Companies are getting an earful from shareholders this year. Climate change and social justice dominated discussions at many shareholder meetings, compelling companies to take a more aggressive stance when it comes to the issues that matter to investors.
Last month, two more shareholder groups spoke out -- this time about the need for better transparency when it comes to companies' lobbying efforts and the political views they support.
In early March, investors at Walt Disney Co. submitted a resolution asking the board to prepare and update annual reports about the kinds of public policies it lobbies.
Pat Miguel Tomaino, associate director of Zevin Asset Management, said investors have been asking the board for clarification about the kinds of political and social issues it spends money on for more than 10 years. “[Transparency] is now more important than ever,” Tomaino wrote in a Denver Post op-ed.
He said the shareholder resolution calls on Disney to “delve a bit deeper” and reveal the kind of lobbying it does on public policies as well as the memberships it holds in organizations that write and endorse model legislation. The resolution identifies four principal issues shareholders feel would help investors better understand the company’s philosophies and strategies when it comes to public policies.
Disney responded to the proposal by saying it already complies with all disclosure laws and urging shareholders to vote against the proposal.
Royal Bank of Canada also heard from its shareholders last month. The global advocacy organization SumOfUs submitted a resolution in preparation for the company’s April 6 meeting, calling on Royal Bank to update its shareholders on how it addresses public policy issues, both in the U.S. and Canada.
The resolution not only asks the board to outline the kinds of policy and procedures that govern the board’s lobbying decisions, but also to reveal the payments the board has made toward direct or indirect lobbying and grassroots lobbying efforts.
“As shareholders, we encourage transparency and accountability in RBC’s use of corporate funds to influence legislation and regulation,” the group wrote in its proposal.
SumofUs said RBC lobbied the Canadian government 47 times in the 2016 fiscal year and contributed more than $800,000 lobbying the U.S. Congress during that same time. The figure doesn’t include any lobbying the bank may have made to state and local governments.
“Payments to organizations that pursue agendas contrary to RBC’s stated vision ‘To be among the world’s most trusted financial institutions’ may pose additional risks to shareholder value,” the shareholders stated in their resolution.
Lisa Lindsley, capital markets advisor for SumOfUs, presented the resolution to the board.
“One of the currencies banks deal in is trust. For banks, trust is pivotal because people are literally investing their life’s work, their family’s legacy, planning for their children’s future or trying to make their dreams come true,” Lindsley said in a statement.
“RBC has been mired in a number of high-profile scandals recently using high-pressure sales tactics to dupe customers. While this resolution doesn’t address all of these challenges, it is a step in the right direction. Judging by today’s result, it’s clear that a huge percentage of shareholders agree that RBC must be more transparent about lobbying efforts that put shareholder value at risk.”
The resolution was also supported by the Vancouver-based organization SHARE (Shareholder Association for Research and Education), which said it is also on a mission to get companies to reveal better information about their political contributions and lobbying efforts in Canada.
SHARE was successful in recent years in persuading a number of Canada’s larger companies to commit to more transparency. CN Rail Co., Goldcorp and Cenovus Energy have all agreed to improve transparency when it comes to lobbying efforts and political contributions. Cenovus has also recently announced that it has stopped making political contributions.
Proxy advisory firm Institutional Shareholder Service also encouraged shareholders to vote for the resolution, noting: “While lobbying is widely acknowledged to be an important strategy in fulfilling organizational objectives, it also carries risk. Poorly thought-out efforts can heighten reputational risks such as corruption or other scandals." Transparency, said the firm, increases shareholder confidence. And that confidence benefits company success.
RBC's board of directors however, encouraged investors to vote against the resolution. It added that while it will “continue to review [its] approach against best practices and to enhance [its] approach … the board of directors does not believe the additional disclosure called for by the proposal is necessary.”
Just under 43 percent of RBC shareholders voted in favor of SumOfUs’ resolution. The support for the resolution calling for more transparency at Disney was not available at press time.
But even though neither of the two resolutions passed, shareholder advocacy does appear to be making an impact. The investor group Ceres regularly publishes a list of companies that receive shareholder resolutions on social and environmental issues. As the list reflects, shareholders want to know their investments are aligned with corporate views and actions they can support.
Jan Lee is a former news editor and award-winning editorial writer whose non-fiction and fiction have been published in the U.S., Canada, Mexico, the U.K. and Australia. Her articles and posts can be found on TriplePundit, JustMeans, and her blog, The Multicultural Jew, as well as other publications. She currently splits her residence between the city of Vancouver, British Columbia and the rural farmlands of Idaho.