Markets Brief: Investors Pushing for More Proxy Wins

Corporate America’s proxy season is under way, and companies are facing votes on a variety of measures that they have in many cases urged shareholders to reject. Their typical success in beating back those proposals may be more difficult than ever to achieve this year as ever-more-assertive investors are demanding action on everything from climate change to corporate governance.

Citibank C, Bank of America BAC, Johnson & Johnson JNJ, and Pfizer PFE are among the companies expected to hold proxy votes next week. Berkshire Hathaway BRK.B faces a proposal to remove Warren Buffett as chairman.

Last year, 33 environmental, social, and governance resolutions received a majority of votes from shareholders, up from 18 in 2020.

“We can think of 2021 as an inflection point and 2022 as really strengthening the gains we saw in 2021,” says Jackie Cook, a director on Sustainalytics’ (a Morningstar company) stewardship services team.

It has gotten to the point where many companies are responding to shareholder demands by adopting proposals without having them to come up for a vote. Just two years ago, there was still a lot of pushback from companies to investor proposals, says Conrad MacKerron, senior vice president at As You Sow, an investor advocacy firm.

"But, in the last year, things have really sped up,'' MacKerron says. “Companies are now making these decisions to agree to what we're asking within a period of months.”

For those issues that do make it onto the ballot, shareholder successes are easy to explain, Green Century Funds chief executive Leslie Samuelrich said in a webinar on April 19. Her firm worked with 130 companies last year during proxy season and saw 25 measures it supported pass, a number they expect to top this year.

Investors are voting with the view that climate change is now recognized by the U.S. Treasury, the Federal Reserve, and the SEC as a potential material risk faced by companies, Samuelrich says.

There is also pressure being put on big shareholders like Vanguard, which was ranked the worst of 30 major asset managers in tackling climate commitments.

There “is not a single policy in sight from Vanguard to restrict investments in fossil fuel expansion or even use its shareholder voting power to hold the world’s biggest polluters accountable,” Lara Cuvelier of Reclaim Finance, which scored the asset managers, said in a statement.

Finally, there are plenty of asset managers new to ESG that are rushing to meet “exploding demand” for sustainable investments from their clients, Samuelrich says.

“As they try to gain credibility, they have started to vote their proxies so that they also can tout their proxy voting record,” she said.

Upcoming Shareholding Meetings Include:

April 26

• Citibank and Bank of America face measures in connection with their reporting on their civil rights practices and on what steps they are taking to cease funding new fossil fuel development.
• Wells Fargo WFC is being asked to report on incentive-based compensation, race and gender board diversity, its policies arounds indigenous people's rights, and climate change.
• Charter Communications CHTR faces calls to report on its lobbying, political, and electioneering activities to see whether they're in sync with the company's publicly stated positions and values.

April 28

• Goldman Sachs GS is being asked to report on its charitable giving, and for a policy that ensures its lending and underwriting don't contribute to new fossil fuel development.
• Johnson & Johnson faces votes on several measures including an audit of its civil rights, equity, and diversity and inclusion practices, and an audit of the racial impacts of its policies. There is also a proposal for a report on the public health costs of protecting vaccine technology.
• Pfizer is being asked to report on the feasibility of transferring its coronavirus vaccine intellectual property to qualified manufacturers in low- and middle-income countries, as well as to report on the "congruency" of its political spending.

April 30:

• Berkshire Hathaway shareholders will vote on a proposal to separate the positions of board chairman and chief executive. The measure is backed by the biggest public employee pension fund in the country, the California Public Employees Retirement System. Votes on a report on how it is managing climate-related risks and opportunities and on how it plans to measure and reduce greenhouse gas emissions associated with its underwriting and investment activities are on the agenda as well. The Berkshire board has recommended voting against the proposals.

Events Scheduled for the Coming Week Include:

• Monday: Coca-Cola KO earnings.
• Tuesday: Bank of America, Citigroup, and Wells Fargo hold their annual meetings. Visa V, General Motors GM, Microsoft MSFT, and Alphabet GOOGL report earnings.
• Wednesday: Meta Platforms FB and Ford Motors F report earnings.
• Thursday: Goldman Sachs holds its annual meeting. Apple AAPL, Sirius XM SIRI, Eli Lilly and Company LLY, Twitter TWTR, PG&E PCG, Mastercard MA, and Amazon.com AMZN report earnings.
  • The Morningstar US Market Index fell 2.94%.
  • The best-performing sectors were real estate, up 0.92%.
  • The worst-performing sector was communication services, down 7.72%, and energy 4.73%
  • Yields on the U.S. 10-year Treasury note rose to 2.90% from 2.83%.
  • Oil prices fell $4.88 to $102.07 per barrel, 4.56% decline.
  • Of the 868 U.S.-listed companies covered by Morningstar, 223, or 26%, rose and 645, or 74%, fell.