With new signs of shareholder support for governance changes in 2024, companies are waging a bolder fight to block proposals that would require more disclosure on everything from environmental policy to AI.
So far this year, Apple (AAPL), Tyson Foods (TSN), and Applied Materials (AMAT) have rejected proposals to require giant companies to disclose more about diversity, ESG, labor practices, and AI policies.
Exxon (XOM) has been closed down by two activist investor groups, Arjuna Capital and Follow This, after the group tried to hold a shareholder vote on whether the oil giant should disclose its greenhouse gas emissions. is suing.
The Securities and Exchange Commission also watered down new climate risk disclosure rules after companies complained about the cost of aggregating indirect emissions. The chamber filed a petition last week with the Fifth Circuit Court of Appeals to block the SEC-passed rule.
In an election year, political heat around environmental, social, and governance (ESG) concerns and diversity, equity, and inclusion (DEI) policies increases, and we're seeing bolder action by large corporations.
Former President Trump promised to banish ESG “forever,” but his allies called DEI “biased” against white men.
Republican-led states are also taking advantage of a 2023 Supreme Court decision that struck down race-based admissions policies at Harvard University and the University of North Carolina, requiring companies to rescind race-based employee quotas. .
Large asset managers and Wall Street banks, which hold huge stakes in major U.S. companies, are contributing to the pullback.
The latest layoffs came last month when financial giants JPMorgan Chase & Co. (JPM), State Street (STT) and Pimco joined the Climate Change Coalition, a coalition formed in 2017 to encourage companies to cut emissions. This was done when he withdrew from “Action 100+''.
BlackRock (BLK), the world's largest asset manager, also ended its U.S. involvement in the group.
dial back
An important test of these issues is taking place this spring as companies vote on a variety of proposals calling for changes to corporate governance. So far this year, many shareholders are saying no.
Apple shareholders have flatly rejected a series of initiatives centering on ethics and employment, including the AFL-CIO Stock Index Fund, which calls for the iPhone maker to report on how it leverages AI technology in its business operations. AFLCIX) also rejected a proposal to support Labor.
Other failed efforts have required Apple to report more detailed information about racial and gender pay gaps and the evenness of its human rights policies around the world.
Even proposals that sought to protect conservative views from discrimination lacked sufficient support to pass. He would have demanded that Apple disclose the potential risks of omitting “perspective” or “ideology” discrimination in its employment policies.
Lindsey Stewart, director of investment stewardship research at Morningstar, said big money managers who are the largest shareholders of large publicly traded companies are avoiding any proposals that could be seen as activism.
This includes both proposals for and against ESG and DEI type policies.
“Certainly asset managers have become less enthusiastic about supporting these types of proposals in recent years,” Stewart said.
The apparent trend toward less disclosure may indicate that shareholders are growing tired of trying to influence corporate behavior.
As for whether this year will be a statistically significant change, Stewart said, “It's still too early to tell.”
new phase
There have been several other notable corporate wins so far in 2024.
At Tyson Foods, shareholders have voted against a third-party audit to monitor its workforce as the company faces allegations that hiring minors violates U.S. labor law.
At Applied Materials, shareholders of the semiconductor materials maker voted against a proposal to report quantitative median and adjusted racial and gender pay gaps.
So far this year, one greenhouse gas emissions proposal has won shareholder approval, according to ISS-Corporate. It took place at Jack in the Box (JACK), where 56% of shareholders voted to require disclosure of emissions reduction targets.
There are other possible explanations for the decline in support. That's as new reporting requirements from regulators and U.S. exchanges begin to satisfy investors.
Over the past decade, many new regulations have been passed that require more information from businesses. In 2020, the SEC expanded its human capital disclosure rules to require companies to disclose the risks and resources associated with their number of employees.
The following year, in 2021, the SEC made it easier for investors to list climate change and social issues on companies' ballots, while Nasdaq required publicly traded companies to disclose diversity.
Starting in 2025, the SEC's new climate regulations will require companies to disclose their carbon emissions to help investors assess how climate change will affect their bottom lines.
“These regulations and standards are starting to be affected,” Stewart said. [shareholders] There are actual requirements that encourage companies to make those types of disclosures, so companies no longer feel the need to push as hard. ”
Regardless of the reason, overall support for ESG-focused resolutions has declined and is likely to continue, according to a recent Morningstar analysis.
“I think we're moving from the proactive side of investors to writing regulations and standards,” Stewart said.
Alexis Keenan is a legal reporter at Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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