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October 23, 2008 8:22 AM Age: 9 yrs

Shareholder Support for Environmental and Social Issues Remains Strong Despite Economic Fears

Category: CG Research & Insights, CSR Research & Insights, SA Research & Insights, SRI Research & Insights, Acc Research & Insights, Proxy 08 Research
Source:  Proxy Governance

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Investor interest in social and environmental issues remains strong, despite the downturn in financial markets. Those are the findings of a report recently issued by PROXY Governance, a leading proxy advisory service. The report examines proxy voting issues through September 2008. Further, the report shows particularly strong support for initiatives to address global warming.

Vienna, VA -- Support for environmental and social policy shareholder proposals held relatively steady during the 2008 annual meeting season, after a sustained run-up in support over the last two years, according to a study of voting results by PROXY Governance, Inc., a leading proxy advisory firm.

Based on results through September 2008, about 15 percent of the approximately 190 social proposals voted on so far this year received support from at least 30 percent of votes cast. This represents a slight decline from last year when 17 percent reached this level, but a jump from 2005 and 2006, when less than 10 percent of resolutions reached the 30 percent threshold. As was the case last year, several of these votes narrowly topped the majority vote threshold, including a sexual orientation anti-discrimination proposal filed at HCC Insurance Holdings, Inc. Following a similar vote in 2007, the company now has the unenviable distinction of being the first company to receive a majority vote on a social issue proposal for two years running.

"What is striking is that shareholder support for social issue proposals has remained close to or at record-levels despite the economic challenges facing the U.S. economy," said Michael J. Ryan, Jr., President & COO of PROXY Governance. "The results reflect the growing recognition that social and environmental factors may be key components of a company's long-term competitive positioning and risk profile," he added.

Bearing this out is the continued increase in support for climate change resolutions, even in sectors stressed by the economic slowdown. For instance, resolutions targeting homebuilders and the carbon efficiency of new homes averaged nearly 25 percent support, while a new, more climate-focused version of the long-running proposal for enhanced sustainability disclosure averaged nearly 24 percent in the airline sector. Overall, seven resolutions, mostly targeting companies in the energy sector, received more than 30 percent support, with average support for the campaign inching up to nearly 23 percent, from 20 percent last year.

The study also finds a growing awareness on the part of corporate boards for the potential of well-targeted resolutions to approach the majority vote threshold a level sufficient to cause concern for a company. In many instances, companies appear to be responding to elevated votes; the study tracks some type of response from corporations on at least 12 of the top 25 highest votes from 2007.

"How companies respond to these vote levels is increasingly viewed as a matter of corporate governance, with companies that ignore shareholder concerns backing themselves into a corner," said Michael Pryce-Jones, Senior Social Research Analyst at PROXY Governance. "Companies that fail to respond appropriately not only face increasing pressure over the targeted issue, but also may attract closer scrutiny of their corporate governance and board accountability," he added.

Vote results, however, were only part of the story. Many proposals were withdrawn as companies and proponents reached agreements over preferred courses of action - particularly on issues with a high level of public awareness, such as sustainability and climate change.

Not all of the social issues raised are resonating with investors, however. This year saw a big jump in the number of resolutions that did not garner support from at least 5% of shareholders, rising from 17% last year to 27% this year. Many of these were related to new or recently expanded campaigns, suggesting that an overall trend of rising shareholder activism does not "lift all boats," even if it does encourage more activity. For instance, an innovative campaign from Harrington Investments, a Californian-based socially responsible investment fund, to use binding bylaw amendments to create board committees on human rights and other sustainability issues, failed to take off. Resolutions filed by conservative groups questioning the validity of corporate social responsibility initiatives continue to receive only single digit support.

The study concludes that recent trends in environmental and social issue proposals, coupled with the historic challenges facing the U.S. economy, will continue to increase both the complexity and stakes of proxy voting.

"Looking forward, it is clear that some traditional SRI concerns will be seen as stakeholder-oriented luxuries that a company can ill-afford," said Pryce-Jones. "On the other hand, bottom-line concerns, particularly with energy issues, may bolster the business case for a focus on sustainability and reform, and investors may find that they have added leverage with companies that fail to adjust to changing economic realities. Moreover, when the dust settles on Wall Street, both boards and shareholders may find that they are meeting on changed terms going forward."

Copies of the study are available by calling PROXY Governance, Inc. at 703.245.4855, or by email at bonettie @


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Published by: Corporate Governance & Accountability Advisors, Inc. Content & Concepts ©2008 by CG&AA, Inc. All rights reserved