Fiduciary Duty Webinar

At the heart of this webinar is the conviction, that the fiduciary duty to act in the best interest of a client does not exclude ESG and socially responsible investing. In addition to addressing common myths, this webinar describes the role and responsibility of a faith-based fiduciary.

On Friday, November 15, we were joined in our quarterly webinar by a leader in the socially responsible investing field: Frank Coleman of Christian Brothers Investment Services (CBIS).

We highly recommend sharing this video with your investment committee and other essential people involved in your investment strategy.

We are very grateful for Frank’s presence in this webinar, for his commitment to work on these issues, and his generosity in sharing his wisdom with us.

As always, we welcome your feedback via a confidential evaluation found here. Slides from the webinar are available via Chris Cox.

SEC’s Proposed New Rules Threaten Shareholder Democracy

Last December, our blog gave an update on efforts by trade associations to restrict shareholder rights .

On Tuesday, November 5, the Securities and Exchange Commission unveiled the exact nature of that threat and voted 3-2 on two separate measures to propose changes to rule 14a-8 that would severely restrict investors’ access to the corporate proxy. The changes would require that:

  • Shareholders own $2,000 worth of company stock for a minimum of three years (up from one) before they can submit a shareholder resolution. They can submit proposals earlier if they own $25,000 for one year and $15,000 for two years. Small shareholders can no longer come together to aggregate their shares to file a resolution.
  • Re-submission vote thresholds were raised from 3%, 6% and 10% for the first three years to 5%, 15% and 25%.
  • Proxy service providers (such as ISS and Glass Lewis) will be required to provide a draft of their proxy advice to companies for comment ahead of issuance. There are several other restrictions on these companies.

These proposed changes are significant threats to our voice as shareholders. They have received significant push-back in the media (Reuters, MarketWatch) and by several investor groups (ICCR, US SIF, CII). “Between the filing threshold increases and the doubling of percentages for resubmissions, it means that smaller investors are going to find it much more difficult to file resolutions,” says Josh Zinner, CEO of ICCR. “It’s a blow against shareholder democracy.”

The 60-day comment period opens once the proposed rule changes are published in the Federal Registrar. Our members are encouraged to sign on to Ceres and ICCR comment letters or, better yet, send in your own comments to the SEC. You should also consider sending letters to your Congressional representatives. Finally, consider submitting op-eds and letters to the editor to your local paper and newsletter stories and blog posts on your websites.

To learn more about the issue and concerns, you read the statements by Commissioner Robert Jackson and Allison Herren. “There is a common theme that unites the two proposals before us today”, said Commissioner Herren. “They both would operate to suppress the exercise of shareholder rights.”

With regards to a second proposed rule change, ISS (Institutional shareholder Services) has filed a lawsuit against the SEC. The final resource is a website, supported by ICCR, that is gathering evidence and sharing reports concerning the shareholder proposal process (Investor Rights Forum).

A lot more to come on these proposals. Please lift your voice in opposition!

The Amazon is on Fire

The Amazon has been a hot topic this year, which is no surprise considering deforestation, including that of the Amazon, is the second largest contributor to climate change. The IPCC recently published a report on Climate Change and Land which identifies the restoring of landscapes and forests as one of the best, most cost-effective, options available to combat the devastating impacts of changing climates. But deforestation is also a leading driver of biodiversity loss, changing rain patterns and human rights abuses.

I attended the ICCR Fall conference session on deforestation where panelists Maria Lusia Mendonca of Rede Social de Justiça e Direitos Humanos, Aditi Sen of Oxfam, and Guarav Madan of Friends of the Earth gave insight on how to address deforestation and its impacts. 

As explained in this National Geographic article on the effects of fires in the Amazon, from earlier this summer, the Amazon absorbs and stores carbon, creates its own rain, provides water for Brazil, Uruguay, Argentina, and Paraguay, and will affect climate change drastically if deforestation and these forest fires continue. The Amazon, as well as many other forests, is usually cleared for soybean growth and cattle farming to ultimately supply many of the companies that SGI members are engaging. Each year, illegal fires are set to clear land for more crops. 

This is a human rights issue as well. According to Amazon Watch: Complicity in Destruction

Brazil is the world’s deadliest country for those defending human rights and the environment, with agribusiness driving killings more than any other industry. Bolsonaro’s violent rhetoric has already been accompanied by a spike in rural violence, particularly against indigenous people and landless activists, emboldening militias controlled by powerful landowners to carry out attacks. His decree to loosen gun ownership in Brazil will almost assuredly aggravate violence, particularly in rural areas. By endorsing violence from major landowners, Bolsonaro fuels the intimidation of community leaders on the front lines of increasingly brutal land conflicts, including prominent indigenous leaders who now fear for their lives.

The New York Declaration on Forests set 2020 as the deadline for eliminating deforestation in the supply chain for agricultural commodities. While 2020 is around the corner, many companies, which have endorsed this effort as well as others, have not been following through on their commitments. Most will not meet their commitment to eliminate deforestation from their supply chains. Whereas some companies are making a concerted effort, others are greenwashing. They sign pledges without actually doing the work to achieve these goals. To show how some companies avoid honest dialogue around these issues, Frank Sherman participated in a role play at the conference with other ICCR members. This demonstrated how to engage companies on deforestation as well as the business responsibility to respect human rights.

A clear point that was made was there needs to be further action on deforestation outside along along with corporate action. There should be a call on public policy, not just on companies to address this issue.

Committed to Fr. Mike’s Legacy in Tobacco

Last week while attending ICCR’s Fall Conference, I attended the regular session on tobacco. As you likely know, Fr. Mike Crosby, O.F.M., Cap., our founder, was an early leader for his shareholder work in tobacco. Our session, in addition to our regular concerns on engagements with the tobacco industry, also included a significant conversation about vaping e-cigarettes.

By way of personal background, my grandmother smoked a pack a day of Pall Mall cigarettes. As a child, I detested the smell. At one point, I decided to leave my suitcase in our car when we would visit, as I did not want my clean clothes to smell of cigarettes. In other words, from early on, I never found smoking attractive. Consequently, I continually find myself surprised at its allure, especially to young people.

In reality, I should not be surprised. The attraction fits an old pattern. We remember the “seven dwarfs” testifying to Congress in 1994 that cigarettes are not addictive, in spite of having evidence to the contrary for decades. With Juul and e-cigarettes, we have a new addition to those archives. While regarded as proprietary information, e-cigarettes are more potent for their concentration of nicotine than cigarettes, according to Vox. In fact, a journal from Stanford University describes it as a “nicotine arms race.” In September, CNBC shared a CDC warning that Juul’s patented nicotine-salt technology allows for much more efficient delivery of nicotine directly to the brain, multiplying its highly addictive effect especially for teens. Hence, it was no surprise when Reuters reported yesterday that Juul disregarded early evidence that teens were becoming addicted. In September, Axios reported that the FDA warned Juul about its misleading advertising. In the face of mounting evidence of the damage caused, the White House planned to ban all flavored e-cigarettes, but the administration recently retreated that to banning all but menthol. Yesterday, the Journal of the American Medical Association published two studies: one on e-cigarette use among U.S. youth and another revealed the flavor preferences among U.S. youth. Simply put, the exclusion of menthol in the ban happens to coincide with the most popular flavor among American youth. Every Thursday, you can visit the website of the Center for Disease Control to see the updated statistics concerning Outbreak of Lung Injury Associated with the Use of E-Cigarette, or Vaping, Products. As of this writing, the CDC counts 1,888 cases of e-cigarette, or vaping, product use associated lung injury (EVALI) and 37 deaths.

We were fortunate to be joined in our session by Meredith Berkman, co-founder of Parents Against Vaping E-cigarettes (PAVE). Berkman and her co-founders were recently featured in the Wall Street Journal: Getting Through to Your Teen About the Dangers of Vaping. She shed some light on the allure to young people. Armed with the various devices and pods, she demonstrated how discreet the products are and how easy they are to use. The PAVE website has a lot of great information.

Simply put, Fr. Mike made advances in this work over the decades, but the fight by no means is finished. For the health of a younger generation, here and abroad, may we have some share of Fr. Mike’s zeal, courage, and wisdom in our engagement with the tobacco industry!

Riverwater Partners Employment Clauses Engagement

By Cindy Bohlen

Chief Mindfulness Officer & Analyst, Riverwater Partners

Riverwater Partners, a Responsible Investment RIA based in Milwaukee, WI, is working in collaboration with Meredith Benton, Whistle Stop Capital, and Molly Betournay, Clean Yield Asset Management, and a few other investors, on an engagement campaign with companies to end the use of Forced Arbitration and Non-Disclosure Agreements in the context of employee harassment and discrimination claims. Riverwater chose to participate in this campaign because we believe the cost and effort to end the use of these tools is insignificant compared to the risks associated with their use, which include human capital costs, legal risk, and brand exposure.

In June, Riverwater sent letters to CEOs and Investor Relations of 24 portfolio companies highlighting said risks, stating that Attorneys General from all 50 states have signed a letter calling for the end of mandatory arbitration in sexual harassment cases, and citing examples of high-profile companies that have ended their use. As of August, we have received responses from eight companies, most indicating they do not use Forced Arbitration/Non-Disclosure Agreements at all. A few with union employees stated that negotiated contracts require certain disputes to be determined by arbitration; given that these terms are negotiated by experts on behalf of the employees, we believe this is fair. In all cases, we are encouraging companies to disclose these policies publicly, as investors have begun to focus on the issue.

Riverwater is in the process of following up with companies that have not yet responded. Our goal is to educate them regarding the risks of using Forced Arbitration and Non-Disclosure Agreements, and to encourage them to either disclose publicly if they are not using such tools, or to end use. We will consider further action, including shareholder resolution, if we deem it appropriate. We welcome participation by others who are concerned about this practice. Please feel free to contact Cindy Bohlen of Riverwater at cbohlen@riverwaterllc.com with interest.

Note from SGI: Efforts like this to end mandatory arbitration of sexual harassment claims help to put a stop to the culture of silence that protects perpetrators at the cost of their victims. We salute Cindy for her participation in this important work.

My Visit to South Texas Family Residential Center in Dilley

By Mark Peters

Director of Justice, Peace and Reconciliation, Priests of the Sacred Heart

The August 25 Washington Post ran a story about the South Texas Family Residential Center in Dilley, Texas, the largest of three in the U.S. specifically dedicated to the holding of mothers and children.  Opened to reporters for the first time, the center was described by reporter Maria Sachetti as clean and well-equipped, very different from the images we’ve all seen of kids in pens at the border. 

I can confirm her story – I was there two weeks earlier and saw everything she described:

…a dental office, with a reclining chair and sterile instruments… cafeteria serving hot dogs, lime-cilantro chicken, tortillas and green salad — all you can eat… Kindergartners [singing] “If You’re Happy and You Know It…” access to a wide array of services, including a 24-hour infirmary, a day care, a library with Internet and email access, a beauty salon, a charter school and a canteen.

I’d been asked by SGI to take part in a tour of the Dilley facility and sit in on a dialogue of ICCR members with CoreCivic, the private corporation that runs Dilley and is one of the “big two” in that field, along with GEO Group.  At one time they were in dialogue with GEO, but the company had “paused” that conversation. (In fact the CEO had suggested they sell their shares and leave them alone!

CoreCivic has been a more willing partner, and after the dialogue I sat in on later that afternoon after the tour of the detention facility, the ICCR delegation saw signs for hope that human rights were getting needed attention.  But one has to wonder what an organization like Catholic Charities could do with the money CC is getting to run this camp, whether it’s full or not (surprisingly it never has been and often is way under its 2400 bed capacity).  The director told us he had “no idea” how Customs and Border Patrol and ICE decide who to send and not – mothers have reported an almost “eenie-meenie-minee-moe” approach at the border.

The Post reporter’s story is excellent in my opinion, and I encourage you to read it.  I especially call attention to her explanation of the Flores Agreement and the impact the Administration’s plan to nullify it would have on the length of time families are forced to stay in these camps (in a “vast stretch of scrubland in a tiny former oil-boom town, an hour south of San Antonio”), where the temperatures are often above 100 degrees and people generally don’t leave their air-conditioned pods.

The women who’ve left and were interviewed by Sachetti all agreed that, while “far better than the Border Patrol holding cells or the safe houses they stayed in during their trip through Mexico,” they still considered Dilley a jail.  Most currently stay less than the 20 day Flores limit, but if Flores is negated stays are expected to go to 3 times that and could legally be unlimited.  What will it do to the admittedly good morale (for the circumstances and relative to the trauma they’ve just passed through) we witnessed if that becomes the case.  We need to be telling Congress to keep the Flores Agreement!

I and the others were very surprised by what we saw in Dilley and relieved to know that not every detention facility is as bad as the worst of them (I can only vouch for this one, but I would also have to say that we all felt it was not “staged,” that we were seeing normal life there).  The next day, we heard a group that provides pro bono legal services say that residents were not being allowed to see them without an appointment, which should be their right, but we weren’t able to ask the CoreCivic official about that.  Follow-up is planned.  I’m grateful to SGI and ICCR for the opportunity to participate in this visit and commend the dialogue team for their dogged efforts to ensure that human rights are not trampled.  Perhaps what we saw would not have been that way without the efforts of them and so many others to let government and business know we are watching.

On opioids, shareholders spoke, companies begin to listen

Since 2017, SGI has participated in Investors for Opioid Accountability (IOA). This week, the IOA released a two-year progress report detailing landmark agreements with 20 opioid manufacturers, distributors and retail pharmacies implicated in the crisis. 

Between headlines about Democratic debates and Washington feuds, news about lawsuits and proposed settlements have drawn some attention this week. Steadily and purposefully, the IOA has dug down into the crisis and sought ways to address it as shareholders. Specifically, the IOA has engaged opioid manufacturers, distributors, retail pharmacies, and manufacturers of drug treatments.

A few important things to note from the report:

  • A majority (52%) of shareholder proposals led to agreements with the companies;
  • Of the shareholder resolutions filed, seven resolutions at Rite Aid, Walgreens, Mallinckrodt, Mylan, and Assertio Therapeutics received majority votes and an additional two resolutions received majority support at AmerisourceBergen from independent voters, leading to reforms;
  • Twelve companies agreed to conduct risk assessments of opioid-related business practices including governance, compliance, compensation and political lobbying and to report these findings publicly. Two of these companies (Cardinal Health and Assertio) established special board-level committees on opioids;
  • Ten companies agreed to adopt misconduct clawback policies  to recoup executive pay, including the public disclosure of the use of the clawback;
  • Three companies agreed to separate their chair and CEO positions (McKesson, Cardinal Health and AmerisourceBergen), and;
  • Two companies agreed to disclose when they adjusted metrics to exclude legal costs when calculating their executive pay awards. 

Established out of heightened concern that opioid company risks both threaten long-term shareholder value and have profound long-term implications for our economy and society, the IOA uniquely represents influential and diverse funds from across the investing universe including faith-based, sustainability, public, and labor funds as well as comptrollers, treasurers and asset managers that are taking swift and decisive actions to hold manufacturers, distributors, and retail pharmacies’ boards accountable for their role in the opioid crisis. The IOA consists of 54 investors with over $4 trillion in assets under management and is co-led by Mercy Investment Services, Inc. and the UAW Retiree Medical Benefits Trust.

If you wonder what difference shareholders can make, this report spells out in particular detail how attentive and deliberate engagement can achieve results. We are proud of our participation in the IOA. We’d urge our members to examine this report. As you do, keep in heart and mind those who have died in this opioid epidemic, those who struggle with addiction today, families devastated by losses, and communities overwhelmed with the human and material cost of this crisis. If you hold shares in companies outlined in the report, we’d welcome the opportunity to facilitate your support of these engagements. Please, contact our staff for more information.

Additional posts concerning the opioid epidemic and SGI’s efforts are found here: