A Bumper Crop of Green Proposals

In the 2008 proxy season, more stockholders, including church and investment groups, called on companies to address global warming

By William J. Holstein

Shareholder proposals urging companies to tackle issues of climate change and sustainability gained ground during the 2008 proxy season that's now coming to a conclusion, says Meg Voorhes, head of environmental, social, and governance research at RiskMetrics Group (RMG) in Washington, D.C. But the groups making the proposals were largely religious groups, pension funds, and socially responsible investment firms, not environmental groups, she says. That's surprising: Obviously, they're not environmental groups, but they're pushing an environmental agenda. Here are edited excerpts from a conversation:

How much ground did environmental proposals gain at annual meetings this year?

We don't have final results for 2008 yet, but we have been seeing more support for shareholder proposals raising concerns about social and environmental issues, and particularly how those issues could affect the company's value and reputation. From 2004 to 2007, there was a rise to 32%, up from 7.4%, in shareholder resolutions on social and environmental issues that attracted more than 15% of the shares voted. We consider 15% the minimum threshold for having staying power.

In 2007, the issues that drew the most support from investors were proposals calling for companies to expand or report on their nondiscrimination policies, particularly regarding sexual orientation and identity. That set of issues got average support of 33% last year. In second place were proposals asking companies to report on how sustainable their operations are in terms of labor policies, worker retention, use of resources, and minimizing pollution. Those proposals on average got 28% of votes last year.

Why do proposals that get only 15% of shareholder votes mean anything?

They are certainly a signal to management that a significant bloc of investors have concerns about the issue. Often what happens is that, if a proposal starts getting support levels of 15%, 20%, or 30%, management is amenable the next year to working out an agreement. The proposals tend not to be prescriptive. Rather, the proponents are saying: "Here's an issue we think is very important. We're deferring to you. We'd like you to include this issue in your long-term strategic planning, and we'd like to see evidence of that in a report."

Also, there are the proposals that don't come to a vote because they have been withdrawn by proponents after they've achieved agreements with management.

On purely environmental issues, was shareholder pressure on ExxonMobil's (XOM) environmental and energy policies the highlight of the season?

I would say so. We had a resolution from a coalition of religious investors and socially responsible investment firms. The Sisters of St. Dominic in Caldwell, N.J., were the lead filers on the proposal asking Exxon to set goals for greenhouse gas reduction. That proposal got 31% support, which is about what it got last year. But another proposal was refiled this year by an individual asking Exxon to develop renewable energy alternatives. That is striking because it got 27.4% support, and last year it got a mere 7.3% support.

Overall, what's happening to the number of social and environmental resolutions being filed?

More than 390 proposals have been filed [on these issues] for this year's annual meetings, which is a record. Last year, 380 shareholder proposals were filed, and 367 the year before. We're seeing a steady increase in proposals and an uptick in support across the board for them.

Aside from Exxon, what are the hottest social and environmental issues this year?

Climate change is definitely the leading issue. More than 50 proposals asked companies to take action and step up their thinking about climate change. The next category is to seek better disclosure and governance of companies' political contributions.