Companies, Activists Find Common Ground on Climate, Diversity

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By Andrea Vittorio

Companies are more willing than ever before to negotiate with shareholders advocating on issues such as climate change and boardroom diversity, according to data from Institutional Shareholder Services Inc.

Corporate boards and management teams tend to push back when investors try to put proposals about the environment or social issues onto their annual meeting ballots. Now companies such as Inc. and Citigroup Inc. are instead reaching agreements with shareholder activists to change the company’s board diversity policy, for example, or commit to more climate disclosure, as several energy companies have done.

That’s led investors to withdraw a record 44 percent of the environmental and social proposals they submitted for a vote in 2018, the ISS data showed. It’s the first time since ISS started tracking such data that more of these proposals have been withdrawn than voted on during the annual meeting season, which is mostly over now.

A recent shift in big investors’ voting habits helped bring companies to the negotiating table. Last year, companies saw BlackRock Inc. and Vanguard Group’s first votes in favor of a climate proposal and State Street Corp.'s first votes against directors on all-male boards.

“Once the institutional investor behavior changed, I think companies really started to realize that fighting these proposals, as they’d done in previous years, may now be counterproductive,” said John Roe, head of ISS Analytics, the firm’s data arm.

It helped, too, that most of the withdrawn environmental and social proposals asked for disclosure, which is a simpler request for companies to respond to than, say, appointing a new board chair. Once one company provides disclosure, it also puts pressure on peers to do the same.

Domino Effect

Arjuna Capital’s reporting requests saw one of the highest withdrawal rates for shareholder proposals in 2018, according to ISS. The sustainable investment firm has been pushing companies to show whether they have a gender pay gap, since women in the U.S. get paid an average of 80 cents for every dollar men earn.

Arjuna’s campaign started a few years ago with proposals at eBay Inc., Apple Inc., and other tech companies. This year, it got added momentum from the #MeToo movement’s spotlight on sexual harassment, which helped raise the profile of gender-related proposals this year.

“One by one, companies started to agree to publish the data we were looking for, in part because it became a competitive issue in terms of their ability to attract and retain top talent,” said Natasha Lamb, who directs Arjuna’s equity research and shareholder engagement. Arjuna then took its reporting request to banks and credit card companies.

“We saw the same kind of domino effect on Wall Street that we saw in Silicon Valley, with one firm taking up leadership and other firms following,” Lamb said. After Citigroup agreed early this year to report on its gender pay gap, eight other financial firms followed, including Bank of America Corp. and JPMorgan Chase & Co. Many of the banks said their female employees earned 99 percent of what male employees make.

A new U.K. requirement for companies to report on their gender pay gap has played a role too, according to Allie Rutherford, a partner at CamberView Partners LLC, which consults with companies on shareholder engagement.

“The U.K. regulation had a different ask and intent than investor requests,” Rutherford said. But now that some U.S. companies that do business there have gathered pay data and made it publicly available, she said that makes it easier for shareholders to ask for information the company might have already collected.

Diversity Drive

Investors including Calvert Research and Management have also found common ground with companies this year by appealing to them on the business benefits of bringing more women and minorities into the boardroom.

“We explained that inclusive, diverse cultures can contribute to the success of firms,” said Stu Dalheim, who leads shareholder engagement at Eaton Vance Corp.'s Calvert, which considers environmental, social, and governance factors in its investing. Studies from the Boston Consulting Group, McKinsey & Co., and elsewhere have shown that companies with more diverse management teams and boards perform better financially.

That helped Calvert withdraw 12 of its 15 shareholder proposals after talks with companies, giving it the highest withdrawal rate among investors ISS looked at this year.

Most of the $14 billion investment manager’s withdrawn proposals asked companies to publicly report on the diversity of their workforce. Another proposal was withdrawn after software firm Black Knight Inc., which doesn’t have any women on its board, updated its director diversity policy.

“We weren’t the only investor raising the issue,” Dalheim said. “So I think that helped.”

To contact the reporter on this story: Andrea Vittorio in Washington at

To contact the editor responsible for this story: Fawn Johnson at

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