Trends in Sustainability-Focused Shareholder Resolutions
This report from Ernst & Young looks at the rise in CSR-related shareholder resolutions over the last decade, and suggests ways any company can improve its sustainability governance.
The report tracks a nearly 40 percent growth in the number of environmental and social sustainability resolutions filed since 2000, and projects that fully half of all shareholder resolutions filed in 2011 will be CSR-related.
From the introduction to the report:
And it’s not just that there are more of these proposals than there have been previously. Rather, the degree of support for these types of resolutions is growing among mutual funds and other important investors. Partly, this is because investors and regulators such as the Securities and Exchange Commission (SEC) are becoming more aware of the reputational and financial risks associated with social and environmental issues. Shareholder proposals have become increasingly prescriptive in asking boards to mitigate risks tied to evolving regulations, shifting global weather patterns and heightened public awareness of climate change issues — any of which can affect a company’s business.
These developments have placed more pressure on companies to show that they appreciate such risks and are taking appropriate steps to manage them. Board members and senior management need to understand requests for information related to environmental subjects. Just as important, they must work actively to mitigate shareholders’ concerns about environmental issues. Increasing support on shareholder proposals will put pressure on boards to respond. Further, failure to respond to a shareholder proposal that receives 50% or more of votes cast may result in votes against directors in the following year. First steps toward addressing shareholder concerns related to environmental risk include understanding their investment philosophies and voting policies; knowing who is responsible for key voting decisions; and becoming familiar with shareholders’ history of activism with other target companies.
