From Vaccine Distribution to Climate Change... US Shareholder Proposals Flood in Ahead of Annual Meeting Season

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] From the distribution of COVID-19 vaccines to climate change issues, shareholder proposals emphasizing environmental and social values are pouring in during the annual shareholder meeting season in the U.S. from April to June. As voices grow louder that companies should fulfill their social responsibilities beyond their basic purpose of generating profits, shareholders are increasingly expressing their opinions.

On the 17th (local time), The Economist, citing the U.S. Sustainable Investment Institute (SII), reported that the number of ESG (Environmental, Social, and Governance)-related shareholder proposals by U.S. companies reached 576 as of the 12th, an increase of more than 15% compared to 499 last year, marking an all-time high. Climate-related proposals increased by 42% compared to last year.

Shareholder proposals grant shareholders holding a certain amount of stock the right to propose agenda items at shareholder meetings to strengthen active management participation and oversight. Notably, at the annual shareholder meetings of pharmaceutical companies Johnson & Johnson, Moderna, and Pfizer, scheduled for the 28th of this month, a vote will be held on expanding access to COVID-19 vaccines, a proposal put forward by the international relief and development organization Oxfam. Next month, the world's largest e-commerce company Amazon will have a proposal from the New York State Common Retirement Fund to audit its racial equality policies on the agenda of its annual shareholder meeting. Fast-food chain McDonald's and U.S. grocery company Kroger will discuss improving pig farming conditions at their annual meetings, based on shareholder proposals from Carl Icahn, a prominent activist investor on Wall Street.

As seen in these cases, shareholder proposals differ from the past simple approach of buying shares to pressure management for corporate governance or profit increases. This is because voices emphasizing environmental and social values are gradually growing stronger. Although many shareholder proposals fail to pass, the proportion of approval votes has been steadily increasing over the years. Of the 185 environmental and social shareholder proposals submitted last year, the average approval rate was 34%, a significant rise from about 19% ten years ago. Environmental-related shareholder proposals recorded an average approval rate exceeding 50%.

The Economist stated, "These shareholder proposal cases signify that the battle over corporate purpose in the U.S. has moved to the next stage," adding, "Management, which has supported shareholder value with measures beyond corporate profits or cash flow, is now being put to the test."

As shareholder proposals flood in, the importance of shareholders' voting rights has increased. The Economist analyzed that the growing shareholding of large asset management firms such as BlackRock, Vanguard, and State Street has made their votes crucial. According to Bloomberg data, the average shareholding of these three asset managers in S&P 500 companies was 22% last year, an increase of 13.5% compared to 2008.

These asset managers have recognized the importance of understanding systemic risks since the global financial crisis and are now more actively voicing their opinions than before. Additionally, small investors can more easily pass shareholder proposals by partnering with large asset managers, and the skill of drafting proposals is improving, The Economist reported.

This content was produced with the assistance of AI translation services.