Tag Archives: shareholder activism

A good idea, and just in time for proxy season

This is a good idea, and the 2017 proxy season is the time for shareholders to act on it.

As Eliza Newlin Carney points out today in The American Prospect, “a long list of fossil fuels and mining companies support the Cardin-Lugar rule, including BHP Billiton, BP, Kosmos Energy, and Shell, whose executives say it promotes good governance, creates a level playing field, and is in the best interests of American companies.” (Notably, Exxon, under CEO Rex Tillerson, who is now our Secretary of State, lobbied against the rule.)

A shareholder resolution requiring disclosure of payments to foreign governments would simply ask companies to continue doing what they were previously required to do under section 1504 of Dodd-Frank.

Quakers vs. Bankers

Earth Quaker Action PNC Bank

This story from The Pittsburgh Post-Gazette could almost serve as a postscript to what I had to say yesterday about shareholder engagement and the value of face-to-face dialogue.

On Tuesday, PNC Bank Chairman and CEO James Rohr abruptly shut down the annual shareholders meeting at the August Wilson Center in Pittsburgh. He was still delivering his opening remarks when protesters from the Earth Quaker Action Team started calling out the names of individual board members and “asking them to state their position on mountaintop mining.” Rohr’s response? He called the protesters (who are, let’s not forget, PNC shareholders) “out of order, cut short his prepared remarks, played a brief video and adjourned the proceeding roughly 15 minutes after it began.”


An image from the Google Earth Appalachian Mountain Top Removal Tour, created by Appalachian Voices.

According to Earth Quaker, PNC is “one of the nation’s two largest financiers of mountaintop coal mining,” and the Bank had met earlier demands to divest from companies doing mountaintop removal with equivocation, saying it “no longer financed companies with a majority of their business tied to the practice.” The bank failed to add — in a curious omission — that there are no companies with a majority of the business tied to the destructive practice.

George Lakey, one of the Earth Quaker Action members present at the meeting, describes on the Earth Quake Action blog why he and his fellow share-owning Quakers had “decided to break the rules”:

Twice before Earth Quaker Action Team members had gone to the annual shareholders meeting of PNC Bank and obeyed their rules, spoken out during the allotted time in the meeting, expressed our concern about PNC’s large role in mountaintop removal coal mining and the climate crisis. We’d supported people from Appalachia to be there, speaking to PNC’s board about the injury and death that stems from PNC’s choice to put profits first. We’d brought the eighty-year-old grandson of one of PNC’s founders to tell them an evil banking practice was not what his grandpa had in mind.

We even walked 200 miles across Pennsylvania, witnessing in PNC bank branches along the way, to lift up to Pennsylvanians the full reality of the “green bank” that “helps children grow up great.”

But to no avail. In fact, explained Amy Brimmer, director of Earth Quaker Action to the Gazette reporter, “executives have refused to meet with them.” Why the refusal? Instead of a quiet conversation with a group of Quakers (who are very good at quiet conversation!), Rohr had to contend with shouting and singing and (I would add) an ignominious end to his term as CEO. Lakey continues:

After each board member was addressed by name, we again sang from many parts of the room, “Which side are you on?”

James Rohr threw up his hands and declared the meeting adjourned. Ingrid Lakey began to sing “This little light of mine,” we joined in, and sang joyfully as we slowly left the room along with the other shareholders.

I’m not so sure everybody was singing along. A proposal by Boston Common Asset Management calling on the bank to recognize and report on its response to climate change went down in defeat at the meeting. It’s not as if the hippies were about to take over. The bank’s investments were not at risk. Rohr had nothing to fear, except, perhaps, the truth about PNC’s investments in Appalachian mining.

By Tuesday, it was already too late to remedy the situation. Let’s hope incoming CEO Bill Demchak and the PNC board take the opportunity to set this right.

Can JP Morgan Manage Its Human Rights Risk?

No one questions Jamie Dimon’s competence. It’s just not clear that Mr. Dimon or “any executive,” as the Wall Street Journal put it, “can properly oversee such a large financial institution” as JP Morgan Chase. The complexity of the bank’s balance sheet and the scale and scope of its investments boggle even the best minds. The London Whale losses demonstrate pretty clearly that it’s possible for the bank to overlook, or miss or ignore serious exposure – to do something stupid or sloppy, as Dimon likes to put it. I wonder how many shareholders now wish they could re-cast their vote for an independent chair, to check and govern the CEO; and I wonder, too, how many will question the bank’s claim that it is capable of managing the human rights risk in its portfolio of investments.

As I pointed out in a previous post, most boards reject human rights proposals on three grounds: that they would be restrictive, burdensome, or redundant. The JP Morgan board stuck pretty close to this script in urging shareholders to vote against a resolution for a “genocide-free” investing policy, which would ensure that its investments did not “substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights, and to assist customers in avoiding the inadvertent inclusion of investments in such companies in their portfolios.” (You can read proposal 8 and the board’s response in the proxy statement here [pdf]).

Most immediately at issue are the banks investments in PetroChina and its subsidiary China National Petroleum Corporation, which pose “high risk due to their ties to the Sudanese government and its connection to human rights abuses.” That is not the hyperbolical cry of some outraged human rights advocate, but the sober and clear-eyed assessment of the board at T. Rowe Price; they joined 27 US states, 61 colleges and universities and the European Parliament’s pension fund in their decision to divest from PetroChina. JP Morgan, on the other hand, “increased holdings of PetroChina after being made aware of PetroChina’s connection to genocide,” CNN reports; and this year, again, the board confidently – some might now say arrogantly – asserted its ability to manage human rights risks:

 We use our extensive risk management processes and procedures to consider human rights and other reputational issues associated with our businesses….The Firm has a robust risk management framework…, and management routinely reviews specific business clients and transactions including where appropriate for consistency with our Human Rights Statement.

This year, the board had its way. The “genocide-free” proposal went down in defeat, garnering only 9.2 percent of the vote (which, by the way, means it’s not going away any time soon.) But the losses in London, which could run as high as five billion and will be difficult to unravel, give the lie to the board’s argument that further human rights risk review would be merely redundant. To the contrary, the losses raise serious questions about the bank’s ability to manage risk — of any and every kind. Its much-touted risk management framework does not seem so “robust” as the board makes it out to be. And it appears Ina Drew and crew operated without routine reviews or oversight. How, then, can the bank ensure that its investments in PetroChina and around the world are not exposing investors to other, more serious risks?

I refuse to believe that most investors don’t mind blood on their money; their confidence should be shaken.

As for Jamie Dimon, London harbored his white whale. China may turn out to be his human rights dragon. It’s said that when he first discovered the extent of the losses in London he could not catch his breath. Imagine what might happen if Jamie Dimon really understood the atrocities in Sudan and the part JP Morgan has played in them.