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Intelligize Unveils Playbook for ESG Shareholder Proposals

Sustainable packaging. Political spending. Executive compensation.

These were just a few of the environmental, social and governance (ESG) matters that occupied the attention of publicly traded companies during the 2019 proxy season, as detailed in a new Intelligize report released today.

I, along with my Intelligize colleagues, Alyson Clabaugh and Erin Connors, based the 2020 Playbook on ESG Shareholder Proposals on our examination of nine recent ESG proposals that received strong shareholder support in the areas of sustainable packaging, political spending, and compensation clawbacks related to the opioid crisis. The resulting Playbook is a valuable resource for issuers and governance specialists as they confront similar pressures being applied by investors during the upcoming 2020 proxy season.

For one indication of the Playbook’s importance in the current landscape, consider that proponents of shareholder proposals offered 29 non-management solicitations in 2010. As of the third quarter of 2019, proponents have submitted 185 such solicitations. In other words, the campaigns behind these proposals have not only grown more widespread – they are becoming more sophisticated as well. In light of new uncertainty hanging over the Securities and Exchange Commission’s no-action letter process to exclude shareholder proposals, companies should prepare for such proposals to go up for a vote.

The Playbook identifies some noteworthy trends in different categories of shareholder proposals. For example, in the environmental category, shareholder activists have a view of corporate sustainability that often varies dramatically from the perspective of the company itself. Proposals on sustainable packaging, for instance, illustrated a large gulf between the way activist shareholders and issuers like Starbucks and Kroger view their environmental records.

We also note that when it comes to political spending, companies that actively and forcefully explain their resistance to a proposal are generally more successful. And the opioid-related proposals illustrate a continued blurring of the lines between social and governance issues.

Meanwhile, we found that socially oriented shareholder proposals are becoming a matter of course in corporate governance—and in some cases, growing substantially in popularity. For example, a proposal related to retailer Macy’s political spending won 53% approval in 2019, while similar measures proposed during the 1990s garnered about 4% of the vote.

Clawbacks of executive compensation related the opioid epidemic also commanded interest from shareholders. Nearly half of Johnson & Johnson stockholders, for instance, voted in favor in 2019 of a proposal requesting that the company disclose such clawbacks.

Corporations that need a game plan for shareholder proposals, or anyone else interested in the recent proliferation of ESG-related activity, can download the complete Playbook here.

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