Letter from ESG Institutional Investors Opposing the Business Roundtable Curbing Shareholder Resolutions

“Ethical Markets fully supports this Letter opposing the short-sighted efforts of the Business Roundtable (BRT) to  suppress shareholders ESG Resolution.  Large support for such innovative Resolution on disclosure of ESG and Climate risks at Exxon Mobil and Occidental Petroleum in the above 60% range,  have no doubt, rattled fossilized BRT members!

 Yet the acceleration of green economy sectors’ growth is now unstoppable, as we indicated in our 2017 Green Transition Scoreboard ®

“Deepening Green Finance” (free download at www.ethicalmarkets.com ), as well as confirmed in The Economist, Financial Times and Bloomberg.  Fossilized companies must now face facts:  decisions by automobile companies to cease production of fossil-fueled cars and France’s new phase out  on their sale, as well as the growing market share of electric vehicles, and availability of solar-powered EV charging stations like those purchased by New York City from Envision Solar, address drivers’ “range anxiety”, along with better batteries.  All this will being to flatten global demand for petroleum, as we report.

~Hazel Henderson, Editor”

For Full Disclosure, I am an investor in Envision Solar

Dear Mr. Bolton:

We are writing to express the deep concerns of numerous investors regarding the Business Roundtable’s active campaign to effectively end the ability of most investors to file shareholder resolutions for a vote at corporate annual general meetings.

Earlier this year, the Business Roundtable (BRT) sent a letter to the Trump Administration highlighting sixteen regulations that the organization thought were “of most concern” to its members, noting that the regulations “directly and negatively impact economic growth.”   One of those was the shareholder proposal process, characterized by BRT as permitting “activist investors with insignificant stakes in public companies [to] make shareholder proposals that pursue social or political agendas unrelated to the interests of the shareholders as a whole.”  The BRT also issued a statement after the House’s passage of the Financial CHOICE Act highlighting your support for the Act’s proposed revisions to Rule 14a-8. We believe the rule plays a unique and positive role in addressing a wide range of long-term risks and opportunities in the business community.

The BRT’s proposal to eviscerate shareholders’ ability to file resolutions is founded upon a number of inaccuracies and false assumptions. We urge you to review the premises on which this proposal is based.

Shareholder proposals are routinely sponsored by prominent fiduciaries like the public pension plans of California, New York State, New York City, and Connecticut; foundations; labor funds; faith-based institutional investors; and SEC-registered investment advisers, including mutual fund and other asset managers. Dismissing these institutions as “activist investors with insignificant stakes” is factually incorrect and disrespectful. These are fiduciaries, acting to address long-term risks on behalf of their clients, participants and beneficiaries.

BRT’s statement that shareholder resolution sponsors pursue “social or political agendas unrelated to the interests of the shareholders as a whole” is directly at odds with numerous public statements and commitments made by your own corporate members that recognize the strong link between business success and social and environmental sustainability.

In the vast majority of cases, shareholders file proposals with companies to encourage better performance in areas that contribute to long-term shareholder value. Numerous resolutions now gamer majority

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support  and many  get votes  in the 30-50  percent  range,  demonstrating   that these  issues resonate  with shareholders   who see them  as in “their  interest”  and worthy  of support.

Several  other points  are noteworthy:


  • Resolutions  receiving  a low vote  often  stimulate  a meaningful  discussion  within  a company  and may build  momentum  in subsequent  years  as investors  gain insight  into the importance  of these emerging  issues.
  • Some individual  investors  with modest  holdings  propose  resolutions  that often gamer  majority  or significant  votes.
  • Each proxy season,   a substantial  percentage  of proposals  are withdrawn  because  companies  and proponents  are able to reach  agreements,   an indication  that corporate  leaders  view these topics  as worthy  of consideration.
  • The vast majority of shareholder  proposals  are non-binding.    They communicate   shareholder concerns,  but do not oblige the companies  to take specific  actions.


Most  shareholder   proposals  present  a strong  business  rationale.  For instance,  one governance  topic,  board diversity,  has been a popular  focus  of shareholder  proposals  over the past two decades.   There  is a substantial   and growing  body of literature  showing  that diverse  boards  make better  decisions,  and are value  enhancing  for investors.   Examples  include  research  by Credit  Suisse, Morgan  Stanley,  McKinsey, and numerous  academic  institutions.   Shareholder  proposals  often played  an important  role in encouraging   companies  to review their board  composition   and increase  board diversity.

Another  frequent  topic  is reporting  on and managing  risks related  to climate  change,   which  accounted  for approximately   69 resolutions  filed in 2017, according  to the law firm Gibson,   Dunn  & Crutcher.’  The costs to the global economy of ignoring the possibility of catastrophic climate change run into the trillions of dollars according to sources like Ernst & Young and the London School of Economics.  That will

affect the fortunes of countless companies and their investors if not addressed effectively.  Companies

that are leaders in assessing and managing climate risks outperformed their peers substantially, according to a report by Bloomberg.  Investors clearly expressed the financial relevance of this issue through recent votes on shareholder proposals addressing climate change at Occidental Petroleum and ExxonMobil, which received 67 percent and 62 percent of the vote, respectively.

Similar resolutions on climate change that were filed at approximately one dozen other companies also received high shareholder support levels. According to Gibson Dunn, proposals asking companies to “review and report on climate related risks” averaged 46 percent support, and proposals seeking a review and report on greenhouse gas emissions averaged 30 percent according to EY.

Moreover, the Financial Stability Board’s Task Force on Climate Related Disclosures just issued its recommendations, which were endorsed by the CEOs of Bank of America, Citigroup, JetBlue Airways, Johnson Controls, PepsiCo and many other leading corporations and investors.

1  Note these are figures used in a June 29 memo from Gibson Dunn which relies on ISS data for its analysis. Si2, a respected source of information  on social and environmental  issues believes ISS undercounted the total since they missed counting resolutions that were filed but withdrawn  early in light of agreements.

These  examples  underscore   our point that the shareholder   resolution  process  cannot  and should  not be dismissed  as driven  by special  interest  shareholders   with no financial  stakes  in the market.

Furthermore,   companies   are not being overburdened   by a flood  of shareholder  resolutions.   There  are approximately   4,300  publicly  traded  companies  on the U.S. exchanges  and in 2017 Gibson  Dunn estimates  there were  about  830 proposals  filed, of which  less than 440 went to a vote.  Since many companies  receive  more than  one resolution,  a significant  majority  of companies  did not receive  any shareholder  resolutions.

We are encouraged   by the increasing  conviction  on the part of the business  community  that leadership  in sustainability   is good for long-term  financial  value.  We believe  that the shareholder  resolution  process  has contributed  positively   in this regard.   Thousands  of companies:



  • Report  on their sustainability   and corporate  responsibility   programs;
  • Have adopted  proxy  access  bylaw  provisions,   allowing  investor  nominees  to the board to appear on the proxy  statement  alongside  the board’s    own nominees;
  • Promote  diversity  programs  and commit  to non-discrimination    in employment;
  • Publicly disclose  greenhouse  gas emissions  and their plans to reduce  emissions  as a contribution to combatting   climate  change.


Measures  such as these  are associated  with financial  outperformance   as well.  There  are hundreds  of academic  and financial  studies  supporting  this point.   For instance,  Bank  of America’s   December  2016 report concludes  that ESG metrics  are “strong  indicators  of future  volatility,   earnings  risk, price  declines and bankruptcies.t’i     A meta-study’   that incorporated  the results  of more than 2,000 academic  papers noted that approximately   90% of the studies  reviewed  concluded  that the relationship   between  corporate financial  performance   and corporate  performance   on sustainability   metrics  was either positive  or insignificant,   meaning  that sustainability   was rarely  found  to be associated  with poor financial performance,   and often  found to be associated  with  outperformance.

Hence,  we are perplexed  as to why the Business  Roundtable   supports  changes  that essentially  eliminate this fundamental   right for all but the very largest  shareholders,   who have never submitted  proposals. While  the BRT states that this is a “member  priority,”  this  is not the message  we have been hearing  from

your members.  To the contrary,  numerous  companies   in the BRT  engage  constructively  with  investors  on many of these  issues,  often prompted  by shareholder  resolutions  that get withdrawn  before  going to a

2  Bank of America Merrill  Lynch, “ESG: good companies can make good stocks,” Equity Strategy Focus Point, 18

December 2016,

https://www.bofaml.com/content/dam/boamlimages/documents/articles/lD17           0028/equitystrategyfocuspoint    e

3 Gunnar Friede, limo  Busch and Alexander Bassen,”ESG and financial performance:  aggregated evidence from more than 2000 empirical studies,” Journal of Sustainable Finance & Investment, 15 December 2015, http://www.  ta ndfonli ne.com/doi/pdf/10.1080/20430795.2015.  l 118917.

vote. JP Morgan  Chase,  for example,  hired  its first Director  of Environmental   Affairs  and adopted  a comprehensive   set of environmental   policies  in response  to a shareholder  proposal.

We recognize  that many  of your members  who are the recipients  of shareholder  resolutions  would welcome  revisions  to Rule  14a-8.  But they are not champions  of a campaign  to essentially  quash a vehicle  that has a decades-long   track record  promoting  constructive   engagement  with  shareholders.

Furthermore,   the proposed  changes  to the shareholder  resolution  process  would  dramatically  diminish  the resilience  of American  capitalism  by shielding  corporate  boards  from fresh ideas that,  with few

exceptions,   relate to emerging,   long-term  risks.  The BRT proposal  would  also deprive  most shareholders

of the ability  to communicate   effectively  with boards,  undermining   directors’   ability  to carry out their fiduciary  duties.

We urge the BRT to end this campaign,  including  your support  of the CHOICE  Act section  on

shareholder  resolutions,   and join  in a dialogue  with  investors  to better  understand   our perspectives  on the very positive  role shareholder  resolutions  play in the corporate  governance  process.   We are also copying leading  investors  and investor  organizations   that are working  to protect  this important  shareholder  right. We look forward  to discussing  this with you .



Timothy Smith

Senior Vice President

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Julie Fox Gorte, Ph.D                                 1

Senior Vice President for Sustainable Investing

Pax World Management LLC



Director of Corporate Engagement and Public Policy

Domini Impact Investments LLC



Cc:       Ken Bertsch, CII Fiona Reynolds, PRI Lisa Woll, USSIF Josh Zinner, ICCR Mindy Lubber, Ceres