Political Representatives: Conservative Activists Submit Record Shareholder Proposals

Conservative activists have submitted a record number of shareholder proposals at US annual meetings this year, setting up a highly politicized season of power as they take advantage of new regulatory guidelines and borrow themes and tactics from their liberal foes.

“The right has never been more involved” in shareholder activism, said Justin Danhof of the Free Enterprise Project at the National Center for Public Policy Research, a conservative group who managed to present motions at this year’s Disney, Costco and Walgreens Boots Alliance meetings.

The Securities and Exchange Commission “opened the floodgates” to activist resolutions last November by rescinding Trump-era guidance that had limited which proposals on social policy issues could be put to a vote, Danhof said. “We had three [proposals allowed] last year; We have already presented three this year and we will have at least 10 more that we know of.”

Between them, Danhof’s group and the National Legal and Policy Center submitted 19 proposals in 2022, up from a total of 16 last year, according to Conference Board research.

The NLPC garnered nearly 35 percent support at Disney’s annual meeting this month for a proposal that challenged the media company to report on its due diligence on the human rights risks it faces around the world.

Human rights proposals have most commonly been advanced by liberal activists. But Disney received criticism from both the left and the right for his decision to shoot scenes for his movie. mulan in Xinjiang, where Washington has called the Chinese government’s treatment of the Uyghur minority genocide.

Institutional Shareholder Services, the influential proxy adviser, sided with the NLPC in the Disney resolution, boosting support from institutional investors.

The NLPC separately urges Berkshire Hathaway to replace Warren Buffett as chairman and asks ConocoPhillips to disclose its lobbying activities and spending in detail. SEC officials last week permitted an NLPC proposal on diversity on JPMorgan Chase’s board of directors to be presented at the bank’s annual meeting.

Proxy filings are growing across the political spectrum, with the Interfaith Center on Corporate Responsibility reporting that its members have submitted a record 436 proposals this year, up from 244 at the same stage in 2021.

An indirect analysis of the season from As You Sow, the Institute for Sustainable Investing; and Proxy Impact found that a record 529 environmental, social and governance proposals had been submitted as of last month, up 20 percent year over year.

Conservative groups had filed 5 percent of them, he said. Several of those proposals call for more disclosure about charitable giving and racial equity audits, issues historically favored by his liberal opponents.

This grew out of a deliberate strategy, Danhof said: “Because of the procedural hurdles at the SEC, we have to submit proposals that are quite similar to previously successful liberal proposals,” he said, “[so] our only path to the power ticket is to use as much leftist language as possible.”

An NCPPR proposal on the agenda for Johnson & Johnson’s annual meeting, for example, uses terminology familiar to ESG activists to urge the drug company’s board to commission a racial equity audit.

In a statement supporting its resolution, NCPPR expressed concern that anti-racism training in companies’ racial equity programs was itself “deeply racist” and that employees deemed “not diverse” could be discriminated against.

J&J opposed the move, saying NCPPR’s statement reflects views “directly contrary to the company’s beliefs and experience” that embracing diversity, equity and inclusion is important to its business. success. He also opposes another racial equity audit proposal from Mercy Investment Services, which represents a group of nuns.

Historically, proposals put forth by conservative groups have fare poorly, Conference Board research shows. In the last five years, they have submitted 71 proposed resolutions, but only 25 percent made it to a vote, compared to more than 62 percent of all shareholder proposals last year.

The Conservatives also garnered less support from other shareholders: Resolutions garnered an average 11 per cent support and none have passed. By comparison, the 359 total ESG shareholder proposals approved last year garnered an average 34% support and 10% approval.

Conservatives say they are trying to prevent corporate America from being distracted by liberal social causes. “The American capitalist system is the greatest system that man has ever created economically, but the Marxist awakening is. . . a cancer. We have to kill the cancer without killing the host,” Danhof said.

The left had taken over other institutions, from universities to the media, he argued, and conservatives feared it was doing the same in business and finance: “Now we have top bankers and tech titans speaking the language of Davos and not defending Americans.” capitalism at all.”

But Heidi Welsh, executive director of the Institute for Sustainable Investing, an impartial Washington think tank, said conservative groups had failed to get “traction” with their previous resolutions and saw little sign of that changing.

Companies were disclosing more about environmental and social issues because they and a growing number of their investors saw them as important to the bottom line, he said. “They are not Marxist stooges doing this for some communist plot.”

Lucian Bebchuk, a Harvard law professor who studies shareholder resolutions, said sharply worded proposals sometimes command attention, but their impact can be limited.

“The pressure [chief executives] they face is not so much the number of proposals but the percentage of support they think the proposals will get,” he said. “When they think a proposal won’t get a lot of votes, it’s not a source of pressure to do something different.”

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