While 10 percent support may seem minimal, it represents the dividing line between life and death for proposals. The Securities and Exchange Commission established this percentage as the benchmark for continued resubmission of a proposal, regardless of how many times it has appeared on a company’s proxy statement in the past. A 10 percent vote may not effect corporate change, but the continuing presence of social issues on proxy ballots may exert an accretive effect, reminding companies that shareowners do not ignore the social bottom line.
Indeed, many of the issues responsible for this current rise of shareowner interest in social policies have been around for several years, slowly gaining support. Whereas previous highs correlated specifically to concern over the apartheid regime ruling South Africa in the early 1990s, the factors responsible for the current highs are more diffuse, according to IRCC Director of Social Issues Service Meg Voorhes.
Voorhes considers global labor standards, genetically modified organisms (GMOs), and board diversification the hot topics fueling this recent rise in shareowner activism. But if these issues have been around for several years, why are we seeing such significant increases now? Voorhes relates this effect to the educational process, like a collective learning curve-we have now reached a critical mass of understanding about how to advance these causes.
For example, Voorhes points out that institutional investors are more comfortable tracking global labor standards now that more monitoring mechanisms, such as the Social Accountability 8000 program, now exist. And socially responsible investors have adopted, in Voorhes’ words, a -more achievable and more reasonable” goal of simply labeling GMOs, as they came to understand the economic impossibility of phasing them out altogether. And the diversification of boards is now considered not only a social issue but also a governance issue, as more representative boards are seen as a key to business success.
Three of this year’s most popular social policy proposals resolutions called for board diversification: it was supported by 28.2 percent of shareowners at Affiliated Computer Services (ticker: ACS), 27.5 percent atAmerican Power Conversion (APCC), and 27.2 percent at Bed Bath and Beyond (BBBY). As for global labor standards, 23.4 percent of Unocal (UCL) shareowners voted to implement International Labor Organization (ILO) standards.
Of the fifteen social issues IRCC tracks, 12 increased in the percentage of their average vote from 2000 to 2001. The only three categories experiencing decreases were banking/insurance, charitable contributions, and military. As more and more resolutions top the 10 percent mark, socially responsible investing is becoming a permanent fixture on proxy ballots and in the minds of shareowners, not to mention the increasingly diversified boards of directors.