Shareholder Activism Pays Off- Costs vs. Long-term Value

New data confirms: shareholder engagement creates long-term value

Legal fees, data analysis, proxy solicitation, engagement staff—it makes some forms of shareholder activism costly to the investors who undertake it I am everyone happy Friday good to see everyone thank you for being flexible with the time. But a groundbreaking study by Gantchev (2013) used a sequential decision-making model to ask the real question: Is it worth it?

The answer: Yes—especially when targeted at governance reform or capital misallocation.

Gantchev’s study modeled the full lifecycle of activist campaigns, accounting for costs at every stage. He found that successful engagements (those that resulted in changes to capital policy, board structure, or leadership) produced net benefits to shareholders—even after subtracting all expenses.

💡 The Key Takeaway

The most effective campaigns were those that:

• Chose targets wisely — companies with weak governance and clear value gaps;

• Had staying power — persistence across multiple years increased both implementation and performance impact;

• Focused on fundamentals — especially capital return policies, entrenchment, and board effectiveness.

🧨 Why This Matters in 2025

Critics of shareholder proposals argue they are wasteful, confrontational, or harmful to management discretion. But Gantchev’s data suggests the opposite: When activism is data-driven and focused, it’s one of the most value-accretive tools investors have.

That makes recent attempts to raise the resubmission thresholds for proposals all the more concerning. If fewer proposals can be filed or resubmitted, many campaigns would never reach the performance-inflecting stage.

📎 For more: “The Costs of Shareholder Activism”

CalPERS and the Power of Pension Fund Activism

What long-term investors taught Wall Street about board accountability

When most people think of shareholder activism, they picture hedge funds pressuring companies for quick wins. But some of the most influential and enduring corporate governance reforms in the U.S. have been driven not by hedge funds, but by public pension funds—and the gold standard of this strategy is CalPERS.

In a landmark study by Del Guercio and Hawkins (1999), researchers analyzed CalPERS’ campaign strategy targeting underperforming companies with entrenched governance structures. Their findings? Engagements initiated by CalPERS led to statistically significant improvements in both firm performance and governance in the years following proposal filings.

📌 What Made the CalPERS Model Work?

• It focused on long-term economic value, not just market optics.

• Proposals were filed at companies with governance red flags: staggered boards, golden parachutes, poor oversight.

• CalPERS used its public accountability and reputational leverage to demand reforms—like board independence, executive pay realignment, and improved disclosure.

What’s more, many of these proposals never even required a shareholder vote to drive change. The reputational pressure alone often pushed boards to act.

🧭 Why It Still Matters Today

In a world increasingly focused on ESG performance and systemic risk, the CalPERS model offers a blueprint for responsible, credible, and effective shareholder engagement. These campaigns weren’t speculative—they were laser-focused on fixing structural weaknesses that posed financial and reputational risk.

Pension funds still rely on Rule 14a-8 to elevate concerns at annual meetings. Without that right, the gains of the last 30 years—like improved director accountability and board independence—could easily erode.

🔗 Learn more from the 1999 Landmark Study- The Motivation and Impact of Pension Fund Activism

The History of SEC rules and Shareholder Proposal Regulation

During the United States’ first century, corporations had small numbers of investors and were largely controlled by shareholders through deliberations and voting that took place at in-person shareholder meetings. As the US economy grew, and corporations had to bring in large amounts of capital from thousands of investors, shareholder meetings went from in-person affairs to being conducted by proxy, and management solicited blanket voting authority based on little or no information. Ownership and control were largely divorced, and corporate abuse of the proxy, which frustrated the free exercise of the voting rights of stockholders, was rampant. Section 14 of the Securities Exchange Act of 1934 addressed this concern by authorizing the SEC to regulate proxy solicitation.

The SEC adopted the predecessor to SEC Rule 14a-8 in 1942, recognizing that shareholders need notice of proposals to be made by fellow shareholders. One court explained that, “the rationale underlying this development was the Commission’s belief that the corporate practice of circulating proxy materials which failed to refer to the fact that a shareholder intended to present a proposal at the annual meeting rendered the solicitation inherently misleading.” SEC Staff reiterated this purpose, explaining that “[t]he Senate Banking and Currency Committee recognized the need to provide not only for disclosure of matters management planned to present, but also for shareholders to be given ‘reasonable opportunity to present their own proposals and views to fellow security holders.”

Thus, SEC Rule 14a-8 advances the overall Securities Exchange Act’s goal of shareholder democracy—a central purpose of the 1934 Act in reaction to weakening shareholder control and increasingly concentrated corporate power in professional managers. Shareholder democracy stands for the principle that, in return for access to the securities exchanges, the law provides that corporations would incur a corresponding duty to give the shareholders fair suffrage. Referring to 14a-8, one recent judicial decision noted that “[t]he Commission enshrined this edict in its regulations, believing that “fair corporate suffrage” required that all shareholders receive notice of such matters when their proxies are solicited.”

How Investors Deploy Shareholder Proposals

Patrick Miller speaks with Sanford Lewis regarding investors who file shareholder proposals at publicly-traded US companies related to social and environmental issues. They discussed the process for submitting these proposals pursuant to SEC rules.

HOST: Patrick Miller is the Founding Attorney at Impact Advocates APC.

*Disclaimer: The information in these recordings is provided for informational purposes only. You should consult with an attorney before you rely on this information. This information should not be seen as legal advice and does not create an attorney-client relationship. This interview is meant to be a general discussion and may not include all relevant information regarding the issues covered.

Opioids crisis

According to the CDC, opioids were involved in nearly 75,000 overdose deaths in 2023,77 a crisis that continues to ravage communities across the country. The sale and distribution of opioid medications carries significant legal and reputational risks for companies with long-term and systemic societal and economic impacts.

The Investors for Opioid and Pharmaceutical Accountability (IOPA) was a diverse coalition of global institutional investors with 67 members representing over $4.2T in AUM that was established from 2017-2023 to engage opioid manufacturers, distributors and retail pharmacies. IOPA members filed more than a hundred shareholder proposals and took on the most important governance reforms within major pharmaceutical companies to better manage societal and enterprise risks. Central to the IOPA’s strategy was to involve the board in opioid risk management by asking independent directors to investigate and report on how the board is assessing and managing legal, financial and reputational risks related to its opioid business. Fourteen of these companies agreed to conduct board-level risk assessments of opioid-related business practices including governance, compliance, compensation, and political lobbying, and to report these findings publicly. Two companies created a board-level committee dedicated to opioid oversight.

---

For further information on corporate engagement with health equity issues, see ICCR’s page.

Why Faith Groups Have Historically Practiced Responsible Investing

The full statement can be found on ICCR’s website.

Religious organizations steward their organizational finances and the investments managed on behalf of their constituents and beneficiaries in alignment with the beliefs, teachings, and values of their respective faiths. Many religious organizations develop investment guidelines, which include strategies such as screens to exclude industries that they believe cause injury to society, shareholder engagement with portfolio companies to mitigate environmental and social harm, and investing in companies or projects that are making a direct and positive impact.  This practice, known as faith-consistent investing, is one form of what today is commonly referred to as sustainable and responsible investing. Faith-consistent investing is a fundamental right protected under the First Amendment, which guarantees both free speech and religious freedom, and ensures that investors are able to make their investment decisions in accordance with their beliefs.

The Interfaith Center on Corporate Responsibility (ICCR) is a coalition of over 300 faith and values institutional investors who, for more than 50 years, have been leaders in faith-consistent and sustainable investing. Our genesis as an organization is grounded in the advocacy of multiple faith groups to address the racist apartheid regime in South Africa. Faith-consistent investing leads religious investors to assess how corporate policies and practices may adversely impact the health of people and the planet, which has a direct impact on the long-term performance of their portfolios.

Faith-based investor engagements with portfolio companies, through dialogue and the filing of shareholder proposals, are a natural extension of these beliefs and are central to both our duties as trusted fiduciaries seeking competitive returns and our responsibilities as faithful stewards supporting the fundamental values of our religious traditions. For this reason, we are concerned about any attempts by legislators or policymakers to interfere with investors’ fundamental freedom to make investment choices and/or engage with portfolio companies in alignment with their investment philosophies and institutional values. This includes letters received from the House Judiciary Committee in 2024 by several of ICCR’s faith-based members requesting informational disclosures under the pretense of exploring violations of antitrust laws.

While each faith institution has its own set of priority issues that it addresses through its respective ministries and advocacy work, there are many issues where faith investors’ interests converge. Actions to mitigate the climate crisis ravaging our planet, to uphold human rights, including the fair treatment of workers, and to ensure equitable and affordable access to healthcare are just a few examples of priority issues of common concern among many faiths.  The 2016 Edinburgh Finance Declaration is one example of the world’s leading faiths articulating their shared values. We believe that companies that adopt forward-looking policies and practices to mitigate environmental and social risks are well-positioned for long-term financial success and value creation. Conversely, companies that ignore these risks may endanger the performance of the capital we are called to steward, and impose enduring external costs on society, the economy, and the planet that sustains us. Over the past 50+ years, ICCR member engagements with corporations on these issues have resulted in improved conditions for various stakeholders, including workers, customers, communities, and shareholders. For instance, most of the world’s faiths emphasize stewardship of the planet, care for creation, and moral responsibility toward the environment, which makes them deeply concerned about the climate crisis. Faith investors working in climate-vulnerable communities witness firsthand how climate change adversely affects these areas. Without the adoption of meaningful climate mitigation and adaptation measures, extreme poverty and inequality, risks to land, food and water security, forced migration and geopolitical conflict, along with global health risks, will all intensify. Consequently, faith investors often align with other like-minded investors to tackle climate risk and advocate for a reduction of GHG emissions from our portfolio companies. Faith-based investors actively promote worker justice, which includes workplace health and safety protections, the provision of a living wage, and the freedom to associate and engage in collective bargaining. Faith-based investors have advocated for health equity, engaging with the world’s largest healthcare companies to ensure that medicines and healthcare services are affordable and accessible reaching those most in need.

Importantly, while we often cooperate in investor spaces around strategies to spur corporate action, we make independent investment decisions to provide risk-adjusted returns to our individual constituents and beneficiaries in line with our respective faith beliefs. The U.S. Constitution provides that “Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof,” and the First Amendment protects the religious liberty that is foundational to this great nation. This ban against government interference in faith-consistent practices is essential when considering all aspects of the life and work of religious institutions, including their investment decisions.  It preserves their autonomy to invest their organizational assets and the pensions of their millions of beneficiaries in a manner consistent with their religious beliefs.  In recognition of the constitutional limits of entanglement between the federal government and religious institutions, Congress included a Church plan exemption in the Employee Retirement Income Security Act of 1974 (ERISA).

We want to reiterate our belief that companies committed to addressing their impacts on society and the environment are better positioned for financial success over the long term. For this reason and because our faith calls us to do so, we will continue to invest and engage with our portfolio companies to realize that goal.

Governance Proposals

Governance proposals and the role of individual investors

Governance engagements seek to ensure that a well-functioning board can effectively oversee the interests of shareholders. For example, proposals to increase the independence of the audit or risk committee have the potential to reduce accounting fraud risk. Likewise, engagements to increase the holding period of equity-based pay reduce management incentives to manipulate short-term earnings.

Governance shareholder proposals can also increase investors’ ability to engage with companies. It has been shown that it is more costly for investors to engage with companies with entrenched managers.14 The entrenchment of management is principally measured and affected by the corporate governance infrastructure including whether the company has characteristics such as:

• Staggered boards ƒ  

• Limits to shareholder by-law amendments

• Supermajority requirements for mergers ƒ  

• Supermajority requirements for charter amendments ƒ  

• Poison pills ƒ  

• Golden parachutes

Shareholder proposals that improve corporate governance structures on these aspects are frequently part of an overall strategy by investors to provide a better balance of power between investors and a company’s management and board.

S&P Global Market Intelligence: SEC proposed rule would have blocked 614 ESG resolutions since 2010, data shows

Author: Esther Whieldon

Since 2010 more than 600 environmental, social and governance-related resolutions likely would have never advanced under a newly proposed rule by the U.S. Securities and Exchange Commission, according to data the Sustainable Investments Institute shared with S&P Global Market Intelligence.

The SEC in November 2019 proposed to increase the amount of support a shareholder resolution required to be reconsidered in the years following an initial vote. Rather than resolutions needing at least 3% support the first year, 6% the second year, and 10% the third and subsequent years after an initial vote to be reconsidered, the SEC would raise those thresholds to 5%, 15% and 25%, respectively. The agency estimated the changes would cut the number of shareholder proposals by 7%.

While the rule has yet to be finalized, the Sustainable Investments Institute, or Si2, compiled a database of ESG resolutions voted on from the beginning of 2010 through Nov. 18, 2019. Si2 found that 614 ESG-related resolutions, or about 30%, of the 2,019 proposals voted on at company annual meetings over that period would not have been eligible for resubmission. That total is almost three times the number of resolutions — 206 resolutions — that could have failed existing threshold requirements over that time, according to Market Intelligence's analysis of the data.

Of the 614 potentially impacted resolutions, political activity, climate change and human rights issues would have taken the biggest hit.

Companies are coming under increased pressure from investors to disclose how ESG risks could impact their bottom line, and they are addressing those risks and opportunities. But groups such as the U.S. Chamber of Commerce and Business Roundtable have pushed for reforms to the shareholder resolution process.

….

Read full article

Shareholder Rights Group: At Boeing, Wells Fargo, Chevron - SEC Rulemaking Proposals Would Have Blocked Investor Engagement on Critical Issues

Immediate Release
January 7, 2019

The Shareholder Rights Group (SRG), a coalition of investors who exercise their right to file shareholder proposals, has written to the Securities and Exchange Commission (SEC) in opposition to proposed rule changes that would effectively undermine the ability of shareholders to continuously promote increased corporate responsibility and improved corporate governance.  [Link to letter] 

Currently, shareholders that own at least $2,000 in stock for one year have the right to engage an investee company on an issue of concern through procedures set forth in the SEC’s Rule 14a-8. In late 2019, the SEC proposed dramatic changes to the Rule, undermining shareholders’ rights to hold companies accountable for risk mitigation and crisis management. In addition to making it harder to file proposals by requiring larger or longer-term holdings, the rulemaking proposal would make it more difficult for shareholders to submit a proposal to a second or third vote by imposing steep voting thresholds – 25% support by the third year, and disallowing a proposal if it suffered a loss of momentum after that. The SRG letter notes that “[i]n practice sometimes 10% or 20% of investors represent the leading edge of an issue - the prescient minority, and therefore it is not wise for the management to discount the topic they are surfacing.” 

The SRG’s letter highlights three case studies in which shareholders preemptively sought disclosure or oversight of certain issues that have proven to be significant concerns for those companies. Specifically, the SRG’s letter explains how the proposed rule changes, if they had been in effect at the time of shareholder engagement, would have interfered with investors’ ability to directly respond to recent corporate responsibility crises and controversial operations at Boeing, Wells Fargo, and Chevron. 

Boeing: Prior to the two crashes of Boeing’s 737 Max airliners in 2018 and 2019, shareholders had encouraged better disclosure of Boeing’s notoriously aggressive lobbying policies, expenditures, and internal controls. Under the SEC’s proposed rulemaking on resubmissions, shareholder proposals on lobbying would have been barred beginning in 2017 – shortly before the 737 Max crashes. Yet, after the 737 Max crashes, shareholders supported lobbying disclosure with 32.6% of the vote in 2019. Had the proposed resubmission thresholds already been in place, shareholders would have been denied an opportunity to address this matter with the company in the wake of these catastrophic events.

Wells Fargo: Wells Fargo has suffered and continues to suffer a prolonged crisis of public, government, and consumer trust, having paid over $17.2 billion in penalties since 2000. The establishment of 3.5 million fictitious or unauthorized accounts, and improper practices in which 800,000 people were forced to take redundant auto insurance from 2012 to 2017, have punctuated an era of predatory practices. Had the SEC’s proposed resubmission thresholds been in place, shareholder proposals concerned about the ethical and business risks of predatory lending would have been excludable from 2013 to 2016. Additionally, under the SEC’s proposed threshold changes, shareholder proposals seeking an independent board chair would not have been permitted from 2013 to 2016 – a change that the company quickly enacted after its 2016 account fraud scandal. The failings of leadership, toxic corporate culture, and misdirected incentives have cost at least $24 billion in market value, despite early prescient shareholder engagement.

Chevron: In the U.S., advancement on corporate climate change mitigation initiatives has been driven to a large degree by shareholder proposals and shareholder engagement. One informative example is the progression of hydraulic fracturing and methane proposals at Chevron. Shareholder engagement from 2011-2015 had led to significant advancement of Chevron’s environmental practices and reporting; during this timeframe, shareholder support ebbed and flowed reaching highs of 40% (inspiring corporate action) and dipping to 26% before rebounding to over 30%. In 2018, approximately 45% of Chevron’s shareholders voted in favor of a shareholder proposal related to fugitive methane reduction, which again inspired a corporate response on the issue. However, had the SEC’s newly-proposed “momentum requirement” been in place, this natural variation of shareholder support would have meant that investors would not have been offered the opportunity to vote on that 2018 proposal that they resoundingly supported. 

Sanford Lewis, Director of the Shareholder Rights Group explains in the letter that “[i]n our assessment, the SEC’s proposed proxy rule changes would disrupt functional working relationships between shareholder proponents, institutional investors, and proxy advisors and companies. The proposed rule changes would make the path of investor engagement steeper and more convoluted, adding unnecessary costs and red tape, and making it more difficult for investors to foster sustainability, risk management, and governance improvements at their companies. It would block the most established and effective path for improving environmental, social, and governance (ESG) disclosure and performance of the market.”

The Shareholder Rights Group urges all concerned investors to write to the SEC in opposition to the proposed rules by the February 3 comment deadline. Additional info on the proposed rule changes, including links to the proposed rules are included at InvestorRightsForum.com

The SEC is accepting comments on the proposed rules until February 3, 2020. Write to:  Vanessa A. Countryman, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090; Email to: rule-comments@sec.gov. Email or hard copy subject line should include reference to the File No. S7-23-19 (shareholder proposals) and File No. S7-22-19 (proxy advisors).

Investor Coalition Fights Opioids Crisis

By LAURA E. WEISS, CQ

It began as a suggestion from a county health official to leaders of a group of nuns’ money management program. They were addressing climate change, modern-day slavery and immigration — why not the opioid epidemic?

A year and a half later, the mammoth coalition of investors born from that idea wields $2.2 trillion of influence, urging the largest U.S. drug companies to take accountability for playing a role in the opioid crisis. The group, Investors for Opioid Accountability, has cut deals with companies in the business of making or distributing opioid painkillers to review how they oversee sales of the highly addictive drugs and make other corporate governance changes aimed at improving supervision of opioid sales.

“No one is untouched by the opioid crisis in the country — or even globally now as it’s beginning to turn out — but we lead with the investor lens because that is our responsibility and our duty to give an investor voice to it,” says IOA co-leader Meredith Miller. She says the coalition”s 46 members — including state treasurers, public pension funds, faith-based investors and union benefit funds — are hearing from their ministries, citizens or union members about the crisis.

***

IOA’s shareholder proposals include requests for reports on board oversight of risks related to opioid sales, mechanisms for recouping executive pay in the case of misconduct, disclosure of lobbying spending, independent board leadership and other adjustments to oversight mechanisms and how the CEO and other top leaders are paid.

***

IOA has claimed several victories so far. The coalition’s opioid risk report proposal won support from 62 percent of investors in Assertio Therapeutics Inc., which makes opioid painkiller Nucynta. The same proposal neared majority approval at AmerisourceBergen Corp., one of the “big three” U.S. drug wholesalers. IOA says it has a commitment from another large distributor, Cardinal Health Inc., to publish risk reports, recoup executive pay in cases of misconduct and split the roles of CEO and board chair. McKesson, the country’s sixth-largest company, and several manufacturers have also agreed to changes including reviews of how directors oversee opioid sales, avoiding votes on IOA’s proposals.

Read more

Gender Pay Equity

Natasha Lamb
Managing Partner
Arjuna Capital

There are gender pay gaps … and then there are median gender pay gaps. Understanding the difference between the two may determine just how much progress women make in terms of fairer compensation in the next decade.

So first, the definitions:

“Equal pay” gap: What women are paid versus their direct male peers, statistically adjusted for factors such as job, seniority, and geography. Often referred to in the context of “equal pay for equal work.”

“Median pay” gap:  The median pay of women working full time versus men working full time. This is an unadjusted raw measure used by the Organization for Economic Cooperation and Development (OECD).  Women in the US, for example, make 80 cents on the dollar versus men on this basis.

Equal pay gaps measure whether women are being paid commensurate with their peers for the work they are doing today. But median pay gaps measure whether or not women are holding as many high-paying jobs as men. Narrowing the median pay gap means putting more women in leadership (and reaping the performance benefits that diversity affords). And that’s where investors come in. Concerned shareholders in major US financial and tech companies want to make sure the pay gap difference is understood—and acted upon.

Consider the case of Citigroup. While it is true that women at Citi are paid 99% of what men are paid on an equal-pay basis when adjusting for job function, level, and geography, the median pay gap at the financial giant paints a very different picture: Women at Citigroup earn just 71% of what the men earn.

What accounts for the difference? Women are dramatically underrepresented in high-paying positions at Citigroup—and nearly all other major corporations. So, when more US companies begin disclosing their median pay gaps, the numbers are going to be shocking. In fact, Citi’s 29% median pay gap could very well end up being at the lower end for large US financial and tech companies.

This kind of disclosure is not going to happen on its own. But investors are intent on making headway, and establishing benchmarks from which to measure company progress. Between 2016 and 2018, shareholder proposals and concurrent dialogues led by my firm, Arjuna Capital, persuaded 22 companies, including Citi, JPMorgan, Wells Fargo, Bank of America, Bank of New York Mellon, Amex, Mastercard, Reinsurance Group, and Progressive Insurance to publish their gender pay gaps on an equal-pay basis.

Tech giants like Apple, Amazon, Microsoft, Google, and Facebook have been compelled to do the same. And commitments from leading companies often have a domino effect through an industry, putting pressure on more companies to act. The adjusted equal pay gap picture is, in many ways, the easy part of the gender equity story to tell.  But it is only half the story.  Now, shareholders like us want companies to follow Citigroup’s lead and disclose their median gender pay gaps.

Today, Arjuna Capital is announcing an important new phase of our work: a median pay gap shareholder resolution engaging a dozen major US companies across the banking, tech, and retail sectors, including: Adobe, Amazon, Intel, Facebook, Alphabet/Google, Bank of New York Mellon, Bank of America, Wells Fargo, AmEx, JPMorgan Chase, and Mastercard.

The 12th company we targeted with the shareholder proposal—Citigroup—opted to respond almost immediately, disclosing its median pay gap data through a blog, and pledging to narrow this wider gap. On Jan. 16, 2019, Citi became the first US company to reveal its global median pay gap.

The result was a bit of rough sledding for Citi. National and financial news outlets zeroed in on the shock factor in the data. Headlines read: “Citigroup Admits It Pays Women 29% Less Than Men;” and “Citgroup’s business is money, but not a lot of it goes to its female employees.” Others got it right with headlines focusing on the significance of Citi’s groundbreaking decision to release median figures: “Citigroup is revealing pay day data most companies won’t share” and, perhaps most bluntly, “Citigroup Bravely Announces It Pays Women Like S—t.”

Citi had the courage to break the mold and disclose median pay numbers, and that bravery will pay off in the long run, not only for the company but for its investors, by improving gender diversity throughout the company. A recent study cited in the Harvard Business Review found that wage transparency, in countries that mandate it, not only narrowed the wage gap but increased the number of women hired and promoted into leadership positions.

Citi also made it clear that it is taking the proactive steps needed to fix the median gender pay gap. Its goal is to increase representation at the assistant vice president through managing director levels, to at least 40% for women globally and 8% for black employees in the US by the end of 2021. (Yes, there is a minority pay gap and a minority median pay gap problem, too.)

Multinational companies, including Citi, that operate in the United Kingdom are now under regulatory mandate to disclose median gender pay gaps. In 2018, peer Bank of America revealed a 41% gap for its UK operations. Citigroup reported a 36% median gap for the UK, but prior to January’s announcement, the company had not published median information for its global operations, including the US.

Revealing the whole story of the gender and racial pay gap is essential to create change. Indeed, what gets measured (and disclosed) gets managed. As it stands, the World Economic Forum estimates the gender pay gap costs the economy $1.2 trillion annually. The 20% median income gap for all women working full time in the United States is a disparity that can equal nearly half a million dollars over a career. And the income gaps for African-American and Latina women are at 60% and 55% respectively. At the current rate, women will not reach pay parity until 2059. This depressing statistic is not only bad for women, it’s bad for the economy, and it’s bad for the companies that can benefit now from women’s leadership and talent.

It remains to be seen how many of the 12 companies targeted by Arjuna Capital will agree to the shareholder resolution in 2019. Our pledge is to continue to work with the companies’ leadership to find common ground on our resolution, and to educate the media and public about the median pay gap. We will applaud all good faith efforts to publish median pay numbers because the most effective shareholder activism is not about shunning; it is about casting light on a problem, calling companies to task, and nudging them through the sometimes difficult process of disclosure and reform.

Citi learned that disclosing its median gender pay gap meant a little PR pain in the near term. But it also established itself as the leading US institution on pay equity, doing the honest and real work to address inequity for women and minorities. Concerned shareholders will continue to press other companies to follow suit, because, unfortunately, there remains glaring inequality in the US workplace. And it is high time to tell the whole story.

Read more

Kroger and Tropical Forests

Kroger Co., the largest grocery chain in the U.S., agreed to develop and implement a no-deforestation policy after Green Century filed a shareholder resolution with the company, urging them to take action. After the announcement, they withdrew the shareholder resolution with the company.

According to the agreement, Kroger will implement a no-deforestation policy in its private label Our Brands products supply chain by 2020. It also will report on the progress it makes toward its goals through reliable third-party questionnaires.

As one of the largest retailers in the world with an extensive supply chain, Kroger’s new commitment is the kind of corporate buy-in needed to preserve the world’s forests

The Role of Investors in Supporting Better Corporate ESG Performance

For over half a century, the shareholder proposal process has served as an effective way for investors to provide corporate management and boards with insights into their priorities and concerns regarding corporate governance, policies and practices.  The process has resulted in numerous important changes to corporate governance in the U.S.  Examples include:   

• Resolutions were the impetus behind the now standard practice – currently mandated by major US stock exchanges’ listing standards — that independent directors constitute at least a majority of the board, and that all the members of the following board committees are independent: audit, compensation, nominating and corporate governance.

• In 1987 an average of 16 percent of shareholders voted in favor of shareholder proposals to declassify boards of directors so that directors stand for election each year. In 2012, these proposals enjoyed an 81 percent level of support on average. Ten years ago, less than 40 percent of S&P 500 companies held annual director elections compared to more than two-thirds of these companies today.

• Electing directors in uncontested elections by majority (rather than plurality) vote was considered a radical idea a decade ago when shareholders pressed for it in proposals they filed with numerous companies. Today, 90 percent of large-cap U.S. companies elect directors by majority vote, largely as a result of robust shareholder support for majority-voting proposals

• A proposal that built momentum even more rapidly and influenced the practices of hundreds of companies in the last few years is the request for proxy access. Resolutions filed by the New York City Comptroller to allow shareholders meeting certain eligibility requirements to nominate directors on the company’s proxy ballot achieved majority votes at numerous companies. As a result, since 2015, at least 400 companies have adopted proxy access bylaws.

• “Say-on-pay” vote requirements — now mandated by the Dodd-Frank Act — also resulted from shareholder proposals.

• Shareholder proposals or related engagements played a key role in moving close to 160 large companies (including more than half of S&P 100 companies) to commit to disclosure and board oversight of their political spending with corporate funds.

• Since 2009, 85 companies have agreed to issue sustainability reports as result of shareholder resolutions. According to the G&A Institute, 81 percent of S&P 500 companies published sustainability reports in 2015 compared to just under 20 percent in 2011.

• The first resolution requesting that companies source deforestation-free palm oil that went to vote was in 2011 and received 4.2 percent support. By 2016 more than 20 companies had responded to similar resolutions and protected their brands’ reputations by committing to source deforestation-free palm oil produced by workers free from human rights abuses.

• Shareholder proposals have led to wide-scale adoption of international human rights principles as part of corporate codes of conduct and supply chain policies, protecting companies from legal and reputational risk.

• A substantial majority of large companies have sexual orientation nondiscrimination policies largely as a result of hundreds of shareholder proposals. A 2016 analysis by Credit Suisse found that 270 companies which provided inclusive LGBTQ work environments outperformed global stock markets by 3 percent annually for the previous six years.

 The impact of investor influence strategies 

The evidence reveals that investor efforts to engage companies on ESG-related risks and opportunities are associated with better shareholder returns: 

• Academic research on corporate social responsibility engagements with US public companies over the period between 1999-2009 shows that after successful engagements, companies experience improved accounting performance and governance.

• An examination of private engagements conducted by fund manager Hermes demonstrated financial outperformance associated with investor engagement rather than stock picking.

• An analysis of the stock performance of 188 companies placed on the ‘focus list’ for ESG engagement by California Public Employees’ Retirement System (CalPERS) found that these companies performed significantly better than their peers (15.27 percent above the Russell 1000 Index) over a 14-year period.

• Evidence from collaborative dialogues involving 225 investment organizations over the period between 2007-2017 shows that after “successful” engagements (as defined by a set of pre-determined criteria and scorecards) have occurred, target companies experience improved profitability (as measured by return on assets), while unsuccessful engagements demonstrate no change.

• Research from Harvard Business School indicates that filing shareholder proposals is effective at improving the performance of the company on the focal ESG issue, even though such proposals nearly never received majority support. Proposals on material issues are associated with subsequent increases in firm value.

Read the original article here.