For some time, I’ve put forth the idea that sustainability professionals would do well to evaluate and prioritize shareholder information requests and proposals. I mentioned it earlier this month in this blog. Over on TheCorporateCounsel.net, Dave Lynn discussed a House Financial Services Committee hearing titled, “Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder Value.” Committee Chairman French Hill mentioned “the SEC’s Staff Legal Bulletins 14L and 14M, noting how Staff Legal Bulletin 14L ‘shifted the focus of shareholder proposal review from the proposal’s relevance to a specific company to whether the proposed issue had broad societal impact.’” See a bit of background here, here and here.
Dave also points to testimony presented by Ron Mueller, Partner, Gibson Dunn & Crutcher LLP:
“U.S. public companies of all sizes take shareholder relations seriously and welcome the opportunity to engage productively with their investors. But public companies also recognize that not all shareholders have the same priorities, and board of directors and company management have fiduciary responsibilities to act in the best interests of shareholders at large. Thus, one has to question why a single shareholder owning shares with a value of just $2,000 can initiate a process that imposes significant costs and, more importantly, diverts key company personnel, executives, and directors from other business activities, which costs and consequences are borne by all of the company’s shareholders. Moreover, the nature of shareholder proposals being submitted to companies in recent years have changed significantly from the proposals submitted in prior decades. Shareholder proposals no longer are primarily focused on corporate governance issues or on providing information or input on important business activities, but instead increasingly are crafted by special interest groups focused on narrow policy issues or specific outcomes, without regard to whether or how companies may already be addressing the issue, or to other considerations that may be more significant and consequential.”
A few years ago, sustainability professionals relied heavily on the need to respond to ESG shareholder requests and proposals as a cornerstone for showing their importance. The world has changed – along with shareholder and asset manager approaches to sustainability. It is probably best to refocus on direct financial benefits to your company – the financial world will respond as they will.
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