Ethical Finance

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Three proposals raise concerns about ethics and finance, on student loans, tax fairness and fraudulent banking practices. All have been broached in the past.

Student loans:
The Rhode Island pension fund is again asking Navient about student loans, this time seeking a report

on the governance measures Navient has implemented to more effectively monitor and manage financial and reputational risks related to the student loan crisis in the United States, including whether Navient has assigned responsibility for such monitoring to the Board or one or more Board committees or has revised senior executive compensation metrics or policies.

Last year, it filed a similar resolution, which the company successfully challenged at the SEC on ordinary business grounds. The company contends in 2018 that the new proposal can be omitted for the same reason and also because it is moot. Last year, the resolution asked for a review of the company’s procedures “to adequately service customers in default and at risk of default include encourage the use of Income Driven Repayment plans, ability to adapt to shifting legal and standards for loan servicing, and ability to adequately service borrowers in the event of economic shock.”

At Nike, the AFL-CIO is taking up the tax fairness baton initially raised by Domini Investments at Apple in 2015. The resolution asks the company

to respond to rising public pressure to limit offshore tax avoidance strategies by adopting and disclosing to shareholders a set of principles to guide Nike’s tax practices. For purposes of this Proposal, “offshore tax avoidance strategies” are transactions or arrangements that exploit differential tax treatment of financial instruments, asset transfers or entities by taxing jurisdictions to reduce a company’s effective tax rate.

The principles should state that Nike’s board will:

  • Consider the impact of Nike’s global tax strategies on local economies and government services that benefit Nike;
  • Ensure that Nike seeks to pay tax where value is created;
  • Periodically assess the reputational consequences, including views of customers, shareholders and employees, of engaging in practices deemed to be “tax avoidance” by such stakeholders; and
  • Annually review Nike’s tax strategies and assess the alignment between the use of such strategies and Nike’s stated values or goals regarding sustainability.

Wells Fargo:
The Sisters of St. Francis of Philadelphia have gone back to Wells Fargo to ask for more transparency about its internal problems with fraud, after receiving 21.9 percent for a detailed, eight-point proposal last year seeking a report on the problems and how they could be resolved. This year, the proposal is shorter and calls simply for “a comprehensive report by October 2018 on the root causes of past and present fraudulent activities, plans to address them, and how progress will be measured, and disclosed.” Wells Fargo states in a challenge to a different proposal filed by NYSCRF about compensation ties to risky banking practices that it intends to include this resolution in its 2018 proxy statement (See ESG Pay Links).