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Shareholder Resolutions Receive Record Levels of Support in 2011

Raz Godelnik
| Wednesday August 17th, 2011 | 1 Comment

You may have not noticed , but the 2011 proxy season is practically over. In the past, most companies would not notice either since shareholder resolutions, especially environmental and social ones haven’t historically gained much support among voting shareholders. But in the last couple of years this trend has radically changed and support levels are breaking new records every year. 2011 was by far the best year so far with shareholders gaining significant support on various issues, from publishing sustainability reports to disclosing risks associated with natural gas fracking. This year they were definitely noticed.

To put things in perspective, the number of resolutions receiving a majority of votes is still marginal. The growing numbers of concerned shareholders are still not generating big changes in most companies. Yet, as a new report of Ernst & Young concludes, shareholder support for social and environmental resolutions continues to grow as well as to push companies for further accountability and disclosure. This is another indicator of the growing investor concerns about companies’ exposure to environmental risks and their preparedness to address water, climate and other important issues.

John Liu, the New York City comptroller, whose office manages pension funds worth $108 billion and who filed resolutions with several companies, explained it very clearly: “Companies that continue the same outdated practices put both the environment and their shareholders at risk.”

With these growing concerns it’s no wonder that according to the EY report, environmental and social resolutions represented  40% of the total resolutions voted on this year, compared to about 30% in 2010. This is the largest category, followed by board-focused resolutions (30% of the total), anti-takeover/strategic resolutions (20%) and compensation resolutions (10%).

The website Moxy Vote, which also summarized the proxy season with a report of its own, looked at environmental and social resolutions separately. It found that the environmental resolutions included issues such as sustainability reports, the reduction of greenhouse gas emissions, an increase in sustainable business practices, and climate change mitigation efforts. Social shareholder resolutions included topics such as human rights, diversity initiatives, and animal welfare efforts.

The growing share of the resolutions focusing on environmental and social issues is just one part of the story. The other part, which I personally find more interesting, is the growth in the support the resolutions receive from shareholders. According to the EY report, in 2006 only 1% of resolutions got over 50% of the votes. In 2011, it was 3%. In 2006 only 9% of the resolutions got over 30% of the votes. In 2011, it was 32%. If you look at the average support in these resolutions, it is still around 22%, but double the figure for 2005.

The highest level of support was given to a resolution voted at the water infrastructure services company Layne Christensen on publishing a sustainability report – it won a 93% shareholder support, an all time record. This was a bit of a unique case though, as the resolution was supported by the company’s management. The company also moved very quickly into action and published the report last May.

Other examples of environmental resolutions receiving high levels of support include two first-time resolutions with oil and gas companies on oil refinery safety that received high votes: 54.3% at Tesoro and 43.3% at Valero Energy. Another case where a resolution received the majority of votes was at Ameren, where shareholders asked the company to report on its plans to mitigate coal combustion waste. This resolution received 53% of the votes.

Another issue investors got worried about this year that gained substantial support was natural gas fracking. According to Ceres, investors filed resolutions with nine oil and gas companies pressing them to disclose their plans for managing water pollution, chemical use and other risks associated with the process of hydraulic fracturing. Resolutions that went to a vote received substantial support, including 44% at Carrizo Oil & Gas, 40% at Chevron, 49% at Energen Corporation, 28% at ExxonMobil and 42% at Ultra Petroleum. Overall, the average fracking vote was 40%, up from 30% in 2010.

Among the social resolutions submitted this year, the two categories receiving the most shareholder approval were diversity (28%) and human rights (15.2%). Moxy Vote reports that the resolutions focusing on diversity involved changing corporate non-discrimination policies to explicitly include sexual orientation and gender identity non-discrimination. This resolution was presented in seven companies and got the highest support at KBR with 62% approval.

All of these statistics are actually underestimating the growing influence of shareholder resolutions because they don’t include resolutions that were withdrawn. As the EY report mentions, a significant number of resolutions are withdrawn by proponents as a result of substantive dialogue with and/or action taken by companies. These withdrawals represent an important part of the engaging process between shareholders and companies and in many cases generate better results than the ones achieved when the resolutions are brought to vote.

Even if we don’t count the withdrawn resolutions, the 2011 proxy season provides us with hope to see faster and more significant changes in companies. A growing number of shareholders identifying the connection between companies’ environmental and social impacts and shareholder value and demanding answers might be the most effective tool we have right now to move companies in the right direction.

Raz Godelnik is the co-founder and CEO of Eco-Libris, a green company working to green up the book industry in the digital age. He is also an adjunct professor in the University of Delaware’s Alfred Lerner College of Business and Economics.


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  • http://internalconversations.com Andres Steinmetz

    your parragraph that begins with the words “The growing share of the resolutions …” contradicts itself. Please fix it.