Amazon’s GHG Emissions

Amazon Lags Peers in Scope 3 GHG emissions Disclosures

PARKER CASWELL , Climate and Energy Associate, As You Sow

Scope 3, or value-chain emissions, account for an average of 75% of a company’s total greenhouse gas (GHG) emissions, rising to over 90% in the retail sector. While challenges persist in assessing Scope 3 emissions – including data availability and quality concerns – assessing these emissions is critical to any credible climate strategy. Only by acting to assess value-chain emissions will data quality improve.

Scope 3 disclosures provide vital insights into a company’s overall emissions impact. While Scopes 1 and 2 operational emissions disclosures offer a partial glimpse into a company’s direct climate impact, operational emissions are inextricably tied to upstream and downstream product- related emissions – which are captured only within Scope 3. Ignoring these emissions is akin to missing the forest for the trees: By focusing only on operational emissions, the much larger picture of a company’s emissions is ignored.

Consider Amazon. The company’s current Scope 3 disclosures address approximately 1% of the products sold on its retail platform, giving an incomplete impression of its value-chain emissions. In contrast, Walmart reports Scope 3 product-related emissions for all its retail sales, giving investors a clearer understanding of its climate impact. Walmart’s ongoing efforts to measure and reduce its full value-chain emissions not only contribute to meaningful climate action but also reduce its exposure to climate-related financial risks and create affirmative benefits.

By engaging value-chain partners to measure and reduce Scope 3 emissions, Walmart has gained a competitive edge through increased supplier efficiency, addressing consumer and employee climate concerns, avoiding greenwashing risks, and anticipating suppliers’ climate- related problems. Amazon’s incomplete Scope 3 disclosures leave investors in the dark about the emissions footprint of its vast product portfolio, all while regulatory and legal risks grow. Failing to assess full value-chain emissions is not just a climate and reporting concern – it’s a fundamental business risk. Ignoring data on a material risk factor, particularly for a corporation as sophisticated as Amazon, is simply bad business.

Despite overwhelming evidence that Scope 3 disclosures are financially and environmentally prudent, Amazon continues to cite low data quality and limited availability as an excuse for inaction. Walmart has been clear that its Scope 3 data evaluation methods and quality will evolve over time and that shifts in reported emissions are not failures but reflect the evolving nature of emissions accounting and the urgent need for action. Scope 3 data will never be perfect, but Walmart has demonstrated that even imperfect data can drive gigaton-scale emissions reductions. Other major U.S. retailers, including Target and Costco, are also improving their Scope 3 disclosures.

To address the growing legal and regulatory risks posed by Amazon’s insufficient Scope 3 disclosures and to prepare for mandatory emissions reporting, Green Century and Amalgamated Bank, represented by As You Sow, along with Proxy Impact, have filed a proposal requesting that Amazon disclose Scope 3 emissions for all retail sales. This proposal, if acted on, will bring Amazon in line with its more sustainable peers, improve investor understanding of the company’s emissions, reduce climate-related risk, and enhance Amazon’s global competitiveness.

For a more detailed overview of climate-related proposals from the 2025 Season, read the 2025 Proxy Preview.

Artificial Intelligence

Labor strikes in the entertainment industry in 2023 demonstrated that intellectual property infringement by artificial intelligence (AI) can have a material financial impact on a company’s operations. The growing public distrust in the indiscriminate use of AI and increased government regulation were also deemed to pose material financial and reputational risks to tech and media companies. Shareholder proposals during the 2024 proxy season filed at Netflix and Apple requesting greater clarity on the use of AI and its board oversight, and the ethical principles guiding AI use, received 43% and 37.5% of shareowner votes, respectively, thus indicating widespread investor concern on the issue.

Investors have also focused on the financial and legal risks of ineffective content moderation at large social media platforms as a serious threat to society. With Meta and Alphabet now deploying Generative Artificial Intelligence (gAI) tools, investors were concerned that critical human rights and democratic processes could be further compromised. Proposals filed on managing gAI-related risks received 16.7% of votes from all shares at Meta (53.6% of non-insider votes) and 17.6% support at Alphabet (82.4% of independent investor votes).

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To get further information on these proposals, read this article.

COVID Vaccines

How shareholder proposals promote corporate accountability

During the COVID pandemic, pharmaceutical companies received tens of billions of US and global public funding to accelerate medical breakthroughs to respond to the pandemic. Amid press reports of “pandemic profiteering”, shareholders called for financial prudence and a commitment to the public good.

Investor members of ICCR were part of a group of 59 investors representing US$2.5 trillion in assets under management who sent letters to 17 pharmaceutical companies strongly urging financial prudence and a commitment to strategies to ensure widespread access to treatments and vaccines for COVID-19, including affordable pricing and the sharing of technology to scale- up manufacturing. The letters urged the companies to show restraint in terms of pricing, tax avoidance, stock option awards, etc., and to demonstrate a willingness to share their intellectual property to ensure the necessary scale-up, manufacturing and mass distribution at prices low enough to ensure equitable access.

“Excessive drug company executive pay packages are a major contributing factor to prescription drug costs. Since the 1990s, shareholders have used shareholder proposals to urge companies such as Warner-Lambert, Eli Lilly, Bristol-Myers Squibb and Celgene Corporation selling high-priced pharmaceuticals to reduce executive compensation and take other actions to bring prices down to benefit consumers and prevent price gouging.”

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This Columbia Business Law Review article delves into the issue further.

Subprime Lending

Prior to the banking crisis of 2007-2008, shareholders of banks had attempted to draw attention to the risks of predatory lending through shareholder proposals. Predatory lending in the subprime market was of growing concern to some investors as it became clear that borrowers were unable to repay these loans and were losing their homes. In 2004, shareholders submitted a proposal at American International Group (AIG) requesting that the Board conduct a review to study ways of linking executive compensation to successfully addressing predatory lending practices. Although the proposal only received 2.8% voting support, it is a remarkable example of the prescience of shareholders as to material risks to their companies. In 2007, AIG was the world’s largest insurance company with some $850 billion in assets and 76 million customers worldwide (30 million in the US alone). By September 2008, it was on the brink of collapse. Over the course of the financial crisis, AIG received a total of $182 billion in government bailout funds.

The AIG example underscores the foresight and function of ESG-related shareholder proposals as early warning systems—tools that can identify risks long before they materialize into financial catastrophe. While proposals like the one on predatory lending may receive limited support at the time of filing, they often signal systemic vulnerabilities that, if left unaddressed, can have sweeping consequences for companies, investors, and the broader economy. This case study, among others, demonstrates why shareholder engagement should not be dismissed as mere activism. It is a necessary component of sound corporate governance and long-term risk management. In a financial system where the public’s retirement savings are often tied to the health of the national and global economy, shareholder proposals offer a critical mechanism to protect long-term value and promote corporate accountability.

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Learn more about the New York Fed’s actions related to AIG during the financial crisis here.

Drug Pricing

Polling has found that nearly 30% of Americans say they haven’t taken their medication as prescribed due to high drug prices and research estimates that more than 1.1 million Medicare patients alone could die over the next decade because they cannot afford to pay for their prescribed medications.

For decades, members of the Interfaith Center on Corporate Responsibility (ICCR) have pressed drug companies for greater disclosures on pricing structures as a way to promote greater access to medicines, including asking companies to disclose the rates of year-to-year price increases of their top-selling branded prescription drugs and to disclose the rationale and criteria used for these price increases.Excessive drug company executive pay packages are a major contributing factor to prescription drug costs. Since the 1990s, shareholders have used shareholder proposals to urge companies such as Warner-Lambert, Eli Lilly, Bristol-Myers Squibb and Celgene Corporation selling high-priced pharmaceuticals to reduce executive compensation and take other actions to bring prices down to benefit consumers and prevent excessively high prices. Investors have also expressed concern about pharmaceutical companies’ governance structures and their boards’ ability to proactively mitigate risk related to high drug prices, such as the risks from unsustainable business models that rely on price increases for growth, or strategies to extend patents without any meaningful new science.

Patent practices of pharmaceutical companies are also a corporate tool to artificially maintain high drug prices at the expense of consumers. In 2022, a shareholder proposal filed at Gilead Sciences asked for an evaluation of how the company’s patenting policies that extend exclusive rights and prevent generic competitors impact patient access and cause higher consumer drug prices. The proposal earned 39.6% voting support from investors. Similar proposals were also filed at nine other pharmaceutical companies, including proposals at Bristol Myers Squibb and Amgen that were withdrawn due to productive dialogue, and proposals that were voted on and received significant investor support at Pfizer (30.2% vote FOR) and at AbbVie (29.5% vote FOR).

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To learn more, refer to ICCR and Mercy Investment Services for detailed coverage of investor engagement with healthcare and pharmaceutical companies.

Introduction to the Ordinary Business Rule

Ordinary business

A basic principle of SEC Rule 14a-8 is that a proposal should not supplant or attempt to control the day-to-day decision-making of the corporation, referred to as “ordinary business.” The company’s officers are hired to manage the company under the oversight of the board of directors. The board is accountable as an elected representative of the shareholders. As such, the management and board have important day to day discretion in running the company—who to hire, how much to pay them, what kind of products or services the corporation should offer and many other ordinary business matters that it takes to run a business.

While a focus on ordinary business is not appropriate for a shareholder proposal, the courts and the SEC have made a notable exception when shareholder proposals address important policy issues for a company on which it is appropriate for shareholders to weigh in, often referred to as the “social policy” exception. Such proposals are described as transcending ordinary business.

For instance, while the day-to-day lending practices of a bank are ordinary business, when there is evidence that the bank is engaging in predatory policies and practices, shareholders are able to file a proposal asking the company to disclose more about this issue and its current policies. Similarly, policies regarding the amount of compensation paid to employees are generally ordinary business, but proposals coming from shareholders that challenge excessive compensation of the CEO or of directors are appropriate. A pharmaceutical company’s prices for its products are ordinary business, but company policies exploiting a pandemic to exploit vulnerable consumers may be seen to transcend ordinary business. Day to day legal compliance on environmental regulations is ordinary business, but significant pollution incidents or catastrophes that a company may be liable for may be an appropriate topic for a shareholder proposal because it transcends ordinary business.

An important related limitation is for proposals not to micromanage. Even if the topic transcends ordinary business, proponents must not be so granular in their request to the company that they attempt to micromanage the business. The discretion of the board and management is protected in this process. That is why many proposals often ask the board or management to disclose more about their policies and practices, and proposals seeking action are typically advisory rather than a mandatory order.

The Value of Environmental and Social Proposals

Evidence of sustainable value raised in environmental and social proposals

Shareholder proposals frequently address risks due to environmental issues that can be highly costly to companies and their investors when they ultimately materialize in the near- or long- term. Consider that the shareholder value of BP plummeted by 55% after the explosion of the Deepwater Horizon oil rig, from $59.48 per share on April 19, 2010 to $27 per share on June 25, 2010. Climate change-induced changes in severe weather such as drought and flooding, as well as regulatory responses and constraints in various markets worldwide, has been documented to threaten substantial financial risks to the banking, mining, industrials, transportation, agriculture and real estate sectors. Bringing greater transparency to the management of such risks has been the subject of shareholder proposals in these sectors.

Corporations also face risk related to social issues such as disruption of the business or supply chains due to human rights abuses workforce health and safety scandals or failures to protect the online safety of children. The growth in environmental and social shareholder proposals over the last several years also reflects concern that certain issues threaten the economy as a whole and large swathes of investment portfolios.

“Informed investors are often early movers on addressing risks that ultimately prove to be quite material, and even existential, to their investments. As an example, proposals filed by members of the Interfaith Center on Corporate Responsibility ICCR) against predatory lending in the early 2000s at AIG and other companies.43 At the time, these proposals might have been characterized as merely addressing social risks yet they foreshadowed the banking crisis driven by such predatory practices that proved to be very expensive for AIG and the other companies, and for society in the housing crisis and bank bailouts that followed.”

Shareholder proposals also mirror public sentiment. A recent study of companies in the Russell 3000 Index found that negative public sentiment about a firm on both financial and broad sustainable investing aspects are significantly related to the number of shareholder-sponsored proposals, with the impact of news sources being slightly stronger than social media in affecting the number of shareholder proposals. The study also found a strong association between the number of shareholder proposals on the ballot and director turnover and forced turnover of CEOs at the firm, finding one additional shareholder proposal is associated with a 10.9% increase in director turnover and a 24.8% increase in forced CEO turnover, both to the mean. The study not only found association between these factors; it also was able to demonstrate causal evidence that negative sentiment around corporate practices that are not sustainable leads to increased shareholder dissent.

Toxic Products and Chemicals

Johnson & Johnson knew its baby powder contained asbestos, an undisputed carcinogen, at least as early as the 1970s, yet allegedly misled consumers into believing its talc products, which it sold for more than a century before stopping, were safe. The misconduct led to a class action lawsuit, tens of thousands of individual lawsuits and an investigation by 42 US states and Washington, D.C. into its marketing of baby powder and other talc-based products. Some of the lawsuits included accusations that Johnson & Johnson marketed baby powder to Black and overweight women despite knowing about possible asbestos contamination for decades. While the company stopped the sale of baby powder products in the United States and Canada in 2020, the product was still on the market for many consumers worldwide by 2022, when investors filed a shareholder proposal asking the company to report on the public health risks from continued worldwide sales of its talc products.

As of mid‑2023, Johnson & Johnson had fully transitioned worldwide to its cornstarch-based baby powder, ending talc-based sales in all markets.

Toxic Chemicals in Water

Poly and perfluoroalkyl substances (PFOA and PFAS) are a class of chemicals that has been under scrutiny and has been linked to hormone disruptions, liver and kidney disease, and cancer in addition to other human health harms. In 2023, Mount Sinai researchers concluded that higher blood concentrations of certain PFAS were associated with a significant reduction in the likelihood of pregnancy and live births. Other studies have shown that certain PFAS can disrupt reproductive hormones and delay puberty and have been linked with increased risks for polycystic ovary syndrome and endometriosis.

In 2023, Sisters of St. Francis of Philadelphia filed a proposal at Essential Utilities, requesting that the company report on PFAS levels at all Essential water sources, along with the potential public health and/or environmental impacts of toxic materials in the water it provides to the public. The proponents withdrew the proposal after the company agreed to make public test results for its wells and water systems and to report the results to its one million customers.

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For more information, refer to the Sustainable Investment Institute’s Investor Briefing on PFAS and other toxic chemicals.

Climate Shareholder Proposals Show Real Market Value

Climate-focused proposals boost shareholder wealth

For years, critics dismissed climate-focused shareholder proposals as distractions—“political,” “non-financial,” or simply too speculative. But a major 2024 study by Berkman, Jona, Lodge, and Shemesh turns that argument on its head. Published in the Journal of Corporate Finance, the study rigorously analyzed thousands of environmental shareholder proposals (ESPs) filed between 2006 and 2021 across Russell 3000 companies—and found a clear signal: markets reward climate proposals.

📈 Filing Climate Proposals? Markets Notice.

The researchers measured stock price reactions around proxy filing dates and found that climate-related proposals generated significantly positive abnormal returns—stronger than proposals tied to other environmental issues. These returns weren’t just random noise: the researchers used regression discontinuity methods around voting thresholds to isolate causal effects. Their results indicate that:

• Climate proposals were more likely to elicit supportive action from management when markets reacted positively.

• This suggests that boards recognize the economic substance behind these proposals, not just the optics.

🌎 Why This Should Reshape the ESG Debate

The paper undercuts the idea that ESG is separate from financial materiality. Climate risk—in the form of emissions exposure, stranded asset concerns, supply chain volatility, and regulatory pressure—has real and quantifiable value implications. Shareholder proposals targeting these concerns are not niche or ideological; they are market signals of unmanaged risk.

For institutional investors, this research strengthens the argument that voting in favor of well-constructed climate proposals isn’t just a values move—it’s a fiduciary imperative.

📘 Read the study: Berkman et al. (2024), The Value Impact of Environmental Shareholder Proposals

How Retail Investors Shaped Corporate Governance

Many corporate governance policies that today are viewed widely as best practice were initially driven by the shareholder proposals of small individual “Main Street” investors—not large institutions—and then expanded to common adoption by markets.

Going back to the 1940’s, a small, dedicated group of individual investors have played a leading role in the filing of governance-related shareholder proposals that received high levels of investor support and drove many reforms covering a range of governance topics. These reforms have enhanced capital markets by strengthening the ability of boards to oversee shareholder interests and by addressing power imbalances between investors and company boards and management, proof that many constructive ideas have come from smaller individual investors.

It has driven many reforms covering a range of governance topics, including eliminating staggered director terms, reducing supermajority voting thresholds, requiring an independent board chair, eliminating dual class voting, requiring shareholder approval of bylaw amendments, requiring majority voting in uncontested director elections, and proxy access for shareholder director candidates. The governance-related proposals of individual investors attracted, on average, 47.8% shareholder support between 2005 and 2018, and accounted for a large portion of the passed proposals, an indication that these proposals were receiving widespread support from larger investors. Many of these issues were also adopted by major investors in their proxy voting guidelines and corporate engagements, by market exchanges, and by companies— compelling evidence that constructive ideas have come from these smaller individual investors.

Some examples of corporate governance policies that today are viewed widely as best practice and that were initially driven by shareholder proposals and then expanded to common adoption by companies and markets, include:

• ƒ  Independent Directors and Board Recruitment: Shareholder proposals have encouraged norms such as independent directors constituting a majority of the board, independent board leadership, transparency of board recruitment and qualifications, and annual elections for all directors. For example, in 2013, shareholders submitted approximately 70 proposals requesting the adoption of a policy requiring that the company’s board chair be an independent director.

• ƒ  Electing Directors by Majority Vote: Shareholder proposals have encouraged electing directors by majority vote, rather than by plurality—a radical idea a decade ago when shareholders pressed for it in proposals, and now the norm at 90% of large-cap U.S. companies.29 In 2011, Apple was one of 58 companies the California Public Employees Retirement System urged to adopt majority rather than plurality voting, which more evenly balances power between the company and its investors.30 The proposal had majority support from shareholders at Apple and many other companies.

• ƒ  “Say-on-pay”vote requirements: Now mandated by the Dodd-Frank Act—say on pay vote requirements originally resulted from shareholder proposals. The Say-on-Pay vote asks investors to vote on the compensation of the top executives of the company—the CEO, the Chief Financial Officer, and at least three other most highly compensated executives (“named executive officers”).

Shareholder Proposals: Bridging Governance and Regulation

How policy-aligned proposals shape ESG credibility and investor confidence

In a rapidly evolving ESG policy landscape, shareholder proposals are no longer just investor opinions—they are tools that anticipate and influence regulatory alignment. A 2025 study by Luca and Clement dives into this shift, analyzing how proposals that reflect emerging regulatory frameworks (like the SEC’s climate disclosure rules or Europe’s CSRD) can enhance a firm’s ESG profile and attract institutional capital.

The researchers reviewed dozens of U.S. and European proposals filed between 2017–2024 and linked them to outcomes such as ESG ratings trajectory, portfolio inclusion by ESG-screened funds, and net changes in institutional shareholding.

📌 The Key Finding: Regulatory Synergy Works

Proposals that mirror emerging policy trends (like requests for Scope 3 emissions disclosure or alignment of lobbying practices with stated climate goals) were:

• More likely to be implemented, especially in companies facing global investor pressure;

• Associated with improvements in third-party ESG credibility scores;

• Positively correlated with increases in long-horizon institutional investment, especially from European funds that screen for regulatory preparedness.

🧠 Why This Strategy Is Working

Boards that engage with these proposals are hedging regulatory risk and building investor trust. Instead of waiting for mandatory compliance, these companies use shareholder proposals as a way to “pre-comply” with known regulatory shifts, creating more agile, resilient governance frameworks.

The research supports what sophisticated investors already practice: well-crafted ESG proposals are strategic, not burdensome. They build credibility with regulators, appeal to allocators, and reduce uncertainty.

For more, access the full publication here.

Workplace Health and Safety

Amazon has been in the news concerning its unsafe working conditions, including rates of safety incidents far above those of its competitors, such as Walmart and Costco. State labor regulators have alleged that working at Amazon exposes employees to increased risk of ergonomic injury and musculoskeletal disorders as they awkwardly bend and twist to move goods through the warehouse. According to a December 2024 report of the Senate Committee on Health, Education, Labor, and Pensions, at least two internal Amazon studies found a link between how quickly its warehouse workers perform tasks and workplace injuries, but the company rejected many safety recommendations out of concern that the proposed changes might reduce productivity. Shareholder resolutions at Amazon in 2022, 2023, and 2024 focused on this potentially harmful conduct, asking the company to report on worker health and safety and the treatment of its warehouse workers.

Consistent support above 30% over three years shows significant investor concern. Amazon has responded by reinforcing its existing safety narrative, highlighting improvements, opposing external audits, and publicly disputing federal findings. The outcome underscores both the influence and ongoing limitations of shareholder-driven engagement at the company.

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For NPR’s coverage of the issue, please check here.

Rail Safety

Shareholder engagement on railroad safety has been an important force in pushing rail transport corporations to prioritize long-term risk management and community well-being. Following the financial and human costs of disasters like the East Palestine derailment to the local community and surrounding states, the rail industry was resistant to safety measures, blocking regulations such as two-person crew requirements. In response, in 2024, investors filed shareholder proposals at major rail companies such as CSX and Union Pacific aimed at creating safety-focused board oversight of reforms to prevent derailments, protect workers, and safeguard communities. This underscores the importance of shareholder advocacy to hold companies accountable for ethical behavior, address material financial and reputational risks, and preserve shareholder value.

Investor action has already begun to influence corporate behavior. In 2024, CSX agreed to publish a report on safety practices following shareholder pressure, and Union Pacific faced heightened scrutiny over its board’s oversight of derailment risks. These examples highlight how shareholder proposals can push companies to adopt stronger safety standards, demonstrating the material relevance of investor engagement in protecting both communities and long-term shareholder value.

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The Washington Post covers the rail industry’s response to the issue of rail safety.

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.

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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.