Volume 8, Issue 2 February 2021 - Proxy Insight
Transcript of Volume 8, Issue 2 February 2021 - Proxy Insight
www.proxyinsight.com
February 2021February 2021Volume 8, Issue 2Volume 8, Issue 2
VOTING NEWSVOTING NEWS
PROXY PROXY MONTHLYMONTHLY
POLITICAL CONTRIBUTIONS IN THE POLITICAL CONTRIBUTIONS IN THE WAKE OF THE U.S. RIOTSWAKE OF THE U.S. RIOTS
DREW HAMBLY OF MORGAN DREW HAMBLY OF MORGAN STANLEYSTANLEY
PEOPLE MOVESPEOPLE MOVES
It has been a busy month for the Proxy Insight Online team as investors file proposals and outline their engagement plans for the coming year.
With a new proxy season comes new policy updates, and asset managers have made it clear that climate change will be their top priority in future engagements. BlackRock CEO Larry Fink published his letter to CEOs this month, calling for companies to “disclose a plan for how their business model will be compatible with a net-zero economy,” and eliminate greenhouse gas emissions in line with Paris Agreement goals.
Aviva Investors and EOS at Federated Hermes echoed BlackRock’s sentiment, calling for companies to disclose Scope 1 and Scope 2 emissions, as well as pledging support towards the implementation of an advisory say on climate vote, giving shareholders the opportunity to vote on climate transition plans at portfolio companies.
Investors also wrote to Allison Herren Lee, acting chair of the Securities and Exchange Commission (SEC) requesting the SEC reform its Rule 14a-8 no-action process, suggesting the current policy makes it difficult for shareholders to successfully submit environmental proposals with portfolio companies.
The investors emphasized the Biden administration’s goal to combat climate change through investor engagement but are waiting on an answer from the SEC.
This month’s interview is with Drew Hambly, executive director of global stewardship at Morgan Stanley Investment Management. Drew discusses how Morgan Stanley’s custom voting policy promotes improved governance practices and what the European Technical Expert Group for Sustainable Finance’s official EU Ecolabel means for the future of sustainable investing.
Our first article in this month’s issue explores political action committee (PAC) contribution proposals and the growing demand among investors for disclosure of lobbying payments and policies. The storming of the Capitol building on January 6 by pro-Trump rioters has led many companies to pause PAC contributions, and investors will be increasingly supportive of lobbying disclosure proposals in the coming proxy season.
This month we also include an article first published in Activist Insight Monthly in November 2020. Our sister magazine’s vulnerability report that month cited FirstCash’s weak corporate governance as a potential catalyst for activist activity at the U.S. pawn shop. FirstCash has been subject to ongoing criticism for its all-male board that is only 67% independent, and three directors up for re-election on the staggered board received less than 80% support at FirstCash’s June 2020 annual meeting. To read two of these reports each week, as well as additional analysis, please contact [email protected] to arrange a trial of Activist Insight Vulnerability.
We are also pleased to feature a new section in this issue of the magazine, the personnel round-up. This quarterly section highlights the latest hirings and appointments within the investment industry and complements our weekly round-ups on the Proxy Insight Online newswire. I hope you enjoy this issue of Proxy Monthly and welcome your feedback regarding these new developments.
[email protected]@Rebecca_proxy
Proxy statementRebecca Sherratt, corporate governance editor, Proxy Insight, an Insightia company.
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The storming of the U.S. Capitol building by pro-Trump rioters on January 6 led many companies to pause donations to political action committees (PACs). As tensions increased in the lead up to Joe Biden’s inauguration, investors have been given a sudden wake up call to the risks PAC contributions can have on investment portfolios. As a result, investors will be increasingly attentive toward PAC contribution disclosures in the coming proxy season.
Dying embers
The number of shareholder proposals seeking disclosure of political contributions subjected to a vote has seen a steady decline in recent years. In 2014, 94 shareholder proposals of this kind were subject to a vote in the U.S., decreasing to 73 in 2016, and 60 in both 2019 and 2020 respectively, according to Proxy Insight Online data.This decrease is partly a result of issuers excluding
shareholder proposals from proxy statements on the grounds of being immaterial to shareholder interests after filing 14a-8 no-action requests to the Securities and Exchange Commission (SEC). Companies such as Duke Energy Corporation, The Walt Disney Co, and Pfizer have all successfully excluded proposals of this kind in recent years through use of the 14a-8 no-action process.
A more optimistic take is that companies are improving, at least by some measures. The CPA-Zicklin Index, established by the Center for Political Accountability and the Wharton School’s Zicklin Center for Business Ethics Research, scores companies based upon the transparency of their political donations. The number of S&P 500 companies receiving scores of 90% or higher for transparency was 35 in 2016 but increased to 79 in 2020, with five companies, HP, Honeywell International, Edwards Lifesciences, Northrop Grumman, and Becton, Dickinson & Co, scoring 100%.
Reaching a boiling pointSupport for political contribution disclosure grows, as U.S. investors seek to mitigate the risks of corporate spending, writes Rebecca Sherratt.
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Shareholder proposals for disclosure of lobbying activities
Source: Insightia | Proxy Insight Online
2015 18249Total666 9
2121142016Total737 8 2
192472017 Total6510 5
1952018 Total577 20 6
31532019 Total604 21 14
2020Total606125 22 14
30-39.9920-29.990-9.99 50+
Support (%)10-19.99 40-49.99
North American issuers, data by calendar year.
2014 172322Total9411 15 6
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“SUPPORT HAS INCREASED HAND-IN-HAND WITH INVESTORS LEARNING TO RECOGNIZE THE RISKS OF
CORPORATE POLITICAL SPENDING.”
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But, despite this, support for political contribution disclosure proposals that are subject to a vote has increased year-on-year. In 2014, 22.3% of proposals received over 40% support. This figure increased to 28.3% in 2019, and 33.3% in 2020. In 2017 and 2018, no proposals received over 50% support, compared to 5% in 2019 and 10% in 2020.
Support has increased hand-in-hand with investors learning to recognize the risks of corporate political spending, leading them to urge companies to mitigate risk in their portfolios and safely navigate the ongoing tensions in the U.S.
“The storming of the U.S. Capitol building happened a little late to impact the filing of shareholder proposals for the 2021 proxy season, but will impact the level of support for proposals that will be subject to a vote,” said Dan Carroll, vice-president for programs at the Center for Political Accountability. “The Capitol storming may drive companies to be more interested in reaching withdrawal agreements” with proponents, usually following concessions.
Even if proposals fall short of majority support and receive support in the “upper 20-upper 30% range […] this level of support will often persuade companies to move within a year or so to adopt political disclosure and accountability,” said the president of the Center for Political Accountability, Bruce Freed.
Call to action
Following the storming of the Capitol building, all eyes have been on leading asset managers to engage with portfolio companies regarding the pausing of PAC contributions. But, so far, this has not been the case.Both BlackRock and Vanguard announced a pause on their own PAC contributions, but have made no announcements regarding expectations amongst portfolio companies in direct response to the Capitol storming.
BlackRock’s commentary on political lobbying, published December 2020, recommends issuers “provide accessible and transparent disclosure” so that investors and interested parties can understand how a company’s strategy and contributions align, but data suggests that disclosure of this kind is not a priority for BlackRock. According to Proxy Insight Online data, BlackRock supported 3.3% of political contribution disclosure proposals in 2019, dropping to 0% in 2020.
In BlackRock’s 2020 corporate governance guidelines, the asset manager suggests that “it is not the role of shareholders to suggest or approve corporate political activities; therefore we generally do not support proposals requesting a shareholder vote on political activities or expenditures.”
Although this stance suggests shareholders need not concern themselves with a company’s political contributions, the Center for Political Accountability argues that this view clashes with the concept of accountability being a cornerstone of good governance.
BlackRock is not the only major asset manager subject to scrutiny regarding its support for donation proposals. Vanguard has opposed every proposal of this kind in the past six years, citing similar reasons for opposition, although the asset manager suggests it will take into account the effects of the Capitol storming in future engagements.
“Recent events in the U.S. political landscape have raised new questions about the potential risks associated with corporate political activity,” Vanguard told Proxy Insight
Online in an interview. “The Vanguard funds will take
Investor 2015
2016
2017
2018
2019
2020
*
BlackRock 0 0 0 1.7 3.3 0
Vanguard Group 0 0 0 0 0 0
SSgA Funds Management 31 36 44 27.6 32.8 32.1
Top investor support
Source: Insightia | Proxy Insight Online
Top investor support for political contribution shareholder proposals in the U.S. by calendar year (%).Data for 2020 not yet fully disclosed.
“A MORE TRANSPARENT POLITICAL SYSTEM MAY BE COMING, WHETHER THE INDEX FUNDS ARE ON
BOARD OR NOT.”
that into consideration in our case-by-case analysis, in the same manner in which we integrate other market developments and new data.”
State Street Global Advisors, the world’s fifth-largest asset manager, demonstrated the highest level of support for proposals seeking disclosure of political contributions, 33.8% support over the past six years.
The storming of the Capitol building served as an awakening for investors regarding the risks PAC contributions can have on their portfolios. A more transparent political system may be coming, whether the index funds are on board or not.
Source: Insightia | Proxy Insight Online
Top shareholder proponentsMost prolific filers of shareholder proposals on political contributions from 2015-2021.
InvestorProposals
filed
Comptroller of the State of New York 113
Mercy Investment Services 101
Comptroller of the City of New York 74
Boston Trust / Walden Asset Management 71
International Brotherhood of Teamsters 57
T H E A C T I V I S T T H E A C T I V I S T I N V E S T I N G I N V E S T I N G
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Could you provide a brief overview of how Morgan Stanley approaches its proxy voting responsibilities?
Morgan Stanley carries out its proxy voting processes slightly differently compared to most asset managers, in that we do not outsource. In the 6,500 meetings we vote at on average per year, our team reviews every single meeting and ballot item. We do take advantage of proxy advisory research, but are in no way beholden to proxy voting recommendations from Glass Lewis or Institutional Shareholder Services (ISS).
Morgan Stanley has its own custom policy that is managed internally, and have yet to turn our custom policy over to anyone else to interpret – we do all the work ourselves. We have set ourselves up in a way that we can work with individual investment teams to really understand what is a good governance practice for a certain type of company in a certain type of portfolio. As such, a lot of work is conducted on a case-by-case basis.
Do you expect companies to review executive compensation as part of their approach to coping with COVID-19?
We do, and this falls into two categories. We have witnessed some companies do very well in the pandemic, able to move the majority of their workforce to a work from home model with very little interruption to services provided to clients. In contrast, there are businesses, such as the travel industry, that have been hit hard by the pandemic.
Our expectation is that every company is going to review compensation in the coming year and we would like to see companies that have had a difficult year be very tempered. We expect companies to
show evidence that they are protecting their whole workforce, not just those at the top.
On the flip side, if a company has done extremely well through the pandemic and has had a record-breaking year, we still expect them to be cautious. Morgan Stanley doesn’t support volatile pay, and we advise against companies raising executive compensation by a significant percentage because they had one good year. In our minds, this establishes a level of expectation, causing complications if the following year’s results are flat or a little down. We are expecting boards to take a more holistic view on pay this year because last year was such an unusual year.
How do you think the pandemic will impact the upcoming proxy season? Do you expect we will see a shift in investor voting trends or in the kinds of proposals filed by investors?
COVID-19, the Black Lives Matter movement, and ongoing political turmoil will potentially foster some unique shareholder resolutions in the coming proxy season, perhaps more focussed upon human capital management, climate disclosure, and EE0-1 reporting. COVID-19 was a catalyst for investors to re-examine ESG issues that have always been there in the background, giving people pause to engage with these issues in more depth.
What trends do you think will gain traction in 2021, regarding ESG concerns in the corporate world?
The Black Lives Matter movement has spurred a focus on diversity, equity, and inclusion (DEI), so we expect this topic to gain more attention in 2021, especially at board level. We are cognizant that some directors may
A breath of fresh airAn interview with Drew Hambly, executive director of global stewardship at Morgan Stanley Investment Management.
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not want to be pigeonholed, so perhaps boards could disclose data at an aggregate level.
The change in U.S. administration is also bringing some fresh air into the ongoing discussion regarding climate change. Biden recently established a net-zero goal for utilities by 2035, meaning investors such as ourselves will be increasingly engaging with issuers and asking what they are doing to transition towards wind or solar energy, or to help retire coal plants.
I think these two issues, as well as an emphasis on a circular economy, are finally receiving increased attention and 2021 will help push this agenda forward.
Do you believe we will see any key areas of growth in socially responsible investing in 2021?
Yes. Starting in spring, the European Technical Expert Group for Sustainable Finance will be permitted to certify sustainable funds with the official EU Ecolabel, should they meet certain sustainability criteria. We may see a lot more investment funds and solutions that are branded as such, promoting responsible investing.
Sustainability is, of course, a broad term and there is the potential for greenwashing, but we are also seeing an increasing number of asset managers allocating portions of their funds to sustainable investments. An example of this is the New York City Employees Retirement System and the New York City Teachers’
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“COVID-19 WAS A CATALYST FOR INVESTORS TO RE-EXAMINE ESG ISSUES THAT HAVE ALWAYS BEEN
THERE IN THE BACKGROUND, GIVING PEOPLE PAUSE TO ENGAGE WITH THESE ISSUES IN MORE DEPTH.”
$715bn assets under management.*
*At Sept 30, 2020, according to their website.
Investor % Voted For ISS Match %Glass Lewis
Match %
Management
Board of directors 95.4 95.6 92.8
Remuneration 85.3 91.5 85.2
Corporate structure 87.6 97.3 92.9
Committees and reporting 98.4 99.1 96.8
Shareholder
Environmental 53.3 88.9 68.4
Social 44.0 80.0 68.0
General governance 40.5 59.5 60.3
July 1, 2019-June 30, 2020. Source: Insightia | Proxy Insight Online
About Morgan Stanley Investment Management
More than 26,000 resolutions voted in year to June 30, 2020.
Receives voting research from ISS and Glass Lewis.
Retirement System’s $4 billion divestment from coal last month. Investors can sell their oil and gas stocks, but where will they put that money? With more strategies tailored to investors who are focused upon sustainability, we will see an uptick in shareholders taking a more targeted approach as to where they invest their assets.
It will also be interesting to see if the Securities and Exchange Commission (SEC) establishes more standardized ESG disclosures, under a Biden administration.
As companies were forced to adapt to changing circumstances last year, do you expect virtual or hybrid meetings to become an industry standard?
I believe virtual-only or hybrid meetings will continue to be the model for the 2021 proxy season. Hopefully companies have learnt some lessons about participation in virtual and hybrid meetings, making it easier for all parties to get involved to a greater extent. A well-run hybrid model may, in fact, encourage more shareholder participation than a meeting at a physical venue.
Thank you, Drew.
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“I BELIEVE VIRTUAL-ONLY OR HYBRID MEETINGS WILL CONTINUE TO BE THE MODEL FOR THE 2021
PROXY SEASON.”
“WE EXPECT COMPANIES TO SHOW
EVIDENCE THAT THEY ARE PROTECTING
THEIR WHOLE WORKFORCE, NOT JUST
THOSE AT THE TOP.”“
“
IN HOCKFIRSTCASH, THE BIGGEST PAWN SHOP OPERATOR IN THE AMERICAS, COULD FIND ITSELF TARGETED BY ACTIVISTS DUE TO ITS SLOWING GROWTH RATE, WEAK GOVERNANCE, AND FAILURE TO EMBRACE TECHNOLOGY, WRITES JASON BOOTH.
FIRSTCASH
SECTOR FINANCIAL SERVICES
MARKET CAP $2.3 BILLION (MID CAP)
EXCHANGE NASDAQ
TICKER FCFS
HQ FORT WORTH, TX
VULNERABILITIES
A pandemic-induced recession might seem like the ideal
time to be running a chain of pawn shops, but market leader
FirstCash has failed to cash in. Weak corporate governance
and a board getting low marks from investors may make it a
tempting target for a bargain hunting activist. The Texas-based
company ranks in the 96th percentile of the Activist Insight
Vulnerability index of companies most likely to face demands
over the next nine months.
If so, an activist would likely push the company to follow the
example of peer EZCorp by developing its online presence,
thus reducing dependence on store traffic to generate revenue.
They could also follow EZ’s lead and team up with an online
bank to offer financial services to customers, adding a new
business line at a time when acquisition-driven growth looks to
be running out of steam.
FirstCash has grown through acquisitions to become the
largest operator of retail-based pawn stores in the United
States and Latin America, with over 2,700 retail outlets.
Despite its size, its store makes money the same way as
any other pawn shop would, making pawn loans secured by
personal property, ranging from jewelry to power tools and
guns. Most loans are small, averaging around $190 in the
U.S. and $67 in Latin America. FirstCash not only charges a
monthly service fee of around 13% on those loans, but if the
borrower doesn’t repay the loan, the pawn shop can sell the
items held as collateral for a sizable profit, usually between
35% and 40%. Until recently, FirstCash also had a payday loan
business, where people could borrow against future earnings,
paying a steep interest rate. The business generated over $118
million in revenue as recently as 2015. But with federal, state,
and local regulators imposing tighter rules on payday lending
in recent years, FirstCash and its affiliate Cash America have
exited most of that business to focus on their pawn stores.
Revenue more than doubled between 2015 and 2017, from
just over $700 million to around $1.8 billion, but has remained
relatively steady since then. The stock’s performance has
DIRECTOR SUPPORT LACK OF DIVERSITYTOTAL SHAREHOLDER RETURN
“
“GROWTH
.
THIS ARTICLE WAS FEATURED IN THE NOVEMBER 2020 ISSUE OF ACTIVIST INSIGHT MONTHLY.ALL DATA CORRECT AT TIME OF PUBLICATION.
“SINCE MID-2019, HOWEVER, THE STOCK PERFORMANCE HAS WEAKENED AS THE COMPANY HAS STARTED TO RUN OUT OF SUITABLE TAKEOVER TARGETS.”“
“
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FIRSTCASH’S 12-MONTH SHARE PRICE PERFORMANCE
0
20
40
60
80
100
0
1000
2000
3000
4000
5000
01 NOVEMBER 2019 01 MARCH 2020 01 JULY 2020 01 NOVEMBER 2020
CLOSING SHARE PRICE ($) VOLUME ('000S)
reflected that growth. Shareholder returns over the last five
years were a strong 74%, roughly equal to the S&P 500 Index
and easily beating average returns of 5% for peers. Since mid-
2019, however, performance has weakened as the company
has started to run out of suitable takeover targets, wound
down its payday loan business and, more recently, seen
business slow due to the COVID-19 pandemic.
BAD PANDEMIC
The pawn industry traditionally thrives when unemployment
and the poverty rate rise as more people try to make ends
meet by pawning personal items. But this downturn has
been different, as government stimulus checks have kept
heads above water and the fear of infection has kept them
out of stores. Some pawn shops, and especially those run by
FirstCash, have suffered more than others.
Despite there being over 15,000 pawn shops in the U.S.,
FirstCash has only one large publicly traded rival, EZCorp (its
other proxy peers are discount stores and consumer lending
companies). Over the longer term FirstCash has outperformed
EZCorp in terms of growth and profitability. But the smaller
rival has performed better during the pandemic. While
FirstCash’s revenue fell almost 8% to around $413 million in
the second quarter versus the same period of 2019, EZCorp
revenue was up around 5% to $210 million. Though EZCorp
posted a small net loss in the most recent quarter, it increased
its cash holdings to $311 million, up $100 million compared to
the prior quarter. FirstCash remained profitable, albeit seeing a
30% decline in net earnings, but it also borrowed $500 million,
adding to a sizable debt load, which has tripled since 2015.
As a result, FirstCash’s shareholder returns have been negative
34% over the last year, versus negative 13% for peers and a
gain of 7% for S&P 500 companies. EZCorp’s stock is down
just under 5% over the last 12 months. One reason for that is
that EZCorp still engages in the payday loan business. It has
also begun to embrace technology. Unlike FirstCash, some of
EZ Corp’s stores sell their merchandise via the internet, as do
a growing number of other pawn shops. In 2019, it launched
its “Lana” digital platform, through which it issues credit cards
to people with poor credit, via a deal with Green Dot, enabling
customers to remotely manage both pawn and payday loans.
EZCorp reported more than 32,000 Lana accounts as of June
30, up from around 8,000 at the end of March.
MEN ONLY
An activist would likely also target FirstCash’s weak corporate
governance. There are no women on the board and only 67%
of directors are independent, versus an average 86% for S&P
500 companies. CEO Rick Wessel also serves as chairman
and has been a director for 28 years. Three directors up for
re-election on the staggered board at the annual meeting in
June received less than 80% support, well below the 94%
average for U.S. companies, with dissenting shareholders citing
governance problems.
Primary-focus and partial-focus activists currently hold less
than 1% of shares. But given that insiders own less than 3%
of the company, an activist would have little trouble acquiring
an influential stake in the mid-cap company. An activist might
also find support among existing shareholders.
Earnest Partners, which has a 5.3% stake, supported Starboard
Value’s successful proxy fight at Darden Restaurants. Fiduciary
Management, with 3.6%, supported Voce’s campaign at Argo
Group International Holdings, according to Proxy Insight.
A
JANUARY 29, 2020 - FIRSTCASH ISSUES Q4 2019 EARNINGS.A
JULY 22, 2020 - FIRSTCASH ISSUES Q2 2020 EARNINGS.B
B
Share price data source: CSI - www.csidata.com and Xignite
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Upcoming eventsA selection of meetings and shareholder proposals in the coming month.
Issuer Type HQ Date
Oxford Metrics Annual February 18, 2021 DETAIL
Stellantis Special March 8, 2021 DETAIL
Walt Disney Company Annual March 9, 2021 DETAIL
Maximus Inc Annual March 16, 2021 DETAIL
Starbucks Annual March 17, 2021 DETAIL
Meetings
Shareholder proposals
Sponsor Issuer HQ Meeting Date
Oxfam America Sanderson Farms February 18, 2021 DETAIL
Report on human rights due diligence process
Requesting a report to assess the company’s human rights due diligence process.
Unknown Apple Inc. February 23, 2021 DETAIL
Improve principles of executive compensation program
Improve the executive compensation program to include NEO pay ratios.
John Chevedden AECOM February 24, 2021 DETAIL
Report on lobbying payments and policy
Requesting a report disclosing company policy and payments concerning lobbying.
Congregation of Sisters of St Agnes Walt Disney Company March 9, 2021 DETAIL
Report on lobbying payments and policy
Requesting a report disclosing company policy and payments concerning lobbying.
Kenneth Steiner Applied Materials Inc March 11, 2021 DETAIL
Require independent board chairman
Requesting the adoption of a policy requiring the board chairman to be independent.
Global
BlackRock CEO Larry Fink’s annual letter to CEOs called
for companies to “disclose a plan for how their business
model will be compatible with a net-zero economy,”
eliminating greenhouse gas emissions in line with Paris
Agreement goals, and establishing science-based targets
to limit global warming to no more than 2°C above
preindustrial averages.
More than 20 asset managers wrote to BlackRock CEO
Larry Fink on January 25, calling for the world’s largest
asset manager to align its disclosure policies with its
recommendations for portfolio companies. BlackRock
is criticized for its lack of disclosure surrounding its own
lobbying activities, and failing to support shareholder
proposals calling for transparency surrounding corporate
political donations.
The Net-Zero Asset Owner Alliance published its “Inaugural
2025 Target Setting Protocol” on January 14, outlining
decarbonization targets for issuers and institutional investors
to achieve by 2025. The protocol promotes the disclosure of
Scope 1 and 2 emissions, and the establishment of targets to
cut Scope 3 emissions. The protocol asks financial institutions,
sovereign wealth funds, and companies to set science-based
targets for 2025 and report against those.
Investor alliance Follow This announced its intention to file
multiple shareholder proposals at oil and gas companies,
including Chevron, BP, and Equinor. The proposals call
for the energy companies to disclose their greenhouse
gas emissions data and set targets to reach net-zero
emissions by 2050 and follow on from resolutions filed
by Follow This in 2020, requesting companies align with
Paris Agreement goals.
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News summaryThe latest developments in corporate governance.
Policy Changes
Glass Lewis announced updates to its proxy voting recommendations for Europe and Asia. The proxy adviser’s changes
reflect a renewed focus on board composition and independence.
Fidelity Management & Research published its 2021 proxy voting guidelines, revising its policies regarding board
composition, overboarding, and stock lending.
Aviva Investors updated its proxy voting guidelines for 2021, adding expectations for companies to set science-based
emissions targets. Revisions have also been made to its guidelines concerning conflicts of interest, remuneration, and
board independence.
Invesco’s proxy voting guidelines have been updated, revising the asset manager’s policies regarding auditor
independence, board accountability, and conflicts of interest.
Schroders updated its proxy voting guidelines, outlining developments to its ESG risk management processes and an
increased focus on board independence and human capital management.
Massachusetts Financial Services Investment Management (MFS) published its 2021 proxy voting guidelines, featuring
amendments to its director nomination, diversity, and proxy analysis sections.
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A study published by climate lobby group InfluenceMap
suggests leading asset managers are failing to align portfolios
with the goals of the Paris Agreement. In a sample of the
world’s 30-largest asset managers by equity holdings,
between 8% and 27% deviated from Paris-aligned targets.
Overall support for environmental proposals increased in the
2020 proxy season, but institutional investors declined to
support 75% or more of environmental proposals, according to
InfluenceMap’s report.
North America
The New York City Employees Retirement System (NYCERS)
and the New York City Teachers’ Retirement System (TRS)
announced an estimated $4 billion divestment from securities
related to fossil fuel companies, one of the largest divestments
in the world. This announcement forms part of the New York
Comptroller’s target to reach net-zero emissions by 2050 for all
New York pension funds. The divestment, announced January
25, is expected to take five years.
Joe Biden’s presidency is expected to give socially responsible
investing a big boost in the coming years, according to
a white paper from leading proxy adviser Institutional
Shareholder Services (ISS). ISS evaluates countries on their
ESG frameworks through its ISS ESG Country Rating system.
Implementation of Biden’s climate engagement plans could
push the U.S. from its current ISS ESG Country Rating ranking
of 117 out of 120 to 70 within the next five-10 years, the report
suggests.
Shareholder activist James McRitchie filed proposals for
multiple companies, including Starbucks, to consider non-
management employees as prospective director candidates.
McRitchie cited a recent study by the National Bureau of
Economic Research, suggesting that employee representation
on boards “contribute[s] to overall more cooperative labor
relations.”
A group of investors told Acting Chair Allison Herren Lee
that the Securities and Exchange Commission (SEC) must
urgently revise its Rule 14a-8 no-action relief process to allow
investors to engage with issuers on climate concerns. The
investors suggested the current framework works against the
Biden administration’s goal to combat climate change through
investor engagement.
The Open Media & Information Companies Initiative (Open
MIC) coordinated the filing of shareholder proposals at
Home Depot and Omnicom Group on January 15, calling
for investigations into the spread of inappropriate content
via social media advertising. The proposals seek third-party
investigations into how advertisers may have “inadvertently
financed the spread of white supremacy, disinformation, voter
suppression, government censorship, and more on social
media platforms.”
A serious lack of ESG expertise on U.S. boards of directors
is hampering engagement with investor concerns, according
to a study by Tensie Whelan, Clinical Professor of Business
at the New York University Stern Center for Sustainable
Business. The white paper, entitled “U.S. corporate boards
suffer from inadequate expertise in financially-material ESG
matters,” reviewed the credentials of 1,188 Fortune 100 board
members, finding “very little director expertise” present among
evaluated board members.
The Congregation of Sisters of St Agnes refiled a shareholder
proposal calling for Walt Disney to revise its current lobbying
policies and report on payments it has made as part of a six-
year engagement with the company to disclose its lobbying
expenditures. The board recommends shareholders oppose
the upcoming resolution, suggesting additional disclosure is
not an efficient use of resources.
Europe
The European Securities and Markets Authority (ESMA)
wrote to the European Commission (EC) on January 28,
urging the organization to implement standardized ESG
ratings and regulations for ESG assessment tools, to
mitigate the risk of greenwashing, product mis-selling and
capital misallocation.
The U.K. government published a rule that would require
workplace pension schemes to report on climate-related
risks within their portfolios, as part of the Pension
Schemes Bill. From October 2022, trustees of pension
plans with more than 5 billion pounds in assets under
management will be required to report on the financial
risks within their portfolios, in line with recommendations
set out by the Task Force on Climate-related Financial
Disclosures (TCFD).
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The Investor Forum published its 2020 annual review
on January 12, reporting its strongest year of collective
engagement activity and recommending the introduction
of a mandatory “say on climate” vote. The say on climate
campaign, launched by The Children’s Investment Fund (TCI)
CEO Chris Hohn, advocates shareholders being given the
opportunity to vote on corporate climate action plans. The
campaign encourages issuers to establish emission reduction
plans and provide annual disclosure of emissions.
RPMI Railpen, the asset manager for U.K. railway pension
schemes, urged the government to revise the HM Treasury’s
Listings Review, expressing concern that the proposed dual-
class share structure ruling does not protect the rights of minority
shareholders. RPMI Railpen suggested reconsidering whether
shares with reduced voting rights should have their weighting in
the index reduced by a commensurate amount.
French energy company Total announced it would not be
renewing its membership to the American Petroleum Institute
(API), following disagreements regarding climate policies and
investor pressure to cut emissions. In a January 15 press
release, Total said differing views on pricing carbon, as well
as a lack of support for investment in electric vehicles, were
behind its decision to exit API.
Responsible investment charity ShareAction wrote to the chairs
of FTSE 100 businesses, calling for companies to make annual
meetings more accessible to shareholders in the coming year.
Investors have expressed concern regarding shareholder
meetings in the coming year, as the U.K. Government’s
Corporate Insolvency and Governance Bill, allowing companies
to shift to virtual meetings in response to the pandemic, is due
to expire on March 30.
In a new whitepaper entitled “Gender diversity in the FTSE
350,” Glass Lewis notes that the aggregate percentage of
women directors in the FTSE 350 has increased from 15.8% in
2018 to 33.6% in 2020. Glass Lewis recommends companies
focus attention toward appointing qualified women into key
leadership roles, including CFO and CEO positions. The
whitepaper also suggests FTSE 350 companies aim for a
minimum of 40% female representation, providing a buffer in
transitional periods where women directors may exit boards
and diversity levels may decrease.
Shareholders filed a proposal at FTSE 100 supermarket chain
Tesco on February 9, calling the company to set targets to
increase the proportion of healthy products in its sales. The
resolution, co-filed by 108 investors and co-ordinated by
responsible investment organization ShareAction, requests
Tesco disclose the share of total food and non-alcoholic drink
annual sales consisting of healthier products (as defined by
the U.K. Department of Health) and develop a strategy to
“significantly increase” that share by 2030.
Asia-Pacific
In response to proxy advisers Glass Lewis and Institutional
Shareholder Services (ISS) updating their policies to oppose
cross-shareholding share structures, the Tokyo Stock Exchange
has announced revisions to its listing requirements. Index
membership will depend upon the level of free-flowing market
capitalization, excluding cross-held shares. Changes will be
implemented on March 31, 2021.
South Korea’s Financial Services Commission (FSC) announced
that large companies will be expected to disclose ESG data
by 2025. This will expand to all companies listed on the Korea
Composite Stock Price Index (KOSPI) by 2030. The Korea
Exchange will publish guidance on ESG disclosure in the coming
weeks, promoting voluntary disclosure by listed companies.
The Korean stewardship code will also be revised, introducing
revisions to fiduciary duties relating to ESG.
South Korean conglomerate GS Group has drawn the ire
of investors with a proposed $3 billion tie-up of two of its
retail businesses. In November, GS Group revealed plans to
merge GS Retail with GS Shop, touting the synergies and
increased scale resulting from the tie-up. But GS Shop minority
shareholders say the proposed merger ratio of 4.22 shares of
GS Retail for one share of GS Shop undervalues the country’s
biggest home shopping network.
A recent study by the Australasian Center for Corporate
Responsibility (ACCR) calls on investors to revise their
engagement process with fossil fuel companies to ensure
all measures to support climate change action have been
exhausted prior to divestment.
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Satyam Khanna – Securities and Exchange Commission
Senior policy adviser for climate and ESG
Satyam Khanna was promoted to senior policy adviser
for climate and ESG for the Securities and Exchange
Commission (SEC). In this new role, Khanna advises the
SEC on environmental, social, and governance matters
and advancing new initiatives across its offices. Khanna
was previously a member of the SEC’s Investor Advisory
Committee, where he served on the Investor-as-Owner
Subcommittee, and was a senior adviser to the U.N.
Principles for Responsible Investment (PRI).
Olivia Knight – As You SowRacial justice initiative coordinator
Olivia Knight recently became a leading member of As You
Sow’s Racial Justice Initiative. She earned a Master’s in
Environment, Development, and Policy from the University
of Sussex in the U.K. where her research focused on
African-American participation in mainstream environmental
movements in the U.S.
Sharo Atmeh – Alyeska Investment Group
Head of ESG
Sharo Atmeh joined Alyeska Investment Group as head of
ESG, overseeing the integration of ESG factors into investment
processes and portfolio construction. Atmeh also leads the
sustainable investing and corporate engagement programs.
U.K.
Eva Sun-Wai – M&G Investments
Global government bond fund manager
M&G Investments promoted Eva Sun-Wai to manage its global
government bond fund, with over 2.5 billion pounds in assets
under management. Sun-Wai has taken over from Claudia
Calich and will serve in her stead as deputy manager of M&G’s
global macro bond strategy, with over 2.3 billion pounds in
assets. Sun-Wai joined M&G in 2018 as a graduate intern,
before moving to the wholesale fixed income team in 2019.
Daniela Dorelova – Nomura Asset Management
Global utilities and ESG analyst
Daniela Dorelova joined Nomura Asset Management’s
global equity team in London, to bolster the team’s ESG
research and support its sustainable equity strategy.
Dorelova joined from Nomura’s risk and performance unit,
having spent most of 2020 helping the team achieve its
environmental impact goals.
Minako Takaba – Nomura Asset Management
ESG investment manager
Minako joined Nomura Asset Management in January 2021
to support ESG integration within managed funds. Prior
to this, she spent 13 years overseeing ESG ratings and
managing ESG Japan research at Morgan Stanley Capital
International ESG Research. She is a co-head of Women in
Exchange Traded Funds’ Japan Chapter.
Nancy Hameni – CMi2i
Head of proxy
Nancy Hameni recently joined Cmi2i as the firm’s new head
of proxy solicitation. Hameni joins from D.F. King where
she was a director of proxy solicitation and corporate
advisory across the EMEA region. Hameni has over nine
years of experience in investor relations, shareholder
communications, corporate governance, transactional
services, and activist situations.
Heloise Courault and Anne Hirai – Squarewell PartnersCo-heads of ESG research
SquareWell Partners appointed Anna Hirai and Heloise
Courault to co-head its newly-created ESG Research
Team. They will support the consultancy’s growing global
client base and craft ESG strategies that resonate with
all stakeholders. Hirai joins SquareWell from one of the
leading ESG research and ratings firm, Vigeo Eiris, where
she rated listed companies’ ESG practices. Courault joins
SquareWell from Institutional Shareholder Services (ISS),
the world’s largest proxy adviser, where she served as a
senior research analyst and was involved in ISS’ policy
formulation for continental Europe.
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Personnel roundupThe latest hirings and appointments in the investment market.
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Rest of the World
Allyson Porter – Georgeson
Corporate governance manager
As corporate governance manager of Georgeson Australia,
Allyson Porter oversees the company’s ESG advisory services
for Australia. Porter holds a Diploma of Investor Relations, a
Bachelor’s in Commerce, and an MSc in Aviation.
Luiz Sorge – BNP Paribas Asset Management
Head of Latin America
BNP Paribas Asset Management promoted Luiz Sorge to
the role of head of Latin America. In this new position, Sorge
will expand the company’s long-term sustainable investment
solutions for BNP Paribas clients. Sorge joined BNP in 2001
as director of products for BNP Brazil. In 2007, he became
head of sales and product development for institutional and
individual investors and foreign investors.
Gomolemo Seete – Old Mutual Investment Group
ESG analyst
Old Mutual appointed Gomolemo Seete as its ESG analyst
on February 1. Prior to this role, she served as an equity
analyst specializing in ESG at All Weather Capital, based in
Johannesburg, South Africa. Seete began her financial career
at STANLIB Asset Management, serving as an investment
support administrator for four years, during which time she
obtained her Honours degree in Investment Management from
the University of Johannesburg.
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Last month in briefA summary of shareholder proposals in January.
Board of directors
Corporate structure
General governance
Committees & reporting
Remuneration
Environmental & social
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4 4
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Source: Insightia | Proxy Insight Online
Global shareholder proposals by category
Resolution TypeGlobal* U.S. U.K. Canada Australia Japan
Avg Chng Avg Chng Avg Chng Avg Chng Avg Chng Avg Chng
All 38.1 +0.3 33.9 +0.2 46.4 0 28.4 +0.4 18.7 0 18.9 +0.1
Board of directors 48.0 +0.4 39.2 +0.7 47.2 0 43.2 0 14.6 0 27.2 0
Committees & reporting 36.7 -0.6 17.4† 0 14.0† 0 3.4 -0.2 N/A N/A 11.8 0
Corporate structure 28.6 -0.2 16.9 +0.2 78.5 0 23.8 -4.6 19.5 0 14.1 0
Environmental & social 23.8 -0.1 31.1 -0.2 17.8† 0 26.5 0 24.4 0 6.1 0
General governance 40.9 +0.7 41.2 +0.4 N/A N/A 59.2† +40.8 6.8† 0 40.9 +1.5
Remuneration 33.5 -0.3 20.7 -0.4 3.1† 0 14.7 0 N/A N/A 21.2 0
Source: Insightia | Proxy Insight Online * Excludes China due to difference in market practices.† Based on fewer than five results.
Shareholder proposal results by region12-month average support % to January 31, 2021, with degree of change from December 31, 2020.