ESG Guidelines

Proxy Impact guidelines are helping to raise the bar for ESG standards on many key issues.

Environmental and Social issues:

Proxy Impact’s in-depth knowledge of shareholder resolutions on environmental and social issues (see Proxy Preview) have led it to overwhelmingly support these resolutions. Environmental and social resolutions generally ask for reports or policy changes. Although they are non-binding they still have the power to change company practices. Climate and energy are the dominant environmental concerns, while political spending and gender issues top the list of social resolutions. Proxy Impact regularly supports the following resolutions.

Climate and energy

This is the largest category of environmental resolutions and a growing number of climate and energy resolutions have received majority votes or 30-40%+ support.
We vote for resolutions that ask companies to report on how they are adapting to climate risks, their alignment with the Paris Accord’s climate goals, the impacts of coal, oil and gas operations, or proposals that call for policy changes to set greenhouse gas emissions reduction targets. We also support proposals that focus on solutions, including resolutions that ask companies to report on their renewable energy and energy efficiency policies.

Environment

We support environmental resolutions that call for reports or policies focused on deforestation, recycling strategies, food waste, water use, and antibiotics in animal feed.

Gender and diversity

Gender and diversity issues have been the fastest growing area of shareholder concern over the last few years. Gender and racial pay gap resolutions ask companies to annually report on their pay data, while workplace and c-suit diversity resolutions ask companies to report on their racial and gender breakdown and diversity programs effectiveness.

Workplace safety

Fair and safe work conditions are the focus of proposals calling for minimum wage reform, sexual orientation anti-discrimination policies, and the elimination of mandatory arbitration and non-disclosure agreements–which have been shown to help cloak sexual harassment incidents. We also support resolutions that focus on accident prevention efforts.

Human rights

South African apartheid was the issue that launched the shareholder advocacy movement 40 years ago and human rights continues to be a major concern. Many of these resolutions are concerned with forced labor and call for human rights assessments in supply chains. Other recent proposals ask for polices to prevent sex trafficking, to respect indigenous people’s rights, to report on conditions in prisons and immigrant detention centers, to stop the sale of assault weapons, and to prevent child sexual exploitation online.

Health

A handful of resolutions ask corporations to report on health issues such as the national opioid epidemic, harmful tobacco additives, and childhood obesity. Other resolutions are concerned about drug pricing and accessibility to medications.

Sustainability

Sustainability reporting has been a perennial issue for many years and hundreds of companies already provide sustainability or corporate social responsibility reports. We also support resolutions that seek to link executive pay to sustainability metrics.

Political spending

For the last decade the largest category of social resolutions is those calling for disclosure of corporate political contributions and lobbying expenditures. This is a long running shareholder campaign that has persuaded several dozen companies, including Wal-Mart, the nation’s largest company, to post their contributions online.

Governance:

The vast majority of proxy votes are on governance issues as board of directors and executive compensation are annual votes on virtually every proxy.

Executive compensation

The astronomical growth of U.S. CEO pay – nearly 1000% over the last few decades – is completely out of line with the growth in the stock market, the GDP, and the cost of living over that same time. That highlights how excessive CEO pay has become and how little it is tied to company performance. CEO compensation is inflated due to a heavy reliance on peer-to-peer compensation comparisons resulting in an endless race to the top, and on compensation that is less reliant on salary and more on stock options and other bonuses.
Our guidelines vote against CEO pay that exceeds the 75th percentile of the company's peer group, as we believe the top 25% to be highly inflated. Other red flags that result in votes against executive comp are long-term incentives not tied to financial performance, tax gross-ups, accelerated vesting of awards upon mergers, and the absence of risk mitigation measures such as stock retention requirements and clawback provisions.

Board diversity

Women hold 10% of corporate board seats at Fortune 500 companies and less than 20% in the S&P 500. Yet studies show that companies with more women on the board outperform those with fewer or no board gender diversity.
Proxy Impact is a member of the Thirty Percent Coalition that has successfully engaged more than 100 companies to add at least one woman to their board.
Our guidelines support resolutions calling for more board diversity and we vote against board nominating committee members if the company has less than 30% board gender diversity or no minority members.

Board accountability

The proxy is primarily a vote about corporate management, and the main item on most proxies is the election of the board of directors. We utilize the proxy to hold the board accountable for its management decisions.
The CEO manages the company and the board oversees and evaluates the CEO and key executives. The board is responsible for determining executive compensation, approving strategic decisions, and to represent the shareholder’s interest.
We vote against CEOs who serve as board chairman, and against non-independent board chairmen (such as former CEOs). We feel that independent oversight of the CEO is needed.
Our board accountability guidelines dictate that any vote against management’s recommendations on such issues as board diversity, executive compensation, auditor ratification, proxy access, or environmental or social issues will result in votes against all members of the appropriate board committee (i.e. nomination, compensation, audit, governance committee, etc.).

Shareholder rights

Proxy Impact strongly supports proxy access and other resolutions that protect or promote shareholder rights. These include proposals that ask for a simple majority vote (as opposed to supermajority votes that require 2/3 to pass), and that one share should equal one vote (conversely we oppose the creation of unequal stock classes). We also support resolutions seeking to eliminate exclusive forum requirements (i.e. shareholders can only file claims against the company in specific courts) as it limits shareholders litigation rights.