Diversity vs Climate - Investors face tough decisions at US AGMs

April 23 2021

The number of shareholder resolutions on diversity at US companies has soared this year in the wake of the Black Lives Matter campaign. 

In total, 68 resolutions on workplace diversity have been filed to US companies this year. This figure is more than twice the number tabled last year and the highest number of diversity resolutions ever. The resolutions have been filed at  American companies across a range of sectors and industries. 

The surge in shareholder concern over diversity emerged in the Proxy Preview 2021, a report into shareholder resolutions compiled by US shareholder groups As You Sow, The Sustainable Investment Institute, and Proxy Impact. 

The report identified 435 shareholder resolutions on environmental, social and governance (ESG) issues filed at companies for this year’s voting season. The figure is slightly lower than for 2020 and below the peak of almost 500 ESG-related resolutions filed in 2017. 

The number of ESG resolutions that are eventually subjected to shareholders votes will be lower than the number filed, as every year some proposals are either dropped by their proponents or are blocked by companies after appeals to the Securities and Exchange Commission. 

The total number of resolutions filed is, however, a valuable guide to the scale and persistence of shareholder activism on ESG issues. 

The jump in resolutions on diversity was the biggest change on previous years. Resolutions on workplace diversity account for 16% of all ESG resolutions in 2021, making it the second biggest issue for shareholders after corporate political activity (18%), and placing it ahead of climate change (15%). 

In his introduction to the report, Andrew Behar, chief executive of As You Sow, said: “The escalating Black Lives Matter movement has forced a public re-evaluation of civil rights progress and has catalyzed change. Every corporation now can see how its policies and practices contribute to systemic racism; each must pivot to an antiracist stance.” 

On top of resolutions on workplace diversity, there have been 19 proposed resolutions on the broader issue of racism, how it affects companies and how they plan to combat it. 

Climate change was still the biggest single environmental issue raised in resolutions with 66 proposals. This figure is lower than in previous years, but proposals that have some link to the issue also appear in resolutions on sustainable governance and political activity. 

Climate change appearing in these areas is seen as sign that the issue is increasingly regarded as important to corporate strategy and governance. The report also noted that US President Joe Biden’s support for a more proactive climate policy, including plans to introduce obligatory disclosures for companies, will be a key factor in how US companies and shareholders address the issue. 

The report highlighted the role of UK-based hedge fund chief Sir Chris Hohn of the Children's Investment Fund in pushing climate as a governance issue. The report identifies Sir Chris as a prominent supporter of the ‘Say on Climate Change’ campaign, which aims to make formal shareholder votes on climate change a standard part of corporate governance similar to advisory votes on executive remuneration.  

Climate issues were also a feature of resolutions linked to corporate political activity, with 13 resolutions proposed seeking more information on any political lobbying by companies about climate change. 

The global pandemic in 2020 has also provided some highly topical issues for shareholder resolutions.  A handful of shareholder resolutions address the issue of workplace safety at their companies and the measures taken to minimise Covid-19 risks for employees.  

Meanwhile, several pharmaceutical companies have been targeted with resolutions seeking information about whether public financial support given to the companies to help develop treatments and vaccines will be taken into account in setting the prices and availability of their Covid-19 products.