Public companies have been pushed to action by shareholder votes at a remarkable pace this year, and nowhere has that been more effective than on climate and social justice issues.
There have been 101 shareholder proposals focused on climate issues filed in 2022 among companies in the Russell 3000 index, according to a recent analysis of the proxy season by think tank The Conference Board. Of those proposals, 11 saw majority votes in their favor. That compares with 60 shareholder proposals filed in 2021, with eight passing.
“While investors, regulators and others care about risks that climate change poses for companies in general, they are especially focused on the impact that companies with significant greenhouse gas emissions are having on climate,” said the author of the report, Matteo Tonello, managing director of ESG research at The Conference Board.
“If they haven’t already, those companies should consider gathering information on the costs and benefits of designing an emission-reduction strategy that includes targets and timelines.”
Social themes
Among 43 resolutions covering racial equity and civil rights audits, there were eight that saw majority support, according to the report. By comparison, no such proposals passed in 2021.
On “human capital management” and social issues overall, there have been a record 155 shareholder resolutions this year, up from 136 in 2021, according to the report.
“Due to prior instances of wrongdoing or the results of their own investigations, some boards may have reason to believe that their companies face litigation and reputational risks in this area,” stated Umesh Chandra Tiwari, executive director of ESGauge, which collaborated on the report with The Conference Board, Russell Reynolds Associates and Rutgers University’s Center for Corporate Law and Governance.
“If so, directors could conclude that an independent audit is the best risk mitigation strategy, as it may go to the root of the cultural issues and preempt bigger problems down the road.”
Additionally, four resolutions have passed this year on employee arbitration policies, the groups found. There were also 53 proposals filed over companies’ political spending, with four passing.
Meanwhile, more companies saw less support for their say-on-pay votes, at 67 losing votes this year, up from 61 in 2021, according to the report.
Companies have increasingly been linking some CEO compensation with climate goals, but those arrangements have come under criticism for being far too lax.
CEO woes
A report last week from As You Sow of nearly 50 US companies with the highest levels of greenhouse gas emissions found most have weak standards for CEO compensation goals or simply not climate-related goals at all.
The group gave letter grades of D or F to 89% of the 47 public companies it examined, as those businesses do not have quantitative standards for climate-related compensation or do not tie CEO pay to it.
“Climate metrics included in CEO pay can either incentivize timely progress on emissions reduction or can be another form of company greenwashing,” lead author Melissa Walton, executive compensation and say on climate associate at As You Sow said.
“Of the companies that did link CEO pay to a climate-related metric, we generally found the metric to be formulated in such a way as to not adequately incentivize emissions reduction performance.”
No such companies received an A in that report, which would require linking CEO pay with a Paris-aligned climate goal of 1.5 degrees C. However, As You Sow gave the highest grade to Xcel Energy, a B, for tying CEO compensation with quantitative emissions reduction.
