SEC’s rule changes set back transparency and shareholder voice

Today, the SEC approved in a 3-2 party-line vote new rules that severely restrict shareholders’ access to the corporate proxy by limiting the filing of resolutions. These new rules are a consequence of lobbying by powerful industry trade associations that have sought to limit shareholder engagement with corporations on critical environmental, social, and governance issues.

The shareholder resolution process, governed by the SEC’s Rule 14a-8, has been effective for decades and has allowed smaller shareholders who had held at least $2,000 of shares for over one year to file proposals asking companies to consider non-binding proposals that may raise questions of environmental and social impacts of corporate policies and practices, or governance best practices.

Today’s new rules will significantly limit investors’ ability to submit these proposals. The new rules raise the thresholds of ownership both in terms of the number of shares and length of time they must be held. Under the new rule, new purchasers of stock must hold $25,000 in shares for at least a year, or hold $2,000 in shares for at least three years.

As well, the new rules make it much more difficult to refile a proposal that has been voted on. The prior rule required 3% support on a first-year vote, 6% on a second vote, and 10% on a third vote to keep a proposal before a company’s shareholders. Now resubmission will require 5% on a first vote, 15% on a second vote and 25% on a third vote. Emerging issues will be much more difficult to bring to the proxy.

SGI’s executive director, Frank Sherman said, “The choice to approve the new rule aims to fix something that is not broken. A half-century of evidence shows that shareholders have an important voice that companies need to hear. Pioneers like Fr. Mike Crosby have helped companies pay attention to environmental, social, and governance concerns that they were missing. To the detriment of U.S. companies, this rule restricts that important voice.”

In a press release, ICCR executive director, Josh Zinner said: “The new rule guts the existing shareholder proposal process, which has long served as a cost-effective way for shareholders to communicate their priorities and concerns to management, with little economic analysis supporting the needs for these substantial changes. The new rules appear to be based on a wholly unsupported assumption that shareholder proposals are simply a burden to companies with no benefits for companies or non-proponent investors when there is 50 years of evidence to the contrary.”

Over many decades, the shareholder proposal process has served as an efficient way for corporate management and boards to gain a better understanding of shareholder priorities and concerns, particularly those of longer-term shareholders concerned about the long-term value of the companies that they own.  Engagement by shareholders has served as a crucial “early warning system” for companies to identify emerging risks and there are hundreds of examples of companies changing their policies and practices in light of productive engagement with shareowners.

For more information:

  • ICCR’s press release can be found here.
  • Joint letter from investor groups regarding the shifting interpretation of 14a-8 No-Action Challenges can be found here.
  • Case Studies showing the impact of the new rules on shareholder engagement can be found here.
  • For more information on the history of comments submitted to the SEC regarding these rule changes visit ICCR and Shareholder Rights Group
  • See also SEC’s Proposed New Rules Threaten Shareholder Democracy
  • See as well SGI’s formal comment submission to the SEC here.

Just Transition to Clean Energy: A Virtual Conference

Seventh Generation’s 2020 Conference will look a little different than years past. 

Rather than a member meeting of networking, a panel of speakers on stage, and members, colleagues, educators, investors, advisors, and friends, we’re preparing for a virtual panel discussion, donning the style of a “Brady Bunch” title screen we all have been experiencing these past few months. 

The year, 2020, marks 50 years since the first Earth Day, and we are grappling with the effects of the climate crisis. At present, and in years past, SGI members urge utilities, among other companies, to publish decarbonization plans that meet Science-Based Targets (SBT) aiming to limit global warming to 1.5 degrees celsius. Without corporate action, this is seemingly impossible. Moving towards a low-carbon economy presents new challenges on technology and the workforce.  

This year’s annual conference: Just Transition to Clean Energy will take place virtually on October 12th, 2020. 

Joining us to take on the questions of “what is a Just Transition?,” and “what does it mean for energy providers, employees, consumers, and investors?,” are:

These expert panelists will bring a unique set of experiences and remarks, challenging each other, and us, on the path to achieving a Just Transition. A social issue as much as a technology, climate’s intersection with human work becomes more apparent in the energy sector as the push towards electrification grows. We are lucky to have this great panel lined up for this event, and we look forward to learning all we can from them! 

It would be hard to hold this conference and not mention the impacts of COVID-19 on all those affected. While we hope our virtual conference allows for the inclusion of those previously unable to attend, we hope all are staying safe and healthy amid this pandemic.

If you are interested in attending, and haven’t previously registered, please do so here.

The webinar link and information will be sent out via Eventbrite prior to the conference date. 

Sr. Ruth Geraets, PBVM to receive SGI’s 2020 Fr. Mike Crosby Award

Sr. Ruth Geraets, P.B.V.M.

The Board of Seventh Generation Interfaith coalition is pleased to announce that Sister Ruth Geraets of the Sisters of the Presentation of the Blessed Virgin Mary of Aberdeen, SD has been selected to receive the 2020 Fr. Mike Crosby Award. The award will be presented at the SGI member meeting on October 12. The Fr. Mike Crosby Award recognizes a person who has promoted a more just and sustainable world and exemplifies the passion and commitment of our founder, Michael Crosby, O.F.M., Cap.

“We are so happy to honor my dear friend Sister Ruth”, said SGI Board Chair Dan Tretow. “She worked closely with the SGI staff and other members in engaging several companies to operate more just and sustainably.”

“Ruth’s dedication to those most vulnerable guides her shareholder advocacy”, added Frank Sherman, SGI Executive Director. “At the same time, her cheerful and gracious attitude creates common ground with corporate management. This is why Sister Ruth has been so effective in her work with companies. Father Mike would be very pleased with this well-deserved recognition.”

Sister Ruth entered the Presentation Convent in August 1961. She earned a Bachelor Degree in Elementary Education and Mathematics at Northern State University and went on to obtain a Masters of Arts Degree in Pastoral Studies from the University of St. Thomas, St. Paul, MN. For 21 years, Sister Ruth taught in Catholic Schools in MN and SD. Her ministry then led her to McDowell County, WV, where she worked with Catholic Community Services serving with those made poor as coal companies were leaving the area. Her compassionate heart led her back to South Dakota where she directed shelters for abused and neglected women and children on the Cheyenne River Reservation. She was Coordinator of Formation and Director of Novices 1999-2011. In January 2008, she was appointed Congregational Treasurer, a position she still holds today.

Sister Ruth became involved with SGI in 2008, serving on the Board for the past 6 years. Her Presentation Congregation has a particular interest in Care of the Earth and the Rights of Women and Children.

Please join us in congratulating Sister Ruth.

Chevron Investors Call for Climate Disclosure

This is the first of a series on the 2020 shareholder meetings

Chevron Corp.’s busy annual shareholder meeting this year featured seven shareholder proposals, on topics ranging from lobbying, climate, and human rights. Cindy Bohlen of Riverwater Investments and Mary Minette of Mercy Investment Services co-filed the human rights proposal led by Sister Nora Nash, OSF, asking the company to provide a report on Chevron’s effectiveness to prevent, mitigate, and remedy human rights impacts of its operations. We were pleased to have received a vote of 17% for a first-year proposal. Other proposals were presented to the company during the AGM by notable figures: Alec Baldwin, Roger Waters, and Jody Williams, which focused on governance issues, and pointed to Chevron’s 50-year involvement (through its acquisition of Texaco) in toxic pollution in Ecuador. 

Another resolution focusing on climate lobbying garnered a 53%, majority vote. The proposal asked the Company for a report explaining how it ensures its lobbying activities are aligned with the Paris climate accord and the goal of limiting global warming. This majority vote agrees with the investor push for companies to be more transparent about their lobbying activities, especially through their membership in trade associations. 

Recent news highlights why this resolution, and this vote, are critical for the Company. Amid the Black Lives Matter protests, news reports tie Chevron to a public affairs firm urging journalists to examine how green groups were claiming solidarity with black protesters while backing policies which would “hurt” minority communities. Naomi Oreskes, a Harvard University history professor and the co-author of “Merchants of Doubt” said that it is “remarkable that the Company tried to leverage national unrest about systemic racism and police violence to promote an expansion of oil and gas drilling.” While Chevron has denied the claims of being a part of this campaign, it raises the question of Chevron’s public statements supporting the Paris Agreement, while its lobbying activities send the opposite message. 

Additionally, the District of Columbia filed a lawsuit against Chevron and other oil and gas companies  for “systematically and intentionally misleading” consumers about the role their products play in causing climate change.” This lawsuit is of another way, of many, of which stakeholders are trying to hold the company accountable for its actions. 
SGI members are calling on Chevron and other corporations to respect human rights. As a member of the Business Roundtable, Chevron signed on to the new statement of purpose for corporations to serve all stakeholders. It’s time for Chevron to live up to their rhetoric!

SGI Statement of Solidarity

Milwaukee, WI, June 1, 2020: Members of Seventh Generation Interfaith Coalition for Responsible Investment are traumatized and outraged by recent incidents of police brutality in our neighborhoods and cities that manifests individual and institutional racism. We mourn the recent police killings of George Floyd and Breonna Taylor and the murder of Ahmaud Arbery, and stand in solidarity with the victims of systemic racial injustice in the United States. While recent events disclose injustice in law enforcement and our criminal justice system, we recognize that institutional racism exists as well in our corporations, our economy and throughout our society.

We lament that years of protests, demonstrations, and marches have failed to bring an end to the suffering, the dehumanization, the oppression, and the loss of so many precious lives. So many people of color who historically have been disenfranchised continue to experience economic inequities, sadness and pain; a pattern seen as well in the path of the COVID-19 pandemic, disproportionately affecting people of color in the number of cases and fatalities.

We recognize our obligation to work as institutional investors, as citizens, and, most importantly, as people of faith to address and change unjust and immoral cultural patterns and social systems. We commit ourselves to listening to the stories of those subjected to institutionalized racism to more authentically accompany them. Through the lens of faith, we will reform our investment practices and challenge companies to increase diversity and address their negative impacts on people of color. We recommit to building a more just and sustainable world for our brothers and sisters who are most vulnerable.