Last week the Manhattan Institute launched ProxyMonitor, a site tracking shareholder proposals submitted to publicly traded companies via the annual proxy process. Right now, the site is limited to proposals made to Fortune 100 companies. Data goes back three years, to 2008. The site already offers some great features, including links to SEC filings around each proposal as well as the ability to filter and sort search results and export them to Excel.
People who have read my blog posts about business and society won’t be surprised that I went immediately to the “Social Policy” filter, which turns up 266 results.
Of these, thirty are human rights proposals made to the boards of twenty-one corporations: Abbot Laboratories, Archer Daniels Midland, Bank of America, Boeing, Caterpillar, Chevron, Cisco, Citigroup, Coca-Cola, E. I. du Pont de Nemours, Google, Honeywell International, IBM, JPMorgan Chase, Microsoft, Morgan Stanley, Motorola, News Corp, Philip Morris, United Technologies and Wells Fargo.
I’ve been sorting through those 30 proxy proposals, to see what they say about the way shareholder proponents and Boards of Directors deal with proposals around human rights.
It’s a fairly narrow range of investors putting forward these resolutions, and I wonder if this limits their chances of success. Proponents include churches and religious orders — the Sisters of Charity of St. Elizabeth, the Domestic and Foreign Mission of the Episcopal Church, the Province of St. Joseph of the Capuchin Order and the Presbyterian Church — as well as socially responsible investment funds: Christian Brothers Investment Services (who invest for Catholic institutions) and New Covenant (dedicated to advancing the Presbyterian mission through investment) along with independent, socially conscious investment firm Trillium Asset Management. Among the thirty proposals is one from Amnesty International; a handful of individual investors submit their own proposals. So far, no big surprises. The only standout entry in the list of human rights proponents is the New York City Comptroller’s Office, shareholders in Archer Daniels Midland.
It’s no surprise, either, that shareholder support for these proposals is usually weak, ranging from around 3-8 percent. There are a few notable exceptions. The NYC Comptroller’s Office proposal to ADM — requesting “that the company commit itself to the implementation of a code of conduct based on…ILO human rights standards and United Nations’ Norms…by its international suppliers and in its own international production facilities” — garnered 20 percent and 25 percent of the vote in 2008 and 2009 respectively. A 2010 proposal would have required Caterpillar to “review and amend, where applicable, Caterpillar’s policies related to human rights” and to post “a summary of this review…on Caterpillar’s website by October 2010”; that gained 20 percent support. And a proposal put forward by Chevron shareholders — that the Board “adopt a comprehensive, transparent, verifiable human rights policy and report to shareholders on the plan for implementation by October 2008” – won almost 28 percent support.
Why these proposals fared so much better than others is a question for another day. Why they didn’t ultimately succeed merits discussion as well. Despite impressive levels of support, they met with the same objections as all the other human rights resolutions in the ProxyMonitor database.
Why do Boards of Directors oppose these resolutions and recommend that shareholders vote against them? Or, at least, why do they say they can’t get behind human rights resolutions? What reasons do they offer?
Board opposition falls roughly into three categories.
First, the proposals are opposed because they are restrictive. The argument here is that the proposal would limit the company’s autonomy and blanket policies will hamper the company’s ability to operate. As JPMorgan Chase notes in its response to a 2008 human rights proposal, these matters are “complex” and “fact-specific,” so they need to be taken on a case-by-case basis. Good judgment deals in particulars, without having to check each call against abstract measures; and since “opportunities for engagement” on these issues “vary greatly,” blanket policies might prevent the company from responding to a particular case in an appropriate way; and they might also hinder the company from pursuing “objectives and policies” they are charged with.
Second, they are opposed because they are burdensome. Putting human rights proposals into practice can be expensive, and it can place other burdens on company resources. Some companies make it sound as if they would simply be overwhelmed. This argument is taken to an absurd extreme by Wells Fargo in a 2008 filing.
Proponents were moved by the example of Sudan to put forward a resolution to “authorize and prepare a report to shareowners which discusses how our investment policies address or could address human rights issues.” The report was to specify “appropriate policies and procedures to apply when a company in which we are invested, or its subsidiaries or affiliates, is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.” Wells Fargo took refuge in its position as “a diversified financial services company”:
we invest on behalf of clients and customers in thousands of domestic and foreign companies, many with complex and far-reaching global operations. The effort required to screen thousands of individual companies, as the Proponents would seem to advocate, would be a task of tremendous scope requiring in-depth research and detailed evaluations of the nature and extent of each company’s global operations. We simply do not have appropriate resources or access to adequate and accurate information to make informed judgments on these complex issues.
So the argument that won the day came down to this: Wells Fargo can’t really track its own investments. The world is just too complex. Unable to do the research required to clarify its positions in “thousands of individual companies” and to make “informed judgments,” Wells Fargo simply can’t account for all the places it puts its clients’ money. This is not exactly reassuring. Still, the argument seems to have served its intended purpose. The proposal only received 6.81 percent support.
The third and by far the most common objection to human rights proposals is simply that the resolution is unnecessary or redundant. We see this argument made again and again in the SEC filings: the company already has a human rights framework or a code of conduct in place; the proposal, as one Chevron filing says, would “merely duplicate…current efforts” – an “unnecessary and inefficient use” of company resources.
Chevron has The Chevron Way. Caterpillar has its Worldwide Code of Conduct. ADM “believes that our company’s Business Code of Conduct and Ethics and our existing business practices address the substantive areas covered by the proposal.” Coke and Motorola say that when it comes to human rights, they already have it covered. Microsoft “continues to take steps we believe are appropriate” in the area of human rights and requires no additional prodding or cajoling. Citigroup has “implemented best practices regarding human rights,” so “a report concerning the company’s investment policies with respect to human rights issues would provide no meaningful benefit” to shareholders.
So much for scrutiny. In nearly every response to human rights resolutions, we are asked to believe that the company’s good faith, code of conduct and current efforts will be sufficient. Over and over again, companies assert against human rights proponents that they are perfectly capable of monitoring themselves and governing their own behavior. They have already incorporated existing human rights frameworks, such as the non-binding UN/Ruggie framework, into their deliberations, or developed their own codes of conduct with reference to those frameworks. Additional human rights reporting would be meaningless and probably just interfere with business operations. What could a report possibly turn up, these companies ask, that we ourselves have not already seen?
Call it arrogance, but these Fortune 100 companies are now confidently asserting their own human rights competence. They refuse to be held accountable because in their own estimation they are already socially responsible.