Thanks to Sr. Ruth Schaaf, O.P. who sent this headline our way: Nun Funds: The Original Impact Investors. The article recounts the origins of what we know today as impact investing. Reading the article, one can only come away impressed with these women who have invested and multiplied the talents (Matthew 25:14–30).
When we saw a recent article (Wisconsin groups to get $12M settlement for natural gas price fixing) from the La Crosse Tribune quoting Sr. Sue Ernster, FSPA, we wanted to bring it to the attention of our SGI members. Sr. Sue adds:
FSPA participated in the lawsuit of the manipulation of natural gas pricing by multiple utilities as another way of how we live out our social justice activities and our values. We see this as an effort to help those whose voices are not represented in this and other situations. We are utilizing the resources we have at our disposal to hold those accountable who were responsible for this price manipulation.
Our hope is that participating in litigation settlements such as these, as well as filing shareholder resolutions with companies, demonstrates that people are paying attention, asking questions and holding them accountable for their actions.
The Seventh Generation Interfaith Board of Directors elected new officers for the 2018 calendar year. Dan Tretow (School Sisters of St. Francis), formally Treasurer, has stepped up to become President. Sister Sue Ernster (Franciscan Sisters of Perpetual Adoration) was elected to take the Treasurer position and Peg Groth (Sisters of the Sorrowful Mother) has agreed to serve as Secretary. The Officers deal with the administrative duties of the coalition and act as a sounding board for the staff. The membership is grateful for these volunteers for their service on behalf of the membership. Please join me in congratulating our new Officers.
The Board is thankful to Mark Peters (Priests of the Secret Heart) and Sr. Ruth Geraets (Presentation Sisters, Aberdeen, SD) who served as President and Secretary for the past two years for their service and commitment to bring good news to the poor.
Frank Sherman, executive director of SGI, wrote this post.
Today, the ICCR published a press release about resolutions filed with five U.S. pharmaceutical companies. SGI members are co-filers on each of the five resolutions. These resolutions are important components of SGI’s activity this year in health. The resolutions can be described as tools to gain insight into how executive compensation aligns with the values, vision, and business strategy of the companies.
This post will be updated with media coverage:
- Bloomberg: Big Pharma Is Urged to Report on Links Between Pricing and Pay
- FiercePharma: Do pharma’s executive pay plans push up drug prices? Investors want to know
The press release is shared in full below.
Investors say executive pay packages at pharma may incentivize drug pricing risks
In resolutions at five U.S. drug makers, investors request a review of compensation policies that may drive senior execs to ignore the long-term business risks of skyrocketing drug costs.
NEW YORK, NY, Wednesday, December 13, 2017 – Investors today announced they have filed resolutions at five major pharmaceutical companies asking for information about how well executive pay incentives mitigate long-term financial risks associated with mounting public concerns over the affordability of prescription medicines.
The investors are all members of the Interfaith Center on Corporate Responsibility (ICCR), a shareholder coalition that has been engaging the pharma sector for decades on drug access and affordability. In the resolutions, the investors argue that an executive compensation incentive program reliant on revenue growth solely from drug price increases is a risky and unsustainable strategy.
The resolution specifically requests a report on the extent to which risks related to public concern over drug pricing strategies are reflected in executive compensation policies, plans and programs. Read the full resolution text here. The five companies receiving the resolutions are Abbvie, Amgen, Biogen, Bristol Myers Squibb, and Eli Lilly. ICCR members also filed a separate but similar resolution at Pfizer and Vertex requesting a report on the business risks from rising pressure to contain U.S. prescription drug prices.
“As investors in these companies, we are concerned that misaligned incentive pay may encourage executives to sacrifice long-term, organic growth from drug discovery for short-term, ‘quick fix’ strategies that may pose business risks,” said Meredith Miller of the UAW Retiree Medical Benefits Trust.
Public anxiety over drug prices has soared in recent years as millions of Americans struggle to afford the essential medicines needed to maintain their health. Scandals over excessive price hikes at several pharma companies have made the pharma industry the target of Congressional hearings, law suits, denials of coverage from insurers and ballot initiatives in several states which would force manufacturers to negotiate the prices of key medicines with government agencies such as Medicare and Medicaid.
Against this backdrop, the investors say, companies need to prove to their investors and to the public that they are doing everything possible to control drug prices in order to manage business and brand risk. The investors view executive incentive programs as a governance tool designed to ensure adequate oversight of risk and alignment of corporate strategies with mission.
Said Donna Meyer of Mercy Investment Services, “The increased scrutiny around drug pricing and how it is being managed by pharma management has had reputational consequences for the entire industry. Our resolution request is very straightforward: an evaluation of how these concerns are being integrated into corporate governance structures. To the degree that executive incentives reflect a company’s mission and growth strategies, this is clearly a critical and material issue for investors.”
“Our goal is to better understand what oversight these pharmaceutical company boards are exercising when executive incentives are tied so closely to profits,” said Cathy Rowan, who represents Trinity Health as a member of ICCR. “When these profits appear to be derived wholly from price hikes, it raises concerns among those of us who care about access to, and the affordability of, medicines — particularly for vulnerable populations like women, children and seniors.”
Investors are expected to vote on the resolutions at each company’s 2018 annual meeting of shareholders.
During our November member meeting, we announced our plan to conduct quarterly webinars to educate SGI Members on ICCR issues and processes. At the time, we agreed to start with an orientation of ICCR’s and SGI’s websites. We were fortunate to have Julie Wokaty of ICCR join us to give us a tour of ICCR’s website and Chris Cox to do the same for SGI’s website.
We will maintain an index of webinars and links to the recordings on our Resources page.
SGI joined with other investors to express concern about JPMorgan Chase’s financing of private correctional REITs (often referred to as private prison companies) which are receiving growing numbers of contracts to detain immigrants amid the current administration’s immigration policy.
We believe the operations of these companies are at odds with JPMorgan Chase’s robust Environmental and Social Risk Management Framework used to assess lending and advisory relationships, and may contradict the commitment in its Human Rights Statement and “How We Do Business Report.”
As America’s incarcerated and detained populations have boomed in recent years, the business of owning and operating prisons and jails has grown into a multibillion-dollar industry. A 2016 report uncovered which Wall Street banks finance the industry’s two leaders, CoreCivic (formerly “Corrections Corporation of America [CCA]”) and GEO Group. In the report, The Banks That Finance Private Prison Companies, In the Public Interest reveals how these banks profit from providing credit, bonds, and loans to private prison companies. Download report.
At the May 2017 shareholders’ annual meeting, after investors raised concerns about human rights violations in private prisons, JPMorgan Chase CEO Jaime Dimon said: “We will look into the funding of these prisons you’re talking about. I’m not sure we completely agree with you.”
The letter that SGI signed calls for Mr. Dimon to inform investors in writing regarding steps taken to review the relationship with private prison and immigrant detention companies and to arrange a meeting to discuss the matter further.
The Board of the Seventh Generation Interfaith CRI gathered at my mother house, the Franciscan Sisters of Perpetual Adoration, in La Crosse, Wisconsin last month to reflect on both the challenges and opportunities we face and to map a path forward. The day was facilitated by Marlene Weisenbeck, FSPA, with presentations by Frank Sherman, Executive Director of Seventh Generation Interfaith, and Seventh Generation Interfatih Board members Peg Groth and Mark Peters.
Sister Marlene’s opening reflection on the loss of our founder, Fr. Mike Crosby, O.F.M. Cap. was both moving and a spur to “ring the bells that can still be rung,” as Leonard Cohen urged us in his song Anthem. We spent time in breakout groups discussing the external and internal trends impacting our mission and vision. We agreed on a SWOT analysis (strengths, weakness, opportunity and threats), a vision of what success would look like, measurable goals and objectives to get us there, and an understanding of who would be responsible for achieving them. After this discussion, we discerned what would be a possible organizational model and funding strategy to facilitate it.
I found the workshop to be both challenging and energizing. Fr. Mike Crosby left us a 45-year legacy of shareholder engagement. Despite the headwinds of a challenging political environment and the changing demographics of our members, the group came away feeling that this ministry has been a catalyst for change and compelled to continue in Mike’s footsteps to bring good news to the poor and God’s creation. I look forward to working in coalition with other SGI members to ring the bells that can be rung.