and to disclose some direct spending, but far less willing to shine a light on “dark money” that flows into politics through groups that keep their donors secret.

Elections and lobbying—About half of the lobbying resolutions are resubmissions and two would not have been eligible for resubmission had the SEC’s pending proposed rule been in effect, since they did not receive at least 25 percent last year, at Ford Motor and Tyson Foods. A new proposal seeking information on if and how lobbying align with the aims of the Paris climate accord has been filed at four energy and airline companies, as well. Two-thirds of the 34 resolutions using the model of the Center for Corporate Political Accountability (CPA) on election spending are resubmissions; support for these has continued to climb and averaged more than 36 percent last year. Just one has been withdrawn to date.

Decent work: A total of 52 proposals seek fair pay and equitable working conditions and are driven by the goal of reducing persistent economic inequality in the United States and addressing high profile problems with sexual harassment and violence in the workplace. Forty were pending as of mid-February and nine had been withdrawn.

Pay disparity—Five resolutions covered in this report take on disparities between high CEO pay and their underlings, but two have been omitted so far; they are pending at 3M, TJX and Juniper Networks. About two dozen resolutions ask for information on global median gender pay disparities; almost all are resubmissions. While companies are providing some information, only a few (including Starbucks recently) have agreed to provide the global median figures, which take into account all workers.

Mandatory arbitration—Resolutions this year include about a dozen proposals from the New York City pension funds and others to report on mandatory arbitration, which critics say helps hide sexual harassment but also makes it hard to address wage theft; the resolutions face pending challenges at the SEC, which has yet to weigh in. The resolutions highlight a new law in California that is being challenged in court. One of the arbitration proposals has been withdrawn by the Nathan Cummings Foundation at Nordstrom after the company provided information. At CBRE, the AFL-CIO goes further and wants an end to mandatory arbitration.

Sexual harassment—Five proposals ask for review and reports on sexual harassment policies; four are pending, at Comcast, Wells Fargo, XPO Logistics and one other company not yet public.

Time to vote—Trillium Asset Management has withdrawn new proposals at Alphabet and Apple asking for information on paid time off for voting.

Human capital management—Five new proposals ask for reports on how companies are managing diversity and labor issues, invoking the Sustainability Accounting Standards Board metrics that are industry specific; one has been withdrawn at Advance Auto after an agreement.

Safety—A new proposal from the Teamsters is on worker safety at Amazon.com, seeking information on what the company does to oversee its own facilities and those of its third-party contractors, although the company is contending this is ordinary business.

Diversity in the workplace: After a dip last year, workplace diversity resolutions have surged back, with 29 filings; 21 are pending and eight (including all seven that ask for gender identity policies) have been withdrawn. New proposals at eight companies ask for analysis of corporate diversity programs, while longstanding proposals seeking data on diversity in different job categories and related affirmative action have been filed at seven companies. One is at Travelers, where it received 50.9 percent support last year and another is at Home Depot, where it has been on the ballot for nearly two decades and seems to have prompted some additional company disclosure last year. The effort begun in 2019 to encourage greater diversity in upper management continues with six proposals, five of which are pending.

Ethical finance: Members of the Interfaith Center on Corporate Responsibility are seeking a report on how Merck has used the proceeds from the federal tax reform legislation, although a similar proposal last year at Gilead Sciences earned only 2.2 percent support.

Health: The Investors for Opioid and Pharmaceutical Accountability (IOPA) campaign, led by Mercy Investments and the UAW Retirees’ Medical Benefits Trust, in its third year continues to ask for corporate governance reforms to create accountability and disclosure at firms connected to the opioid epidemic and high drug prices. Two opioid report requests are pending, at Johnson & Johnson and Walmart, and one has been withdrawn at Walgreens Boots Alliance because the company produced the report.

New this year are resolutions from As You Sow and the Rhia Advisors that raise concerns about how restrictive reproductive health rights laws in some states may affect companies and their employees. Resolutions are pending at Macy’s and Progressive and planned at others. Institutional investors with $236 billion in assets sent a letter to more than 30 Fortune 500

companies last September asking about efforts to support employee rights. Also new but not going to a vote was a proposal worried about 5G technology deployment health risks, and another new proposal on youth tobacco use faces a challenge from Altria.

(Additional proposals seek links between drug pricing risks and executive pay, noted below under Sustainable Governance.)

Human rights: A total of 41 resolutions address a wide array of human rights problems. The biggest group seek stronger policies and disclosures about risk management. Just eight of the human rights proposals are resubmissions and 30 are now pending, with eight withdrawals and two omissions so far.

Policy and approach—Relatively general proposals ask for risk assessments, new corporate policies or reports on how current implementation is going. A new proposal on how vulnerable communities are disproportionately affected by contamination and climate change impacts is at Chevron, while another from Oxfam at Amazon.com wants disclosure about sourcing of products from high risk areas with labor abuses. Still another takes aim at the long global supply chains for automotive supplier Lear and defense contractor Northrop Grumman, from Investor Advocates for Social Justice, which has launched its Shifting Gears campaign. These proposals note low scores from recipient companies from initiatives such as Know the Chain and the Corporate Human Rights Benchmark.

Penal system—While proposals last year took on controversies about the U.S. immigration systems and the penal system, these seem to have been folded into the more broadly focused policy proposals this year. The exception is a continued effort from NorthStar Asset Management to report on the use of prisoners in the product supply chain, at Home Depot and TJX. Resolutions there earned 30.3 percent and 37.6 percent, respectively, in 2019. The Nathan Cummings Foundation also is concerned about the possible use of workers from a drug treatment diversion program at ExxonMobil.

Child sexual abuse—Four pending proposals at communications and internet companies seek action to prevent child sexual exploitation online; one last year at Verizon Communications earned nearly 34 percent support. One withdrawal has taken place at Apple after dialogue.

U.S. slavery reparations—These resolutions come amid mounting criticism, media investigations, and bi-partisan legislation highlighting the tech industry’s role in putting children at risk. It is not clear if the resolution will go to a vote, but an individual would like railroad company CSX to study how it “can best atone” for pre-Civil War slavery connections from a company it now owns. This is the first reparations proposal ever on U.S. slavery to our knowledge but it faces a challenge from the company at the SEC on ordinary business grounds.

Weapons—Two resolutions ask how companies that make guns and ammunition address the risks inherent in their products. One is at Sturm, Ruger, where a 2018 proposal earned 68.8 percent but did not go to a vote last year. The other is at Olin, a new recipient.

Offensive products and whistleblowers—A resubmitted proposal on hate speech and products is at Amazon.com; it earned 27.2 percent last year. Taking a different angle, a new proposal asks about protections for Alphabet workers who have questioned certain business lines.

Media—A handful of proposals question internet media companies about how they impose controls on their platform content, with a new resolution from Azzad Asset Management at Alphabet seeking annual reporting and another at Amazon.com about its work with Immigration and Customs Enforcement. Concerns about Amazon’s involvement in surveillance products are the subject of two proposals, but one seems likely to be omitted on the grounds it duplicates the other.

Sustainable Governance

Proponents continue to use a corporate governance approach in their requests about environmental and social concerns, seeking reforms in how boards are structured and what companies tell their investors about broadly framed sustainability strategy. But because so many companies now routinely produce sustainability reports, those reporting resolutions have dropped precipitously—while proposals to link environmental, social and governance (ESG) metrics to executive compensative continue at a steady rate.

Board diversity: Proponents remain keenly focused on diversifying boards and have filed 49 resolutions, the most ever and up from 44 last year. New this year is a proposal from the New York City pension funds on CEO diversity but one of these has been omitted on the grounds a policy change at PACCAR made it moot, in the SEC’s view. Thirty-four proposals are pending and 14 have been withdrawn to date, but more agreements for diversity promotion are certain since almost all these

proposals usually prompt agreements. The resolutions ask either for reports on how boards are trying to diversify their mix of nominees or for the adoption of policies to do so. They mention gender, race and ethnicity. (A conservative version that asks about reporting on “ideological diversity” is noted below.)

Board experts and oversight: All six resolutions that ask for specific types of board oversight on climate change or human rights are pending; four more request particular types of board member expertise. These numbers are comparable to 2019.

New is a proposal from Mercy Investments asking Amazon.com about the board’s oversight of risks connected to third-party vendors using the platform as a “vast unregulated thrift market” to sell unsafe products that could come back to haunt the company, although Amazon says this is an ordinary business concern and should be omitted.

Sustainability disclosure and management:

Reporting—Since corporate sustainability reports are now ubiquitous, proponents largely are focusing on other aspects of sustainability and filed just six proposals seeking these reports this year. Four are pending.

ESG pay links—The number of resolutions seeking links of sustainability metrics to pay has held steady at just over 20 for three years; of the 22 filings this year on pay links, 18 are pending. They ask for links to a panoply of issues—high drug prices, extraordinary legal costs connected to the opioid crisis and student debt, executive diversity, community impacts and cybersecurity. Votes last year on drug pricing links were relatively strong, in the 20-percent range. Companies are contesting the inclusion of the three legal cost proposals; these resolutions, notably, come from pension funds in jurisdictions hard hit by opioids—Vermont and Philadelphia.

Corporate purpose: New resolutions ask six companies (four major banks, BlackRock and McKesson) to explain how they will define and deliver on their CEOs’ commitments to support the Business Roundtable’s (BRT) redefinition of corporate purpose, issued last summer. The BRT suggests companies should attend to the needs of all stakeholders, not just shareholders. So far, two proposals have been omitted and four remain pending.

ESG proxy voting—Proponents have been urging large mutual funds to integrate ESG concerns into their proxy voting policies for several years and there will be at least four resolutions filed this year, although two of the fund companies have mounted SEC challenges.

Conservatives

The field of proposals from politically conservative groups, chief among them the National Center for Public Policy Research (NCPPR), has always focused heavily on social policy; this remains true in 2020.

Board diversity: Conservatives have copied an approach about reporting on board member attributes first used by the NYC pension funds two years ago as they argued for more diversity in terms of race, gender and ethnicity. But the conservative variant contends that “ideological diversity” is what’s missing. Last year they had no luck persuading investors at large of this thesis, though; none of the seven votes in 2019 surpassed the 3 percent minimum needed for resubmission. Three recipients of the proposal this year have convinced the SEC their current disclosures make the proposals moot, but a vote of 1.4 percent occurred at Costco Wholesale and another at Deere was 1.1 percent.

Diversity at work: NCPPR is asking three tech companies and Starbucks about purported risks connected to excluding “ideology” from their non-discrimination policies. Although there will be a vote at Starbucks, Apple has already convinced the SEC this is ordinary business and similar challenges from Alphabet and Salesforce.com make further votes unlikely. An individual wants Intel to stop flying the gay pride flag, in a proposal similar to one that was omitted last year and a vote there is also unlikely given an SEC challenge.

Lobbying: Four lobbying resolutions have surfaced to date and a few more are likely to emerge as the season progresses. These proposals use the same resolved clause as those asking for lobbying disclosure but in their supporting statements praise companies for their lobbying efforts.

Charitable giving: Four resolutions from an anti-abortion activist sought a report on charitably giving but just one is still standing after a withdrawal and two omissions and the final one faces a challenge that seems likely to succeed.