Avocado-driven Deforestation in Mexico

The Avocado Industry’s Turning Point: How Corporate Accountability Is Reducing Deforestation in Mexico

In complex situations where environmental and human rights issues driven by a high-impact commodity are not adequately addressed by local regulation, corporations have the power to demand more from their suppliers. When this influence is directed properly, corporations can catalyze significant positive change for all stakeholders. This is demonstrated in the continuing evolution of Mexico's avocado industry, where shareholder engagement, political action, NGO efforts, and community organizing are helping corporations to address rampant illegal deforestation and its impacts.

Our insatiable demand for avocados has created serious environmental and social issues for Mexico. More than 10 football fields of Mexican forests are cleared daily for avocado orchards, with most of this deforestation violating federal law. Illegal deforestation has severe consequences: depleting community water supplies, destroying protected habitats including the Monarch Butterfly Biosphere Reserve, and enabling criminal activities through land seizures and corruption.

In 2023, a powerful New York Times exposé based on a Climate Rights International (CRI) report lifted the veil on the dark side of the avocado industry, exposing illegal practices that have been wreaking havoc on Mexico’s forests and communities for years. The CRI report reviewed satellite images of the same land over time to identify where unpermitted deforestation had occurred. Using that data, avocados from major importers could be traced back to orchards on illegally deforested lands, calling into question the sustainability of a substantial portion of the avocados sold in U.S. supermarkets.

The NYT exposé prompted a reaction. Environmental NGOs began to put pressure on policy makers and grocery chains to address avocado-driven deforestation. In February 2024, six U.S. senators urged the Biden Administration to support efforts to ensure that the US-Mexico avocado trade is not driving illegal deforestation. This collective call to action coincided with the 2024 Super Bowl, prompting action from Michoacán's governor and Mexico's agricultural secretary.

Noting this growing risk, As You Sow began engaging with leading U.S. retailers and distributors of avocados, raising awareness of illegal deforestation in their avocado supply chains and highlighting the practical solution sanctioned by the State of Michoacan: a system to trace and flag illegal orchards and a transparent certification system. Working with Guardián Forestal, a Mexican NGO specializing in GPS data, the State of Michoacan has created an online portal to verify avocado sourcing. The system is elegantly simple: orchards established before 2018 are considered legal - accounting for the six-year growth cycle of avocado trees - while newer orchards without federal permits are flagged as illegal.

The impact of the certification system was immediate and profound. By approaching the issue from both the top down and the bottom up, As You Sow worked with Mission Produce, a major avocado supplier, which committed to avoid the purchase of avocados from illegally deforested orchards. This was soon followed by certification commitments from other major avocado suppliers recognizing the system as a way to ensure ethical sourcing while protecting the environment.

Other retailers and distributors now have the opportunity to not only leverage this verification system to avoid illegal deforestation in the Michoacan avocado market, but to seek expansion of the tool to other Mexican states. By ensuring avocados aren’t coming from recently deforested land, companies can help disincentivize further deforestation in the region.

Solution-oriented action can solve the world’s toughest environmental and social issues. The collective action on avocado driven deforestation provides a blueprint for how industries can work through complex challenges and champion solutions for lasting and meaningful change.

Elizabeth Levy, As You Sow

Large Institutional investors Respond to the Proxy Voting Debate

This article draws from Dorothy S. Lund’s scholarly work, “The Past, Present, and Future of Proxy Voting Choice,” which surveys the evolution of U.S. proxy voting policies and details recent reforms by major index fund managers in response to political and public scrutiny.

The role of BlackRock, Vanguard, and State Street in U.S. markets has changed dramatically over the past two decades. Together, these managers hold massive stakes in most public companies and have become central players in corporate governance. This concentration, combined with the rise of index funds, prompted a lively policy debate: should a handful of big asset managers wield so much voting power?

Under pressure from policymakers and clients, especially on high-profile issues like ESG (environmental, social, and governance), these firms have responded by rolling out voting choice programs. BlackRock’s and State Street’s initiatives now allow a significant portion of institutional and some retail fund investors to guide votes based on selected policy templates. Vanguard has joined as well, expanding access to similar options.

While these programs do not yet put all voting power in the hands of individual investors, they provide new flexibility. Investors can opt into policies that match their priorities or values, such as sustainability or corporate governance best practices. The effectiveness and reach of these programs are still developing, but for the first time, a broad base of fund holders is participating, even if only indirectly, in corporate decision-making.

For example, board diversity is a common proxy voting topic where investors' preferences may vary. BlackRock’s 2025 proxy voting guidelines reflect a case-by-case approach to diversity voting decisions, removing rigid numerical targets but still emphasizing diversity’s importance relative to market norms.

Through BlackRock Voting Choice, institutional and eligible retail investors can now direct their pro-rata share of votes or select from third-party voting policies that might be stricter or more lenient on board diversity issues than BlackRock’s default policy. This means an investor who prioritizes board diversity could opt into a voting policy that votes against boards lacking sufficient gender or racial diversity, while another investor might choose a policy that applies a different threshold or focus.

This flexibility exemplifies the practical impact of voting choice programs: empowering investors to exercise their governance preferences on specific topics such as diversity, while still investing through large index funds. It also demonstrates how the Big Three are adapting governance oversight to evolving political and client demands.

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Further reading.

What Is Proxy Voting Choice?

This analysis is based on Dorothy S. Lund’s 2025 article, “The Past, Present, and Future of Proxy Voting Choice,” published in the Journal of Corporation Law and available via Columbia Law School’s Scholarship Archive. Lund examines how new proxy voting systems have emerged as a response to concerns about the concentration of voting power among a small group of U.S. asset managers, especially the “Big Three”: BlackRock, Vanguard, and State Street.

Proxy voting allows shareholders to cast ballots on important issues at corporate annual meetings, and in recent years, several large asset managers have begun offering clients new choices in this process. “Proxy voting choice” is an innovation where funds give end investors—both institutional and, more recently, retail—the option to influence or directly choose how their shares are voted.

Traditionally, investment managers like BlackRock, Vanguard, and State Street controlled the voting rights for the millions of shares pooled in their investment funds. As these firms grew, concerns mounted about the concentration of voting power among just a few institutions. Critics pointed out that passive index funds have limited incentives to thoroughly research and vote on individual companies, potentially weakening effective corporate oversight.

In response, and after growing public and political pressure on topics like climate change and diversity, asset managers began creating “voting choice” programs. These let clients select from several third-party voting policies or the fund’s default approach. The approach is still voluntary and in its early stages, but millions of investors now have access to some form of voting participation—an important shift in how American corporate governance works. Participation rates and ultimate impacts remain to be seen, but proxy voting choice marks a major step toward democratizing shareholder voice in large public funds.

For example, BlackRock launched its Voting Choice program in 2022, which allows eligible clients—including institutional and some retail investors—to select from a menu of third-party voting policies or use their own. The program has expanded rapidly and now covers $2.7 trillion in index equity assets. More information is available on BlackRock’s official Voting Choice page

Similarly, State Street offers a Proxy Voting Choice program that permits eligible investors in institutional index funds and certain ETFs to decide how their pro-rata share of votes is cast. The program includes access to several third-party voting policies and continues to expand across eligible funds. Details can be found at State Street’s proxy voting page.

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To access the full article, please click here.

Responsible Investment Requires a Proxy Voting System Responsive to Retail Investors

There is growing awareness amongst retail investors of the importance of environmental, social, and governance (ESG ) factors to the performance of their stocks. The same factors impact their lives from a broader societal and economic perspective. Institutional investors have incorporated ESG issues into their proxy voting and corporate engagement. Retail investors who invest in stocks directly have the same voting rights, and collectively a similar power, but data shows that their voting rates have declined precipitously over the past forty years. This chapter traces the history of property rights and proxy voting, examines them within the current regulatory context, and posits that economic rights have been well protected but ownership rights have been neglected. An established framework for stages of capitalism is re-imagined, situating retail investors’ disengagement from the proxy process and highlighting suggestions to regulators for addressing the proxy voting gap.

To read the full paper, please go to SSRN’s website.

Ian Robertson

University of Oxford

ICCR Letter to BlackRock on Integrating ESG Risk Factors

In November of 2024, ICCR wrote Larry Fink, the CEO of BlackRock, expressing a number of concerns regarding BlackRock’s 2024 proxy voting record on shareholder proposals related to environmental and social and governance (ESG) risks.

Dear Mr. Fink,

We are writing on behalf of the Interfaith Center on Corporate Responsibility (ICCR), a coalition of over 300 global institutional investors that collectively represent more than $4 trillion in managed assets, to reflect the concerns of a number of investors and clients regarding BlackRock’s 2024 proxy voting record on shareholder proposals related to environmental and social and governance (ESG) risks. Our members, many of whom are shareholders and clients of BlackRock, are long-term investors who have raised these concerns with you before through conversations and correspondence.

While we are mindful of the recent pressures fund managers face from parties attempting to discredit ESG, the fiduciary case for integrating material ESG risk factors into investment decisions and proxy voting is clear and irrefutable. BlackRock’s own research1 indicates that the long-term implications of inaction on climate change could reduce global economic output by nearly 25 percent over the next two decades, making addressing climate change a material issue for fiduciaries. Yet despite this, BlackRock's recently released 2024 Global Voting Spotlight reports that the firm “supported (only) four out of the 161 shareholder proposals on climate and natural capital that we voted on”. This was 2.5% of votes cast on climate resolutions. The firm’s proxy voting record on shareholder resolutions related to impacts on people was no better as BlackRock “supported 16 out of the 332 shareholder proposals we voted on (~5%), 14 at U.S. companies and two in EMEA”. We believe this an abdication of fiduciary duty and is also bad business.

BlackRock’s survey of institutional investors clearly indicates that your clients care about proxy voting on sustainability (which emerged as the number one criterion for selecting managers by 20% of 200 institutional investors surveyed, second only to “access to proprietary deals’ - selected by 23% of respondents) so you will not be surprised that we are raising these concerns again.

Furthermore, BlackRock’s 2024 proxy voting record and rationale appear at times to be unclear. The most recent NPX filings indicate BlackRock voting against disclosure asks that it supported only last year, and offering vague voting rationale on other asks arguing that: “The request is either not clearly defined, too prescriptive, not in the purview of shareholders, or unduly constraining on the company”. The 2024 Global Voting Spotlight also indicates that in over 60% of the cases, BlackRock did not support a shareholder resolution because the "company has a process in place to address business risk” even in cases when the company did not make appropriate disclosures about the processes in place to address the issue(s) to the shareholders, the proponents or the SEC. At DexCom, BlackRock opposed a majority supported 2024 shareholder proposal calling for political spending disclosure in an election year. This is a clear example of BlackRock’s understanding of material risks raised by shareholder proposals diverging from the majority of shareholders at the company. Given how important proxy voting on sustainability is to your clients we hope you will address some of these apparent inconsistencies.

In February 2024, we welcomed BlackRock’s announcement that it was developing a new sustainability-focused stewardship offering for clients who want its active ownership work to drive decarbonization and sustainability outcomes3. The announcement explained that this service was in response to client demand as a survey of 200 institutional investors globally, representing nearly $9tn in assets under management indicated that 98% of them have set some kind of transition investment objective for their portfolios. However if managing climate risk is a key element in maximizing long-term value for clients then we would expect BlackRock to pursue that consistently as part of your fiduciary duty. BlackRock’s own Resilience Through Change; 2024 Insurance Global Report indicates that 99% of the 410 senior executives representing US 27T of AUM surveyed reported having set at least one type of transition objective within their investment portfolio, a clear indication of the materiality of climate risks among the majority of that sector.

As we look at the hundreds of climate related and social resolutions, we believe many more than 4 resolutions make a strong business case related to shareholder value and are not overly prescriptive. It seems like BlackRock has instituted a new high bar for shareholder resolutions that is almost impossible to meet. We are concerned about what motivated this change and fear that pressure from conservative investors played a role in the shift. In addition, we note that many other investment firms guided by the same fiduciary standards as BlackRock have a much higher number of percentage of votes for resolutions.

Furthermore, while we appreciate your case-by-case approach to assessing shareholder proposals, ICCR members and many of your clients are investors with diversified portfolios and ignoring systemic risks like climate and racial justice may benefit one of their companies but passes that cost on to the other companies in their portfolio. PRI and CAF’s recent guidance on stewardship also states that: “Using influence to promote short-term performance or the performance of individual companies, industries, or markets, without regard to overall value, does not constitute stewardship”.

There is growing evidence that asset owners are becoming increasingly concerned about asset manager’s proxy voting on ESG shareholder proposals5 and many are taking action6. And it seems these concerns are well placed. The UK Asset Owner Stewardship Review highlights a growing misalignment between asset owners and asset managers when it comes to exercising stewardship and proxy voting at major Oil and Gas companies. This misalignment is more pronounced (i) in recent years, (ii) on shareholder resolutions (vs management proposals) and (iii) at American companies (vs. European ones). There is also worrying evidence that asset managers’ corporate engagements are not moving the needle with companies.

As clients and shareholders our members want to see BlackRock as both a market and an ESG leader and would welcome efforts on behalf of the firm’s leadership to reiterate their commitment to ESG and to commit to a critical review of their proxy voting guidelines and record. We welcome the opportunity to continue the dialogue with you on the issues raised.

Sincerely,

Josh Zinner, CEO Interfaith Center on Corporate Responsibility

Katie McCloskey, Vice President of Social Responsibility, Mercy Investment Services

David A. Klassen, Chief Investment Officer, The Pension Boards - United Church of Christ, Inc.

Matthew Illian, Director of Responsible Investing, United Church Funds

Ethan Birchard, Executive Director, Friends Fiduciary Corporation

Corporate Support for DEI Continues Among Investors and Companies

August, 2025

During this proxy season, companies faced a wave of shareholder resolutions attacking diversity, equity, and inclusion (DEI) programs and calling for their eradication. This campaign expanded on last year’s anti-DEI attacks, as tracked in the “Championing Diversity in Corporations," which also included quotes from numerous companies strongly defending their diversity programs. This year’s anti-DEI resolutions built upon growing attacks on DEI by various government agencies and right-wing critics, who argued that company diversity programs were on the way out. Interestingly, these anti-DEI resolutions conveyed the exact opposite message, demonstrating that investors and companies alike believe that diversity has a positive impact on employees and long-term shareholder value.

In fact, in this proxy season, approximately 98% of the shares voted to maintain current corporate diversity, equity, and inclusion programs. Companies including Disney, Costco, Visa, Apple, Deere, Boeing, Goldman Sachs, Levi’s, AMEX, Coca-Cola, Berkshire Hathaway, Bristol Myers, and Gilead Science saw near-unanimous votes, averaging a mere 2% shareholder vote supporting these resolutions, sending a clear message to the boards that shareholders support the business case for non-discrimination in employment and a diverse workforce.

Many of these companies under attack remained publicly committed to their longstanding DEI programs. Corporations like Costco, JPMorganChase, Delta Air Lines, American Airlines, Southwest Airlines, and Apple continue to view diversity as a cornerstone of their workforce strategies, refusing to back down despite mounting pressure from conservatives.

These companies fully understand the benefits of having diverse teams and leadership. For example, a review by As You Sow and Whistle Stop Capital of over 1,600 companies found that manager diversity is positively associated with key financial performance indicators, including return on equity and invested capital, revenue growth, and share price performance.

Similarly, a recent investor brief by the Canadian organization SHARE found that diversity, equity and inclusion add to company performance and, therefore, shareholder value. If a company eliminates or dilutes efforts to promote diversity, they are neglecting that benefit and adding risk for investors. Simply stated, the data shows that diversity is good for business.

The following is an excerpt from a series of quotes and public statements from Senior executives on DEI. This is a small snapshot of company statements, but it clearly demonstrates the fact that numerous leading corporations strongly resist these attacks and stand behind their commitment to non- discrimination and diversity. At the end we also include relevant articles.

AMERICAN EXPRESS:

"We Embrace Diversity: We believe that diversity of experiences, perspectives, and backgrounds enables us to be our best."

BOEING

“Boeing remains committed to recruiting and retaining top talent and creating an inclusive work environment where every teammate around the world is respected, valued, and empowered to succeed," and defended its "culture of nondiscrimination, inclusion, and meritocracy."

COCA-COLA

"Creating a culture of diversity, equity and inclusion. Diversity, equity and inclusion are at the heart of our values and our growth strategy and play an important part in our company's success." 

GOLDMAN SACHS

“We run an inclusive organization, and we’re going to continue to run an inclusive organization.” - David Solomon, CEO, Goldman Sachs

JPMORGANCHASE

“We will continue to reach out to the Black community, the Hispanic community, the veteran’s community, and LGBTQ. We have teams with second chance initiatives — governors in blue states and red states like what we do.” - CEO Jamie Dimon in a CNBC interview.

MICROSOFT

“If ever there were a critical time for the business case for diversity and inclusion in the workplace, it is now… Our innovation has come from our commitment to Diversity and Inclusion (D&I), and our future innovation depends on D&I.”

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To read the full article, please click here.

This document was drafted by Maxwell Homans, Shareholder Advocacy Associate, Mercy Investment Services, in partnership with Tim Smith, Senior Policy Advisor, ICCR.

Legislative Developments in the Shareholder Proposal process

House

On September 18, 2024, the US House of Representatives passed H.R. 4790, the Prioritizing Economic Growth Over Woke Policies Act.110 The legislation is an umbrella bill incorporating a number of other bills that, among other things, significantly increase the ability of companies to exclude shareholder proposals from the proxy statement, including:

• amending the Securities Exchange Act of 1934 to prohibit the SEC from compelling an issuer to include in the proxy statement any shareholder proposal or any discussion related to a shareholder proposal. The bill also expressly states the SEC may not preempt state regulation of proxy materials or shareholder proposals. (Section 2002)

• increasing requirements for resubmission of proposals to require 10% voting support for a first-year proposal, 20% for a second year proposal and 40% for third year proposal, compared to current requirements of 5% voting support the first year, 15% for the second year and 25% for the third year. (Section 3101)

• allowing companies to exclude shareholder proposals where the company already has policies, practices, or procedures that compare favorably with the guidelines of the proposal and address the proposal’s underlying concerns. (Section 3201)

• allowing companies to exclude any proposal relating to environmental, social or political issues from proxy or consent solicitation material. (Section 3301)

• allowing companies to exclude a shareholder proposal under Rule 14a-8(i) without regard to whether the proposal relates to a significant social policy issue. (Section 3401)

• requiring the SEC to conduct a “wasteful and unnecessary” study every 5 years on shareholder proposals, proxy advisory firms, and the proxy process, covering a variety of topics, including the purported costs incurred by the shareholder proposal process and the “risk that shareholder proposals may contribute to the balkanization of the US economy over time.” (Section 3501)

•  providing that an institutional investor may not outsource voting decisions to any person other than an investment adviser or a broker or dealer that is registered with the Commission and has a fiduciary or best interest duty to the institutional investor. (Section 3901)

Senate

On September 23, 2024, S. 5139, the Empowering Main Street in America Act of 2024, was introduced. Among other things, the bill would allow a company to exclude a shareholder proposal from its proxy statement without regard to whether that shareholder proposal relates to a significant policy issue. (Section 305)

SEC Increases Exclusion of Proposals - 2023-2025

In order to help companies decide whether a proposal passes these tests, the SEC has developed a process to allow companies to ask the SEC in advance whether a proposal must be included in the meeting materials. The “no action” process is an informal review process through which the SEC staff advises companies and their investors on whether the SEC staff would likely recommend enforcement action if a company fails to include a submitted shareholder proposal on its annual proxy statement. The staff grants the company’s request if it finds some basis to agree with the company’s arguments that the proposal is excludable under one of the elements of SEC Rule 14a-8. It denies the request if it is unable to concur with the company’s arguments.

SEC Rule 14a-8 is intended to exclude trivial, irrelevant, and inappropriate shareholder proposals, thus minimizing the burden on companies. The no action process is a structured, time-tested process that adds an additional layer of objective scrutiny to company decisions regarding whether to include or exclude proposals, which serves to protect investors’ interests. If an investor disagrees with the no action decision by the SEC, the investor can submit a letter in opposition, but it does not have legal recourse against the SEC. Without Rule 14a-8 and the no action process, an investor only has the option to sue the company under federal law if it disagrees with a company’s decision to not place a proposal on the proxy, which would add delays, and significant costs for both parties.

The SEC staff periodically recalibrates its interpretation of the rules of the no action process to reflect current issues of concern to investors and companies. For example, in 2021, the SEC staff issued an interpretive bulletin, Staff Legal Bulletin 14L, which clarified ordinary business and micromanagement rules in a manner that allowed some environmental and social proposals to reach the proxy that might not have qualified in a prior interpretation. However, following market response and criticisms, the staff tightened up its interpretations of micromanagement and excluded many proposals on social and environmental issues that had previously been allowed, even with the new bulletin remaining in place. From November 1, 2023 to May 1, 2024 the SEC staff supported company requests for exclusion of proposals roughly 68% of the time, similar to the average exclusion rate during the first Trump administration, from 2017-2020, which was 69%.

In the 2025 proxy season, the staff again tightened its interpretation of the micromanagement rule, excluding, for example, proposals on lobbying disclosure that had previously been permissible since at least 2011. On February 12, 2025, the SEC staff signified that it is taking a more restrictive posture on proposals that request specific forms of disclosure or actions by companies. SLB 14M issued on that day revoked SLB 14L and altered staff interpretations of the micromanagement, ordinary business and relevance exclusions. The new interpretations led to an increase in the exclusion of environmental and social proposals, and fewer such proposals appearing on proxy statements. Of particular note in SLB 14M is a shift in interpretation of micromanagement from SLB 14L’s focus on the interest and capacities of shareholders to understand and vote on an advisory proposal, and toward an evaluation as to whether the proposal seeks a specific method, strategy or outcome that the staff views as more appropriately determined by the board or management.

When Public Sentiment Drives Shareholder Strategy

How headlines, hashtags, and media cycles are reshaping proxy season

Do public opinion and media narratives really influence shareholder proposals? A new study says: yes, and in some cases, that influence is financially material.

Analyzing proposal volumes and public discourse, the authors find that:

• Increased public salience of corporate issues (like AI ethics, reproductive rights, or climate impacts) correlates with a rise in ESG-focused proposals;

• These proposals are more likely to receive broader investor support when they align with media attention and reputational risk;

• And when companies respond constructively, firm value tends to improve.

📉 Sentiment as an Early Warning Signal

For investors, public opinion is often a precursor to regulatory or reputational risk. Think of social movements that preceded litigation, consumer backlash, or regulatory intervention—public scrutiny often arrives before the balance sheet feels the impact.

This study confirms that investor engagement is increasingly attuned to reputational signals and that media awareness serves as a “soft metric” for materiality.

“In today’s democratized information environment, companies can no longer operate behind closed doors, shielded from public scrutiny. Shareholders, armed with public sentiment data, are increasingly willing to hold management accountable. This new reality underscores the importance of transparency and responsiveness in maintaining investor trust and long-term value creation. ”

These insights have significant implications for both corporate leaders and investors. For management, the warning is: ignoring public sentiment can lead to increased shareholder activism and leadership turnover. For investors, our findings highlight the effectiveness of acting with the public’s voice in leading to corporate change.

Refer to the original article here.

Shareholder Voting and Corporate Governance

Why shareholder voting isn’t just symbolic—it’s structural

It’s easy to take shareholder voting rights for granted. But according to David Yermack (2010), voting is not just a procedural ritual—it’s a foundational component of corporate accountability.

Yermack’s comprehensive review of governance literature demonstrates that strong voting rights correlate with better corporate outcomes, including:

• Lower CEO entrenchment,

• Greater board independence,

• More responsive management,

• And ultimately, improved long-term firm performance.

These effects are especially visible in firms where shareholders have actively used proposals or majority voting to reshape governance policies. This article reviews recent research into corporate voting and elections. Regulatory reforms have given shareholders more voting power in the election of directors and in executive compensation issues. Shareholders use voting as a channel of communication with boards of directors, and protest voting can lead to significant changes in corporate governance and strategy. Some investors have embraced innovative empty voting strategies for decoupling voting rights from cash flow rights, enabling them to mount aggressive programs of shareholder activism.

🛠️ Voting Rights as Investor Tools

Proposals to declassify boards, require majority voting for directors, or separate the CEO and chair roles aren’t just governance “theater.” They are functional tools that:

• Enable greater transparency,

• Shift power away from entrenched insiders,

• And reinforce the board’s accountability to long-term owners.

⚠️ A Warning Against Restriction

Yermack cautions that undermining shareholder voting mechanisms—whether by limiting proposal access or weakening vote influence—reduces a key market check on managerial behavior.

As policymakers revisit the rules around 14a-8, Yermack’s work offers a timely reminder: Shareholder voting is governance. Curtailing it risks undercutting the integrity of the capital markets themselves.

📚 Further Reading- Shareholder Voting and Corporate Governance

Shareholder Proposals and the Freedom to Invest

Investors’ right to file shareholder proposals has contributed to the success of the US capital markets.

Large, publicly traded companies play a dominant role in the U.S. economy: pharmaceutical companies influence the medicines available in our pharmacies and their cost, health insurers influence which treatments will be affordable to patients, and tech companies influence the degree to which consumers are subject to surveillance or privacy in their use of email and social media.

The free market, and the relationship between investors and issuers, is grounded in investors’ rights as company owners to elect directors as well as file shareholder proposals. The job of boards is to oversee the executives who are day-to-day managing the company. The rights to vote upon directors, as well as to present focused issues through shareholder proposals, are part of the bundle of rights investors possess and value as company owners. The unfettered exercise of these rights reinforces the relationship of trust needed for capitalism to thrive.

Shareholder proposals address issues relevant to companies that are neither trivial nor “picayune.” Risks of potential lawsuits against the company, operational disruptions from droughts, floods and fires, and of ethical scandals that shake consumer or investor confidence— these are typical issues in shareholder proposals and raise material concerns for investors. This private ordering process can allow good ideas to proliferate in the market, advancing best practices and reducing the pressure for government regulation or for more confrontational or costly approaches by shareholders, such as voting against the board, or litigation.

Without the right to make proposals, corporate management can more easily ignore the voice of small shareholders, pension funds, and other investors.

The shareholder’s right to place proposals on the proxy, and the freedom to express a collective voice by voting on such proposals, are part of the social and legal compact between investors and companies that maintains the trust needed for capitalism to thrive. This trust has resulted in the US becoming the largest and most envied capital market in the world.

Shareholder proposals are largely non-binding. Non-binding proposals give companies the flexibility to address shareholder concerns without displacing the traditional role of the board of directors to oversee the operations of the company.

Large investors benefit from smaller investors' right to file proposals

Heidi W. Hardin, General Counsel & Executive Vice President, MFS

Our investment process relies on a long-term orientation, deep fundamental research, and institutional risk controls. Our clients appoint us to help them achieve their investment objectives over the long term. Generally, our clients' objective is to maximize the financial return of their portfolio within appropriate risk parameters.   MFS seeks to understand any factor that could impact our clients' investment returns over the long-term, including financially material environmental, social, and governance ("ESG") factors. 

MFS has historically supported a wide variety of shareholder proposals on ESG topics….  because we believed that the proposals encouraged improved governance or provided shareholders with insight into the company's management of environmental, social, reputational or regulatory risks… Over the years, we have seen smaller shareholders use the shareholder proposal process to initiate and encourage improved governance (e.g., declassification of boards and the introduction of proxy access) and better management of financially material environmental and social risks (e.g., disclosure of risks from climate-related regulatory changes). 

 As a large institutional investor, we generally have access to management teams and directors that smaller shareholders may not have. The current shareholder proposal process offers smaller shareholders the opportunity to have management teams and boards consider the unique, and potentially financially material, risks they have identified.

As an active investor, we believe that it is to our client's benefit to understand the views of other shareholders, as this information can augment our understanding of the risks and opportunities inherent in the companies we own.  As such, we would view any action to limit some shareholders' rights to file proposals as an action to limit all shareholders' ability to fully consider all risks and opportunities of their investment.

Note: MFS is a global asset management firm with $485 billion in assets under management (as of August 31, 2018). 

Read the full text here.

The Role of Shareholder Proposals in Corporate Governance

Luc Renneboog, Peter G. Szilagyi, July 27, 2010

This paper offers evidence on the corporate governance role of shareholder proposals by simultaneously investigating the selection of target firms and the proposal outcomes in terms of voting success, implementation, and stock price effects. Using 2,436 proposals submitted between 1996 and 2005, a sample of 1,961 target and nontarget firms, as well as extensive controls for governance quality, we make several contributions to the literature. First, we find that shareholder proposals tend to be targeted at firms that both underperform and have generally poor governance structures. The results show that regardless of the proposal objectives, submissions are more likely to be made against firms that (i) use antitakeover provisions to entrench management, (ii) have ineffective boards, and (iii) have ill-incentivized CEOs. More detailed analysis reveals that target selection is largely driven by governance concerns irrespective of the sponsor type. Overall, these findings provide very limited basis to the claim that activists such as union pension funds pursue self-serving agendas. . . .

[T]he paper provides clear evidence that the market views shareholder proposals as a relevant device of external control. The stock price effects are most fundamentally driven by the target firm’s prior performance and governance quality. At the same time, they are strongest for proposals that win a majority vote as well as pass, which indicates that the market anticipates voting success reasonably well. Nonetheless, while voting outcomes and implementation rates have improved dramatically over time, the market returns are strongest during stock market peaks when there is a high premium for good governance.

Read full paper

Child Online Safety

Social media companies have been linked to numerous child safety problems, including a mental health crisis for young people, age verification failures, cyberbullying, self-harm and child sexual exploitation, and grooming and trafficking. Since 2016, a group of now more than 60 investors from multiple countries has engaged with tech companies concerning child online safety, collaborating with online safety experts, law enforcement, and policy makers such as the Senate Judiciary Committee to prompt tech companies to remove harmful content and implement stronger protections. Shareholder proposals during 2022 and 2023 at Apple, Alphabet, and Meta Platforms (Facebook) played a significant role in this investor engagement to improve child safety online.

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For information on the resolution, please click here

What is a Shareholder Proposal?

Shareholders—as owners of a company—have a legal right to offer proposals to appear on the corporate proxy statement to be voted upon at a company’s annual shareholders meeting. Corporations are required to hold these annual meetings in order for shareholders to vote
on matters related to the corporation such as auditor ratification, election of directors, and executive compensation. The Securities and Exchange Commission (SEC) requires public companies to file an announcement ahead of the annual meeting including its items of business called the proxy statement.4 SEC Rule 14a-8 allows shareholders to submit statements of up to 500 words (“shareholder proposals”) to be included in the company’s proxy statement.

The proxy statement is therefore the vehicle by which investors are informed of proposals by other investors. SEC Rule 14a-8 defines a shareholder proposal as a specific request from the shareholder - a “recommendation or requirement that the company and/or its board of directors take action, which you intend to present at a meeting of the company’s shareholders.” The SEC states that the proposal “should state as clearly as possible the course of action” that the shareholder believes the company should follow.

“Shareholder proposals are a crucial tool for investors to engage with their companies. Engagement covers a host of strategies investors use to obtain additional information and influence the policies and practices of their portfolio companies on governance and sustainable value creation.”

Some shareholder proposals seek changes in governance infrastructure, for example, requesting that the CEO and the board chair be separate people to increase the independence of the board and its ability to oversee the company on behalf of shareholders. Or they might request a change in voting standards to allow proposals to be passed by a vote of a simple majority rather than a larger voting threshold of supermajority, thus creating a better balance of power between the company and its investors. Other proposals may address environmental or social challenges facing the company—issues that may also be the subject of a wider social or political debate, but which nonetheless have a potential financial impact on the company or the larger economy on which returns depend.

For example, a proposal may request the disclosure of the company’s assessment of its operations, policies and practices designed to mitigate environmental, regulatory or liability risks associated with its mining operations. In another instance, a proposal may request
that a company report as to its timeline and plan for how it expects to transition to meet its stated objective of net zero greenhouse gas emissions. Some of these proposals might be described as “social or political proposals,” but they must nonetheless be relevant to the company’s business according to SEC rules and comply with more than a dozen strict SEC rules for acceptable proposals and filings.

Most shareholder proposals are non-binding. Non-binding proposals give companies the flexibility to address shareholder concerns without displacing the traditional role of the board of directors to oversee the operations of the company.

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.